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EXHIBIT 4.1
SHAREHOLDER PROTECTION
RIGHTS PLAN AGREEMENT
dated as of
JULY 28, 1993
between
FLOTEK INDUSTRIES INC.
and
PACIFIC CORPORATE TRUST COMPANY
as Rights Agent
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TABLE OF CONTENTS
Page No.
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ARTICLE 1- INTERPRETATION
1.1 Certain Definitions 2
1.2 Currency 11
1.3 Descriptive Headings 11
1.4 References to Agreement 11
1.5 Grandfather Provisions 11
ARTICLE 2- THE RIGHTS
2.1 Legend on Common Share Certificates 13
2.2 Execution, Authentication, Delivery and Dating of
Rights Certificates 13
2.3 Registration, Registration of Transfer and Exchange 14
2.4 Mutilated, Destroyed, Lost and Stolen Rights Certificates 14
2.5 Persons Deemed Owners of Rights 15
2.6 Delivery and Cancellation of Certificates 15
2.7 Agreement of Rights Holders 15
2.8 Rights Certificate Holder Not Deemed a Shareholder 16
2.9 Agreement Not Available 16
ARTICLE 3- EXERCISE OF THE RIGHTS
3.1 Initial Exercise; Exercise of Rights; Detachment
of Rights 17
3.2 Adjustments to Exercise Price; Number of Rights 19
3.3 Date on Which Exercise is Effective 23
ARTICLE 4- ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF
CERTAIN TRANSACTIONS
4.1 Flip-Over Event 23
4.2 Flip-In Event 24
4.3 Obligations of the Corporation 25
4.4 Exchange Option 26
ARTICLE 5- SPECIAL MEETINGS OF INDEPENDENT SHAREHOLDERS
TO CONSIDER PERMITTED BIDS
5.1 Meetings of Independent Shareholders 26
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5.2 Approval 27
5.3 Fiduciary Duties of the Board of Directors of the Corporation 27
5.4 Further Acts 27
ARTICLE 6- THE RIGHTS AGENT
6.1 General 28
6.2 Merger or Amalgamation or Change of Name of Rights Agent 28
6.3 Duties of Rights Agent 29
6.4 Change of Rights Agent 30
ARTICLE 7- MISCELLANEOUS
7.1 Redemption and Waiver 31
7.2 Expiration 32
7.3 Issuance of New Rights Certificates 32
7.4 Fractional Rights and Fractional Shares 32
7.5 Supplements and Amendments 33
7.6 Rights of Action 34
7.7 Notice of Proposed Actions 34
7.8 Notices 34
7.9 Costs of Enforcement 35
7.10 Successors 35
7.11 Benefits of this Agreement 36
7.12 Governing Law 36
7.13 Counterparts 36
7.14 Severability 36
7.15 Effective Date 36
7.16 Determinations and Actions by the Board of Directors 36
7.17 Successor Corporations 37
7.18 Meetings of Holders of Rights 37
7.19 Shareholder Review 37
7.20 Time of the Essence 38
Exhibit "A" - Form of Rights Certificate
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MEMORANDUM OF AGREEMENT made as of the 28th day of July, 1993.
BETWEEN:
FLOTEK INDUSTRIES INC., a corporation incorporated under the
laws of British Columbia
(hereinafter called the "Corporation")
OF THE FIRST PART
AND:
PACIFIC CORPORATE TRUST COMPANY, a trust company incorporated under
the laws of British Columbia, as rights agent
(hereinafter called the "Rights Agent")
OF THE SECOND PART
WHEREAS the board of directors of the Corporation has determined that it is
advisable for the Corporation to adopt a shareholder protection rights
plan (the "Rights Plan");
AND WHEREAS in order to implement the Rights Plan the board of directors of the
Corporation has:
1. authorized the issuance, effective at 5:00 p.m. (Vancouver time) on
July 28, 1993 (the "Record Time") of one right (a "Right") in respect
of each Common Share of the Corporation outstanding at the Record
Time; and
2. authorized the issuance of one Right in respect of each Common Share
issued after the Record Time and prior to the Separation Time;
AND WHEREAS each Right entitles the holder thereof, after the Separation
Time, to purchase securities of the Corporation (or, in certain cases,
of certain other entities) pursuant to the terms and subject to the
condition set forth herein;
AND WHEREAS the Corporation desires to appoint the Rights Agent to act on
behalf of the Corporation and holders of Rights, and the Rights Agent
is willing to so act, in connection with the issuance, transfer,
exchange and replacement of Rights Certificates, the exercise of
Rights and other matters referred to herein;
NOW THEREFORE, in consideration of the premises and respective covenants
and agreements set forth herein, the parties hereby agree as follows:
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ARTICLE 1- INTERPRETATION
1.1 CERTAIN DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
indicated:
(1) "ACQUIRING PERSON" shall mean, subject to subsections 1.5(1) and
1.5(2), any Person who is the Beneficial Owner of 20 percent or more
of the outstanding Voting Shares of the Corporation; provided,
however, that the term "Acquiring Person" shall not include:
(a) the Corporation or any Subsidiary of the Corporation, any
employee benefit plan, deferred profit sharing plan, stock
participation plan or trust for the benefit of employees, of
the Corporation or any Subsidiary of the Corporation, or any
Person organized, appointed or established by the Corporation
or any Subsidiary of the Corporation for or pursuant to the
terms of any such plan or trust; and
(b) any Person who becomes the Beneficial Owner of 20 percent or
more of the outstanding Voting Shares of the Corporation as a
result of:
(i) an acquisition or redemption by the Corporation or a
Subsidiary of the Corporation of Voting Shares of
the Corporation which, by reducing the number of
Voting Shares of the Corporation outstanding,
increases the proportionate number of Voting Shares
of the Corporation Beneficially Owned by such Person
to 20 percent or more of the Voting Shares of the
Corporation then outstanding (a "Redemption Event");
(ii) share acquisitions made pursuant to a Permitted Bid
and in accordance with the provisions of Article 5
("Permitted Bid Acquisitions"); or
(iii) share acquisitions in respect of which the Board of
Directors has waived the application of section 4.2
pursuant to the provisions of subsection 7.1(2) or
7.1(3) or which were made on or prior to the date of
this Agreement ("Exempt Acquisitions");
provided,however, that if a Person shall become the Beneficial Owner of 20
percent or more of the Voting Shares of the Corporation then
outstanding by reason of Redemption Events, Permitted Bid Acquisitions
or Exempt Acquisitions and, after such Redemption Events, Permitted
Bid Acquisitions or Exempt Acquisitions, such Person, while still the
Beneficial Owner of 20 percent or more of the outstanding Voting
Shares of the Corporation, becomes the Beneficial Owner of any
additional Voting Shares of the Corporation otherwise than pursuant to
Permitted Bid Acquisitions, Exempt Acquisitions or Pro Rata
Acquisitions, then as of the date such Person becomes the Beneficial
Owner of such additional Voting Shares such Person shall be an
"Acquiring Person"
(2) "AFFILIATE" shall have the meaning ascribed to such term in the Company
Act (B.C.);
(3) "ASSOCIATE" shall have the meaning ascribed to such term in
the Securities Act (B.C.);
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(4) A Person shall be deemed the "BENEFICIAL OWNER" of, and to have
"BENEFICIAL OWNERSHIP" of, and to "BENEFICIALLY OWN":
(a) any securities as to which such Person, or any of such
Person's Affiliates or Associates, is the direct or indirect
beneficial owner (including through being a beneficiary of a
trust which owns such securities whether or not such
Person's interest in the trust is present or future, vested
or contingent) or would be deemed to be the beneficial owner
pursuant to the provisions of the Securities Act (B.C.) for
the purposes of xxxxxxx xxxxxxx or takeover bids or, if such
provisions shall be rescinded and there shall be no
successor laws or regulations, pursuant to the provisions of
the Securities Act (B.C.) as in effect on the date of this
Agreement, whether or not such beneficial owner or deemed
beneficial owner is the holder of record of such securities;
(b) any securities as to which such Person or any of such
Person's Affiliates or Associates has, directly or
indirectly:
(i) the right to acquire (whether such right is
exercisable immediately or after the lapse or
passage of time or upon the occurrence of a
contingency or otherwise) pursuant to any agreement,
arrangement or understanding (other than customary
agreements with and between underwriters and banking
group or selling group members with respect to a
bona fide public offering of securities and other
than pledges of securities in the ordinary course of
business) or upon the exercise of any conversion
right, exchange right, share purchase right (other
than the Rights), warrant or option, or otherwise;
or
(ii) the right to vote such security (whether such right
is exercisable immediately or after the lapse or
passage of time or otherwise) pursuant to any
agreement, arrangement or understanding, or
otherwise; and
(c) any securities which are Beneficially Owned, directly or
indirectly, within the meaning of the foregoing provisions of
this subsection 1.1(4) by any other Person with which such
Person or any of such Person's Affiliates or Associates has
any agreement, arrangement or understanding (whether or not
in writing) with respect to or for the purpose of acquiring,
holding, voting or disposing of any Voting Shares of the
Corporation (other than customary agreements with and between
underwriters and banking group or selling group members with
respect to a bona fide public offering of securities) or
acquiring, holding or disposing of a significant portion of
the property or assets of the Corporation or any Subsidiary
of the Corporation;
provided,however, that a Person shall not be deemed the "Beneficial Owner" of,
or to have "Beneficial Ownership" of, or to "Beneficially Own", any
security:
(d) solely because such security has been deposited or tendered
pursuant to any Takeover Bid made by such Person or made by
any of such Person's Affiliates or Associates until such
deposited security has been taken up or paid for, whichever
shall occur first;
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(e) solely because such Person or any of such Person's Affiliates
or Associates has or shares the right to vote or direct the
voting of such security pursuant to a revocable proxy given
in response to a public proxy solicitation made pursuant to,
and in accordance with, the applicable rules and regulations
under the Company Act (B.C.) and the Securities Act (B.C.);
(f) solely because such Person or any of such Person's Affiliates
or Associates has or shares the power to vote or direct the
voting of such a security in connection with or in order to
participate in a public proxy solicitation made or to be made
pursuant to and in accordance with the applicable rules and
regulations referred to in clause (e) above; or
(g) solely because such Person holds or exercises voting or
dispositive power over such security without claiming any
beneficial interest therein, provided that:
(i) a substantial portion of the ordinary business of
such Person (the "Investment Manager") is the
management of investment funds for others and such
voting or dispositive power of such security is held
by the Investment Manager in the ordinary course of
such business for the account of any other Person
who is not an Associate or Affiliate of the
Investment Manager and of whom the Investment
Manager is not an Associate; or
(ii) such Person (the "Trust Company") is licensed to
carry on the business of a trust company under the
laws of Canada or any province thereof and, as such,
acts as trustee or administrator or in a similar
capacity in relation to the estates of deceased or
incompetent Persons and holds such voting or
dispositive power over such security in the ordinary
course of such duties for the estate of any such
deceased or incompetent Person where neither such
estate nor any beneficiary thereof is an Associate
or Affiliate of the Trust Company and the Trust
Company is not an Associate of such estate or
beneficiary;
and provided further in either of the foregoing cases that:
(iii) the Voting Shares of the Corporation Beneficially
Owned by the Investment Manager or the Trust
Company, as the case may be, other than those in
respect of which the exemption in this clause 1.
1(4)(g) applies, do not exceed five percent of the
outstanding Voting Shares of the Corporation; and
(iv) the Investment Manager or the Trust Company, as the
case may be, has not made and does not propose to
make a Takeover Bid alone or by acting jointly or in
concert with any other Person.
For purposes of this Agreement, in determining the percentage of the
outstanding Voting Shares of the Corporation with respect to which a
Person is or is deemed the Beneficial Owner shall be deemed
outstanding;
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(5) "BOARD OF DIRECTORS" shall mean the board of directors of the
Corporation or, if duly constituted and whenever duly empowered, the
executive committee of the board of directors for the Corporation;
(6) "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in Vancouver are authorized or
obligated by law to close;
(7) "CLOSE OF BUSINESS" on any given date shall mean the time on such date
(or, if such date is not a Business Day, the time on the next
succeeding Business Day) at which the offices of the transfer agent
for the Shares (or, after the Separation Time, the offices of the
Rights Agent) are closed to the public in the city in which such
transfer agent or Rights Agent has an office for the purposes of this
Agreement;
(8) "COMMON SHARES", when used with reference to the Corporation, shall
mean the common shares of the Corporation and any other shares of the
Corporation into which such shares may be subdivided, consolidated,
reclassified or changed, and when used with reference to any Person
other than the Corporation, shall mean the class of shares (or similar
equity interest) with the greatest per share voting power entitled to
vote generally in the election of all directors of such other Person
or the equity securities or other equity interest having power
(whether or not exercised) to control or direct the management of such
other Person or, if such other Person is a Subsidiary of another
Person, the Person or Persons which ultimately control such
first-mentioned Person;
(9) "COMPANY ACT (B.C.)" shall mean the British Columbia Company Act
(R.S.B.C. 1979, c.59), as amended, and the regulations made
thereunder, and any successor laws or regulations thereto;
(10) "DIVIDENDS PAID IN THE ORDINARY COURSE" shall mean cash dividends paid
at regular intervals in any fiscal year of the Corporation to the
extent that such cash dividends do not exceed, in the aggregate, the
greatest of:
(a) 200 percent of the aggregate amount of cash dividends
declared payable by the Corporation on its Common Shares in
its immediately preceding fiscal year;
(b) 300 percent of the arithmetic average of the aggregate
amounts of cash dividends declared payable by the Corporation
on its Common Shares in its three immediately preceding
fiscal years; and
(c) 100 percent of the aggregate consolidated net income of the
Corporation, before extraordinary items, for its immediately
preceding fiscal year;
(11) "EXEMPT ACQUISITION" shall have the meaning ascribed thereto in
paragraph 1. 1(1(b)(iii);
(12) "EXERCISE PRICE" shall mean, as of any date, the price at which a
holder of a Right may purchase the securities issuable upon exercise
of such Right. Until adjustment thereof in accordance with the terms
hereof, the Exercise Price for a Right shall be $10.00;
(13) "EXPIRATION TIME" shall mean the earlier of:
(a) the Termination Time;
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(b) the time, if any, determined pursuant to section 7.19; and
(c) 5:00 p.m. (Vancouver Time) on July 31, 1998;
(14) "FLIP-IN EVENT" shall mean a transaction or event in or pursuant to
which any Person shall become an Acquiring Person; provided, however,
that the term "Flip-In Event" shall not include any transaction or
event that constitutes a Flip-Over Event;
(15) "FLIP-OVER ENTITY" shall have the meaning attributed thereto in section
4.1;
(16) "FLIP-OVER EVENT" shall mean:
(a) a transaction or event or series of transactions or events in
or pursuant to which, directly or indirectly, the Corporation
shall consolidate or merge with or into, amalgamate with or
into or enter into a statutory arrangement with, any other
Person (other than a wholly-owned Subsidiary of the
Corporation), or any other Person (other than a wholly-owned
Subsidiary of the Corporation) shall consolidate or merge
with or into, amalgamate with or into or enter into a
statutory arrangement with, the Corporation, and, in
connection therewith, all or part of the outstanding Voting
Shares of the Corporation shall be changed in any way,
reclassified or converted into or exchanged for shares or
other securities of the Corporation or of any other Person or
cash or any other property; or
(b) a transaction or event or series of transactions or events in
which, directly or indirectly, the Corporation shall sell or
otherwise transfer (including by way of a leasehold interest)
(or one or more of its Subsidiaries shall sell or otherwise
transfer) property or assets:
(i) aggregating more than 50 percent of the property or
assets (measured by either book value or fair market
value); or
(ii) which generated during the Corporation's last
completed fiscal year or may reasonably be expected
to generate in the Corporation's then-current fiscal
year more than 50 percent of the Corporation's
income or cash flow;
of the Corporation and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Corporation or one or
more of its wholly-owned Subsidiaries);
(17) "GRANDFATHERED PERSON", "GRANDFATHERED PERSON TRANSFEREE" and
"GRANDFATHERED BIDDER" shall have the respective meanings attributed
thereto in subsections 1.5(1), 1.5(2) and 1.5(3);
(18) "INCOME TAX ACT" shall mean the Income Tax Act, R.S.C. 1970, C.1-5, as
amended, and the regulations thereunder, and any comparable or
successor laws or regulations thereto;
(19) "INDEPENDENT SHAREHOLDERS" shall mean, with respect to any Referendum
(as such term is defined in Article 5) on any Permitted Bid, holders
of Common Shares of the Corporation other than Common
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Shares of the Corporation Beneficially Owned by (a) the Offeror making such
Permitted Bid, (b) any Associate or Affiliate of such Offeror and (c)
any Person acting jointly or in concert with such Offeror or with any
Associate or Affiliate of such Offeror;
(20) "MARKET PRICE" per share of any securities on any date of
determination shall mean the average of the daily closing prices per
share of such securities (determined as described below) on each of
the 20 consecutive Trading Days through and including the Trading Day
immediately preceding such date; provided, however, that if an event
described in section 3.3 shall have caused the closing price in
respect of any Trading Day used to determine the Market Price not to
be fully comparable with the closing price on such date of
determination or, if the date of determination is not a Trading Day,
on the immediately preceding Trading Day, each such closing price so
used shall be appropriately adjusted in a manner analogous to the
applicable adjustment provided for in section 3.2 in order to make it
fully comparable with the closing price on such date of determination
or, if the date of determination is not a Trading Day, on the
immediately preceding Trading Day. The closing price per share of any
securities on any date shall be:
(a) the closing board lot sale price or, in case no such sale
takes place on such date, the average of the closing bid and
asked prices, for each share of such securities as reported
by the principal stock exchange in Canada on which such
securities are listed and posted for trading;
(b) if the securities are not listed and posted for trading on
any stock exchange in Canada, the last sale price, regular
way, or, in case no such sale takes place on such date, the
average of the closing bid and asked prices, regular way, for
each share of such securities as reported in the principal
consolidated transaction reporting system with respect to
securities listed or admitted to trading on the principal
national securities exchange in the United States on which
such securities are listed or admitted to trading;
(c) if for any reason none of such prices are available on such
day or the securities are not listed and posted for trading
on a stock exchange in Canada or a national securities
exchange in the United States, the last quoted price, or if
not so quoted, the average of the high bid and low asked
prices for each share of such securities in the
over-the-counter market as reported by the National
Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ") or, if the securities are not quoted on
NASDAQ, as reported by the Canadian Over-The-Counter
Automated Trading System or another such system then in use;
or
(d) if on any such date the securities are not quoted by any such
organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market
in the securities selected in good faith by the Board of
Directors;
provided,however, that if on any such date the securities are not traded on
any exchange or in the over-the-counter market, the closing price per
share of such securities on such date shall mean the fair value per
security of such securities on such date as determined in good faith
by the Board of Directors, after consultation with a nationally or
internationally recognized investment dealer or investment banker with
respect to the fair value per share of such securities;
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(21) "OFFER TO ACQUIRE" shall include:
(a) an offer to purchase, or a solicitation of an offer to sell,
Voting Shares of the Corporation; and
(b) an acceptance of an offer to sell Voting Shares of the
Corporation, whether or not such offer to sell has been
solicited;
or any combination thereof, and the Person accepting an offer to sell
shall be deemed to be making an offer to acquire to the Person that
made the offer to sell;
(22) "OFFEROR" shall mean a Person who has announced an intention to make or
who has made a Takeover Bid;
(23) "OFFICERS' CERTIFICATE" shall mean a certificate signed by the
Chairman of the Board, the President or any Vice-President and by the
Secretary, the Treasurer, an Assistant-Secretary or an
Assistant-Treasurer of the Corporation;
(24) "OFFEROR'S SECURITIES" shall mean Voting Shares of the Corporation
Beneficially Owned by any Person who has announced an intention to
make or who has made a Takeover Bid;
(25) "PERMITTED BID" shall mean a Takeover Bid made in compliance with, and
not on a basis which is exempt from, the provisions of Part 11 of the
Securities Act (B.C.) and the regulations thereunder (or such
successor laws or regulations or, if such provisions shall be repealed
and there shall be no successor laws or regulations pursuant to such
provisions as they read on the date of this Agreement) and the
securities laws of all the other relevant jurisdictions and also in
compliance with the following additional provisions:
(a) the Takeover Bid is made to all holders of Common Shares of
the Corporation wherever resident or registered on the books
of the Corporation for all Common Shares held;
(b) subject to subsection 1.5(3), the Offeror does not, alone or
together with Persons acting jointly or in concert with him,
at the time of commencement of or at any time while the
Takeover Bid remains outstanding Beneficially Own five
percent or more of the outstanding Voting Shares of the
Corporation;
(c) if the Takeover Bid is made by a Grandfathered Person
Transferee or any Person acting jointly or in concert with a
Grandfathered Person Transferee or any Person who, as regards
the Grandfathered Person Transferee, is a "control person" as
defined in the Securities Act (B.C.) or any Affiliate or
Associate of any of the foregoing within 12 months from the
date upon which the Grandfathered Person Trustee became such,
the Offeror shall offer consideration for Common Shares
deposited under the Takeover Bid at least equal to the
consideration that was paid on a per-Common Share basis to
the Transferor [as defined in subsection 1.5(2)] from whom
such Grandfathered Person Transferee acquired Voting Shares
or the Offeror shall offer at least the cash equivalent of
such consideration;
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(d) the Takeover Bid is made on terms and conditions that comply
with, and which do not and will not, upon consummation of the
bid, result in the Corporation or any Subsidiary of the
Corporation being in default under, or in contravention of,
any applicable laws;
(e) the Takeover Bid shall contain and the take up and payment
for securities tendered or deposited thereunder shall be
subject to an irrevocable and unqualified condition that no
Common Shares of the Corporation shall be taken up or paid
for pursuant to the Takeover Bid unless a resolution is
passed to approve the Takeover Bid at a special meeting in
Independent Shareholders by the votes of Independent
Shareholders holding or representing by proxy more than 50
percent of the Common shares of the Corporation in respect of
which votes are cast at such a meeting, which special meeting
of Independent Shareholders shall be called and held for that
purpose in accordance with the provisions of Article 5;
(f) the Takeover Bid shall not expire until the earlier of (i) 10
clear Business Days following the conclusion of the special
meeting of Independent Shareholders referred to in clause 1
1(25)(e) and (ii) 120 days after the date of the Takeover
Bid; provided, however, that in no circumstances shall the
Takeover Bid expire earlier than five clear Business Days
following the conclusion of the special meeting of
Independent Shareholders referred to in clause 1. 1(25)(e);
and
(g) the Offeror shall provide the Rights Agent, within two
Business Days of the announcement of the Takeover Bid, with a
list of all securities of the Corporation Beneficially Owned
by each of the Offeror and such Offeror's Associates and
Affiliates and any Person acting jointly or in concert with
the Offeror or the Offeror's Associates and Affiliates,
together with the particulars of the registration of all such
securities, and an undertaking to update such list on a daily
basis to reflect any changes occurring or to occur in such
Beneficial Ownership, and the Offeror shall perform its
obligation under such undertaking;
(26) "PERMITTED BID ACQUISITIONS" shall have the meaning ascribed thereto in
paragraph 1.1(1)(b)(ii);
(27) "PERSON" shall include any individual, firm, partnership, association,
trust, trustee, executor, administrator, legal personal representative,
group, body corporate, corporation, unincorporated organization,
syndicate or other entity;
(28) "PRO RATA ACQUISITION" shall mean the acquisition of Voting Shares of
the Corporation as a result of a stock dividend, a stock split or other
event pursuant to which a Person receives or acquires Voting Shares of
the Corporation on the same pro rata basis as all other holders of
Voting Shares of the Corporation of the same class;
(29) "RECORD TIME" shall mean 5:00 p.m. (Vancouver time) on July 28, 1993;
(30) "REDEMPTION EVENT" shall have the meaning ascribed thereto in paragraph
1.1(1)(b)(i);
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(31) "RIGHTS CERTIFICATE" shall mean the certificates representing the
Rights after the Separation Time which shall be in the form attached
hereto as Exhibit "A";
(32) "SECURITIES ACT (B.C.)" shall mean the Securities Act, S.B.C. 1985,
c.83, as amended, and the regulations thereunder, and any successor
laws or regulations thereto;
(33) "SEPARATION TIME" shall mean the close of business on the eighth
Trading Day after the earlier of:
(a) the Stock Acquisition Date; and
(b) the date of the commencement or first public announcement
(provided such announcement is made after the Record Time) of
the intent of any Person (other than the Corporation or any
Subsidiary of the Corporation) to commence a Takeover Bid
(other than a Permitted Bid), or such later date as may be
determined by the Board of Directors, provided that if any
Takeover Bid referred to in this clause (b) of this
subsection 1.1(33) expires, is canceled, terminated or
otherwise withdrawn prior to the Separation Time, such
Takeover Bid shall be deemed, for the purposes of this
subsection 1.1(33), never to have been made;
(34) "RIGHT" shall have the meaning ascribed thereto in the recitals hereto;
(35) "STOCK ACQUISITION DATE" shall mean the date of the first public
announcement [which, for purposes of this definition, shall include,
without limitation, the filing of a report pursuant to section 93 of
the Securities Act (B.C.)] by the Corporation or an Acquiring Person
of facts indicating that a Person has become an Acquiring Person;
(36) "SUBSIDIARY" of a Person shall have the meaning ascribed thereto in the
Company Act (B.C.);
(37) "TAKEOVER BID" shall mean an Offer to Acquire Voting Shares of the
Corporation where the Voting Shares of the Corporation subject to the
Offer to Acquire, together with Voting Shares of the Corporation
Beneficially Owned by the Person making the Offer to Acquire,
constitute in the aggregate 20 percent or more of the outstanding
Voting Shares of the Corporation at the date of the Offer to Acquire;
(38) "TERMINATION TIME" shall mean the time at which the right to exercise
Rights shall terminate pursuant to section 4.4 or section 7.1;
(39) "TRADING DAY", when used with respect to any securities, shall mean a
day on which the principal Canadian or United States securities
exchange on which such securities are listed or admitted to trading is
open for the transaction of business or, if the securities are not
listed or admitted to trading on any Canadian or United States
securities exchange, a Business Day; and
(40) "Voting Shares", when used with reference to the Corporation, shall
mean the Common shares of the Corporation and any other shares of the
Corporation entitled to vote generally in the election of directors,
and when used with reference to any Person other than the Corporation,
shall mean Common Shares of such Person and any other shares of capital
stock or voting interests of such Persons entitled to vote
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generally in the election of all directors; and the percentage of Voting Shares
Beneficially Owned by any Person shall, for the purposes of this
Agreement, be and be deemed to be the product determined by the
formula;
100 x A
-
B
where
A = the number of votes for the election of all directors generally
attaching to the Voting Shares Beneficially Owned by such Person; and
B = the number of votes for the election of all directors generally attaching
to all outstanding Voting Shares.
1.2 CURRENCY
All sums of money which are referred to in this Agreement are expressed in
lawful money of Canada, unless otherwise specified.
1.3 DESCRIPTIVE HEADINGS
Descriptive headings appear herein for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
1.4 REFERENCES TO AGREEMENT
References to "this Agreement", "hereto", "herein", "hereby", "hereunder",
"hereof" and similar expressions refer to this Agreement and not to
any particular Article, section, subsection, paragraph, subparagraph,
clause, subdivision or other portion hereof and include any and every
instrument supplemental or ancillary hereto.
1.5 GRANDFATHER PROVISIONS
(1) A Person shall not be and shall not be deemed to be an Acquiring
Person if such Person (a "Grandfathered Person"):
(a) is the Beneficial Owner of 20 percent or more of the
outstanding Voting Shares of the Corporation as at the Record
Time; or
(b) becomes the Beneficial Owner of 20 percent or more of the
outstanding Voting Shares of the Corporation after the Record
Time and such Person's Beneficial Ownership of Voting
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Shares of the Corporation does not exceed the number of Voting Shares
of the Corporation Beneficially Owned by such Person immediately
prior to the Record time by more than one percent of the then-issued
and outstanding Voting Shares of the Corporation;
provided, however, that the exceptions in clauses 1.5(1)(a) and (b) shall cease
to be applicable to a Grandfathered Person who shall after the Record Time
become, pursuant to one or more transactions or events, the Beneficial Owner of
additional Voting Shares of the Corporation constituting in the aggregate more
than one percent of the Voting Shares of the Corporation then outstanding,
other than pursuant to Permitted Bid Acquisitions, Exempt Acquisitions or Pro
Rata Acquisitions.
(2) A Person shall not be and shall not be deemed to be an Acquiring Person if
such Person (a "Grandfathered Person Transferee") becomes the Beneficial Owner
of 20 percent or more of the outstanding Voting Shares of the Corporation
solely as a result of the acquisition of all but not less than all of the
Voting Shares of the Corporation Beneficially Owned immediately prior thereto
by a Grandfathered Person or a Grandfathered Person Transferee (the
"Transferor") and such Person's Beneficial Ownership of Voting Shares of the
Corporation after giving effect to such acquisition does not exceed the number
of Voting Shares of the Corporation Beneficially Owned by the Transferor
immediately prior to such acquisition by more than one percent of the
then-issued and outstanding Voting Shares of the Corporation; provided,
however, that the exception in this subsection 1.5(2) shall cease to be
applicable to a Grandfathered Person Transferee who shall after the time at
which he becomes a Grandfathered Person Transferee (the "Transfer Time")
become, pursuant to one or more transactions or events, the Beneficial Owner of
additional Voting Shares of the Corporation constituting, together with the
number of Voting Shares Beneficially Owned by such Grandfathered Person
Transferee immediately prior to the Transfer Time, in the aggregate more than
one percent of the Voting Shares of the Corporation then outstanding, other
than pursuant to Permitted Bid Acquisitions, Exempt Acquisitions or Pro Rata
Acquisitions.
(3) For the purpose of determining whether a Person is entitled to make a
Permitted Bid, the provisions of clause 1. 1(25)(1,) shall not apply to a
Person (a "Grandfathered Bidder") who is either:
(a) a Grandfathered Person or a Grandfathered Person Transferee
at the time of commencement of and at all times while such
Person's Takeover Bid remains outstanding; or
(b) the Beneficial Owner of more than five percent but less than
20 percent of the outstanding Voting Shares of the
Corporation as at the Record Time; provided that the
exception in this clause 1 .5(3)(b) shall cease to be
applicable to a Grandfathered Bidder if such Grandfathered
Bidder shall have the Record Time become, pursuant to one or
more transactions or events, the Beneficial Owner of
additional Voting Shares of the Corporation constituting in
the aggregate more than one percent of the voting Shares of
the Corporation then outstanding, other than pursuant to
Permitted Bid Acquisitions, Exempt Acquisitions or Pro Rata
Acquisitions.
(4) For greater certainty, for the purposes of this section 1.5, a Person shall
be deemed to have become the Beneficial Owner of additional Voting Shares of
the Corporation if the Person becomes the Beneficial Owner of such Voting
Shares pursuant to a transaction or event and, as a result, such Person is the
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Beneficial Owner of a greater number of Voting Shares than the number of Voting
Shares that he Beneficially Owned immediately prior to such transaction or
event.
ARTICLE 2- THE RIGHTS
2.1 LEGEND ON COMMON SHARE CERTIFICATES
Certificates for Common Shares issued after the Record Time but prior to the
earlier of the Separation Time and the Expiration Time shall evidence, in
addition to the Common Shares, one Right for each Common Share represented
thereby and shall have impressed on, printed on, written on or otherwise
affixed to them a legend substantially as follows:
Until the Separation Time (as defined in the Rights Agreement
referred to below), this certificate also evidences and entitles the
holder hereof to certain Rights as set forth in a Shareholder
Protection Rights Plan Agreement (the "Rights Agreement") between
Flotek Industries Inc. (the "Corporation") and Pacific Corporate
Trust Company, as rights agent, the terms of which are hereby
incorporated herein by reference.
Certificates representing Common Shares that are issued and outstanding from
time to time hereafter shall evidence one Right for each Common Share evidenced
thereby, notwithstanding the absence of the foregoing legend, until the earlier
of the Separation Time and the Expiration Time.
2.2 EXECUTION. AUTHENTICATION., DELIVERY AND DATING OF RIGHTS CERTIFICATES
(1) The certificates representing the Rights (the "Rights Certificates") shall
be executed on behalf of the Corporation by its Chairman of the Board,
President or one of its Vice-Presidents together with its Treasurer, Secretary
or one of its Assistant-Treasurers or Assistant-Secretaries under its corporate
seal reproduced thereon. The signature of any of these officers on the Rights
Certificates may be manual or facsimile. Rights Certificates bearing the manual
or facsimile signatures of individuals who were at any time the proper officers
of the Corporation shall bind the Corporation, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
countersignature and delivery of such Rights Certificates.
(2) Promptly after the Corporation learns of the Separation Time, the
Corporation will notify the Rights Agent of such Separation Time and will
deliver Rights Certificates executed by the Corporation to the Rights Agent for
countersignature, and the Rights Agent shall manually countersign and deliver
such Rights Certificates to the holders of the Rights pursuant to subsection
3.1(3). No Rights Certificate shall be valid for any purpose until
countersigned by the Rights Agent as aforesaid.
(3) Each Rights Certificate shall be dated the date of the countersignature
thereof.
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2.3 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE
(1) The Corporation will cause to be kept a register (the "Rights Register") in
which, subject to such reasonable regulation as it may prescribe, the
Corporation will provide for the registration and transfer of Rights. The
Rights Agent is hereby appointed the "Rights Registrar" for the purpose of
maintaining the Rights Register for the Corporation and registering Rights and
transfers of Rights as herein provided. In the event that the Rights Agent
shall cease to be the Rights Registrar, the Rights Agent will have the right to
examine the Rights Register at all reasonable times.
After the Separation Time and prior to the Expiration Time, upon surrender for
registration of transfer or exchange of any Rights Certificate, and subject to
the provisions of subsection (3) of this section 2.3, the Corporation will
execute, and the Rights Agent will manually countersign and deliver, in the
name of the holder or the designated transferee or transferees, as required
pursuant to the holder's instructions, one or more new Rights Certificates
evidencing the same aggregate number of Rights as did the Rights Certificates
so surrendered.
(2) All Rights issued upon any registration of transfer or exchange of Rights
Certificates shall be the valid obligations of the Corporation, and such Rights
shall be entitled to the same benefits under this Agreement as the Rights
surrendered upon such registration of transfer or exchange.
(3) Every Rights Certificate surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Corporation or the Rights Agent, as the
case may be, duly executed by the holder thereof or such holder's attorney duly
authorized in writing. As a condition to the issuance of any new Rights
Certificate under this section 2.3, the Corporation may require the payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Rights Agent) in connection therewith.
2.4 MUTILATED. DESTROYED. LOST AND STOLEN RIGHTS CERTIFICATES
(1) If any mutilated Rights Certificate is surrendered to the Rights Agent
prior to the Expiration Time, the Corporation shall execute and the Rights
Agent shall manually countersign and deliver in exchange therefor a new Rights
Certificate evidencing the same number of Rights as the Rights Certificate
surrendered.
(2) If there shall be delivered to the Corporation and the Rights Agent prior
to the Expiration Time (a) evidence to their satisfaction of the destruction,
loss or theft of any Rights Certificate and (b) such security or indemnity as
may be required by them to save each of them and any of their agents harmless,
then, in the absence of notice to the Corporation or the Rights Agent that such
Rights Certificate has been acquired by a bona fide purchaser, the Corporation
shall execute and upon its request the Rights Agent shall countersign and
deliver, in lieu of any such destroyed, lost or stolen Rights Certificate, a
new Rights Certificate evidencing the same number of Rights as did the Rights
Certificate so destroyed, lost or stolen.
(3) As a condition to the issuance of any new Rights Certificate under this
section 2.4, the Corporation may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be
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imposed in relation thereto and any other expenses (including the fees and
expenses of the Rights Agent) connected therewith.
(4) Every new Rights Certificate issued pursuant to this section 2.4 in lieu of
any destroyed, lost or stolen Rights Certificate shall evidence the contractual
obligation of the Corporation, whether or not the destroyed, lost or stolen
Rights Certificate shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Agreement equally and proportionately with
any and all other Rights duly issued by the Corporation.
2.5 PERSONS DEEMED OWNERS OF RIGHTS
The Corporation, the Rights Agent and any agent of the Corporation or the
Rights Agent may deem and treat the Person in whose name such Rights
Certificate (or, prior to the Separation Time, the associated Common Share
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby for all purposes whatsoever. As used in this Agreement,
unless the context otherwise requires, the term "holder" of any Rights shall
mean the registered holder of such Rights (or, prior to the Separation Time,
the associated Common Shares).
2.6 DELIVERY AND CANCELLATION OF CERTIFICATES
All Rights Certificates surrendered upon exercise or for redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than the Rights Agent, be delivered to the Rights Agent and, in any case, shall
be promptly canceled by the Rights Agent. The Corporation may at any time
deliver to the Rights Agent for cancellation any Rights Certificates previously
countersigned and delivered hereunder which the Corporation may have acquired
in any manner whatsoever, and all Rights Certificates so delivered shall be
promptly canceled by the Rights Agent. No Rights Certificate shall be
countersigned in lieu of or in exchange for any Rights Certificates canceled as
provided in this section 2.6, except as expressly permitted by this Agreement.
The Rights Agent shall destroy all canceled Rights Certificates and deliver a
certificate of destruction to the Corporation.
2.7 AGREEMENT OF RIGHTS HOLDERS
Every holder of Rights by accepting the same consents and agrees with the
Corporation and the Rights Agent and with every other holder of Rights:
(a) to be bound by and subject to the provisions of this
Agreement, as amended from time to time in accordance with
the terms hereof, in respect of the Rights held;
(b) that prior to the Separation Time, each Right will be
transferable only together with, and will be transferred by a
transfer of, the Common Share representing such Right;
(c) that after the Separation Time, the Rights Certificates will
be transferable only upon registration of the transfer on the
Rights Register as provided herein;
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(d) that prior to due presentment of a Rights Certificate (or,
prior to the Separation Time, the associated Common Share
certificate) for registration of transfer, the Corporation,
the Rights Agent and any agent of the Corporation or the
Rights Agent may deem and treat the Person in whose name the
Rights Certificate (or, prior to the Separation Time, the
associated Common Share certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on
such Rights Certificate or the associated Common Share
certificate made by anyone other than the Corporation or the
Rights Agent) for all purposes whatsoever, and neither the
Corporation nor the Rights Agent shall be affected by any
notice to the contrary;
(e) that such holder of Rights has waived his right to receive
any fractional Rights or any fractional Common Shares upon
exercise of a Right (except as provided herein); and
(f) that without the approval of any holder of Rights and upon
the sole authority of the Board of Directors acting in good
faith, this Agreement may be supplemented or amended from
time to time pursuant to and as provided herein.
2.8 RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER
No holder, as such, of any Rights or Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose whatsoever the holder of
any Common Share or any other shares of the Corporation which may at any time
be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed or deemed
to confer upon the holder of any Right or Rights Certificate, as such, any of
the rights, titles, benefits or privileges of a shareholder of the Corporation
or any right to vote at any meeting of shareholders of the Corporation whether
for the election of directors or otherwise or upon any matter submitted to
holders of Common Shares or any other shares of the Corporation at any meeting
thereof, or to give or withhold consent to any action of the Corporation, or to
receive notice of any meeting or other action affecting any shareholder of the
Corporation except as expressly provided herein, or to receive dividends,
distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by any Rights Certificate shall have been duly exercised in
accordance with the terms and provisions hereof.
2.9 AGREEMENT NOT AVAILABLE
No person other than a director of the Company shall be entitled to review a
copy of this Agreement and no person shall be entitled to receive a copy of
this Agreement without the prior approval of the Board of Directors.
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ARTICLE 3- EXERCISE OF THE RIGHTS
3.1 INITIAL EXERCISE; EXERCISE OF RIGHTS: DETACHMENT OF RIGHTS
(1) Subject as hereinafter provided, from and after the Separation Time and
prior to the Expiration Time each Right will entitle the holder thereof to
purchase one Common Share for the Exercise Price (which Exercise Price and
number of Common Shares are subject to adjustment as set forth below).
(2) Until the Separation Time (a) the Rights shall not be exercisable and no
Right may be exercised and (b) for administrative purposes, each Right will be
evidenced by the certificate for the associated Common Shares registered in the
name of the holder thereof (which certificates shall also be deemed to be
Rights Certificates) and will be transferable only together with, and will be
transferred by a transfer of, such associated Common Share.
(3) From and after the Separation Time and prior to the Expiration Time (a) the
Rights shall be exercisable and (b) the registration and transfer of the Rights
shall be separate from and independent of Common Shares. Promptly following the
Separation Time, the Rights Agent will mail to each holder of record of Common
Shares as of the Separation Time [other than an Acquiring Person, and in
respect of any Rights Beneficially Owned by such Acquiring Person which are not
held of record by such Acquiring Person the holder of Record of such Rights (a
"Nominee")], at such holder's address as shown by the records of the
Corporation (and the Corporation hereby agrees to furnish copies of such
records to the Rights Agent for this purpose):
(a) Rights Certificates representing the number of Rights held by
such holder at the Separation Time in substantially the form
of Exhibit A hereto, appropriately completed and having such
marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Corporation
may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply
with any law, rule, regulation or judicial or administrative
order or with any rule or regulation made pursuant to thereto
or with any rule or regulation of any stock exchange or
quotation system on which the Rights may from time to time be
listed or trade, or to conform to usage; and
(b) a disclosure statement describing the Rights, provided that a
Nominee shall be sent the materials provided for in (i) and
(ii) only in respect of all Common Shares held of record by
it which are not Beneficially Owned by an Acquiring Person.
(4) Rights may be exercised in whole or in part on any Business Day after the
Separation Time and prior to the Expiration Time by submitting to the Rights
Agent the Rights Certificate evidencing such Rights together with:
(a) an election to exercise such Rights (an "Election to
Exercise") substantially in the form attached to the Rights
Certificate duly completed and executed by the holder or his
executors or administrators or other personal representatives
or his or their legal attorney duly appointed by an
instrument in writing in form and executed in a manner
satisfactory to the Rights Agent;
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(b) payment in cash, or by certified cheque, banker's draft or
money order payable to the order of the Corporation, of a sum
equal to the applicable Exercise Price multiplied by the
number of Rights being exercised and a sum sufficient to
cover any transfer tax or charge which may be payable in
respect of any transfer involved in the transfer or delivery
of Rights Certificates or the issuance or delivery of
certificates for Common Shares in a name other than that of
the holder of the Rights being exercised; and
(c) a declaration of ownership (a "Declaration") substantially in
the form attached to the Rights Certificate representing the
Rights or in such other form as may be approved by the Board
of Directors pursuant to subsection 3.2(6), in respect of
each Person to whom Common Shares are to be issued as a
result of such exercise duly completed and executed by each
such Person.
(5) Subject to section 3.2, upon receipt of the Rights Certificate which is
accompanied by (a) a completed Election to Exercise that does not indicate that
such Right is null and void as provided by subsection 4.2(2), (b) payment as
set forth in subsection 3.1(4) and (c) a completed Declaration, the Rights
Agent (unless otherwise instructed by the Corporation) will thereupon promptly:
(a) requisition from the transfer agent for the Common Shares,
certificates representing the number of Common Shares to be
purchased (the Corporation hereby irrevocably authorizing its
transfer agents to comply with all such requisitions);
(b) when appropriate, requisition from the Corporation the amount
of cash to be paid in lieu of issuing fractional Common
Shares;
(c) after receipt of such certificate, deliver the same to or
upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be
designated by such holder; and
(d) when appropriate, after receipt, deliver such cash to or to
the order of the registered holder of the Rights Certificate.
(6) In case the holder of any Rights shall exercise less than all the Rights
evidenced by such holder's Rights Certificate, a new Rights Certificate
evidencing the Rights remaining unexercised will be issued by the Rights Agent
to such holder or to such holder's duly authorized assigns.
(7) The Corporation covenants and agrees that it will:
(a) take all such action as may be necessary and within its power
to ensure that all Common Shares delivered upon exercise of
Rights shall, at the time of delivery of the certificates
representing such Common Shares (subject to payment of the
Exercise Price), be duly and validly authorized, executed,
issued and delivered as fully paid and non-assessable;
(b) take all such action as may be necessary and within its power
to comply with any applicable requirements of the Company Act
(B.C.), the Securities Act (B.C.) and the
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Securities Acts or comparable legislation of each of the
provinces of Canada and any other applicable law, rule or
regulation, in connection with the issuance and delivery of
the Rights Certificates and the issuance of any Common Shares
upon exercise of Rights;
(c) use reasonable efforts to cause all Common Shares issued upon
exercise of Rights to be listed on the principal exchanges on
which the Common Shares were traded prior to the Stock
Acquisition Date;
(d) cause to be reserved and kept available out of its authorized
and unissued Common Shares, the number of Common Shares that,
as provided in this Agreement, will from time to time be
sufficient to permit the exercise in full of all outstanding
Rights; and
(e) pay when due and payable any and all federal and provincial
transfer taxes (for greater certainty, not including any
income taxes of the holder or exercising holder or any
liability of the Corporation to withhold tax) which may be
payable in respect of the original issuance or delivery of
the Rights Certificates, provided that the Corporation shall
not be required to pay any transfer tax or charge which may
be payable in respect of any transfer involved in the
transfer or delivery of Rights Certificates or the issuance
or delivery of certificates for Common Shares in a name other
than that of the holder of the Rights being transferred or
exercised.
3.2 ADJUSTMENTS TO EXERCISE PRICE; NUMBER OF RIGHTS
The Exercise Price, the number and kind of Common Shares subject to purchase
upon the exercise of each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this section 3.2.
(1) In the event the Corporation shall at any time after the Record Time
and prior to the Expiration Time:
(a) declare or pay a dividend on the Common Shares payable in
Common Shares (or other securities exchangeable for or
convertible into or giving a right to acquire Common Shares
or other securities) other than pursuant to any optional
stock dividend program,
(b) subdivide or change the outstanding Common Shares into a
greater number of Common Shares,
(c) combine or change the outstanding Common Shares into a
smaller number of Common Shares; or
(d) issue any Common Shares (or other securities exchangeable for
or convertible into or giving a right to acquire Common
Shares or other securities) in respect of, in lieu of or in
exchange for existing Common Shares, except as otherwise
provided in this section 3.2,
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the Exercise Price in effect at the time of the record date for such dividend
or for the effective date of such subdivision, combination or reclassification,
and the number and kind of Common Shares or other securities, as the case may
be, issuable on such date, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive, upon
payment of the Exercise Price then in effect, the aggregate number and kind of
Common Shares or other securities, as the case may be, which, if such Right had
been exercised immediately prior to such date and at a time when the Common
Share transfer books of the Corporation were open, he would have been entitled
to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment under
both this section 3.2 and section 4.2, the adjustment provided for in this
section 3.2 shall be in addition to, and shall be made prior to, any adjustment
required pursuant to section 4.2.
(2) In case the Corporation shall fix a record date for the issuance of rights,
options or warrants to all holders of Common Shares entitling them to subscribe
for or purchase (for a period expiring within 45 calendar days after such
record date) Common Shares [or shares having the same rights, privileges and
preferences as Common Shares ("equivalent common shares")] or securities
convertible into Common Shares or equivalent common shares at a price per
Common Share or per equivalent common share (or having a conversion price per
share, if a security convertible into Common Shares or equivalent common
shares) less than the Market Price per Common Share on such record date, the
Exercise Price in respect of the Rights to be in effect after such record date
shall be determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, (a) the numerator of which shall be
the number of Common Shares outstanding on such record date, plus the number of
Common Shares that the aggregate offering price of the total number of Common
Shares and/or equivalent common shares so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Market Price per Common Share and (b) the denominator of which
shall be the number of Common Shares outstanding on such record date, plus the
number of additional Common Shares and/or equivalent common shares to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price
may be paid by delivery of consideration, part or all of which may be in a form
other than cash, the value of such consideration shall be as determined in good
faith by the Board of Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights. Such adjustment shall be made successively
whenever such a record date is fixed and, in the event that such rights or
warrants are not so issued, the Exercise Price shall be adjusted to be the
Exercise Price which would then be in effect if such record date had not been
fixed.
(3) In case the Corporation shall fix a record date for a distribution to all
holders of Common Shares (including any such distribution made in connection
with a merger in which the Corporation is the continuing corporation) of
evidences of indebtedness, cash (other than a dividend paid in the ordinary
course or a dividend paid in Common Shares, but including any dividend payable
in securities other than Common Shares), assets or subscription rights or
warrants [excluding those referred to in subsection 3.2(2)), the Exercise Price
to be in effect after such record date shall be determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction,
(a) the numerator of which shall be the Market Price per Common Share on such
record date, less the fair market value (as determined in good faith by the
Board of Directors, whose determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Rights Agent and the holders
of the Rights) of the portion of the cash, assets or evidences of indebtedness
so to be distributed or of such subscription rights or warrants
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applicable to a Common Share and (b) the denominator of which shall be such
Market Price per Common Share. Such adjustments shall be made successively
whenever such a record date is fixed and, in the event that such distribution
is not so made, the Exercise Price shall be adjusted to be the Exercise Price
which would have been in effect if such record date had not been fixed.
(4) Notwithstanding anything herein to the contrary, no adjustment to the
Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least one percent in the Exercise Price; provided,
however, that any adjustments which by reason of this subsection 3.2(4) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this section 3.2 shall be made to
the nearest cent or to the nearest ten-thousandth of a Common Share or other
share, as the case may be. Notwithstanding the first sentence of this
subsection 3.2(4), any adjustment required by this section 3.2 shall be made no
later than the earlier of (i) two years from the date of the transaction which
mandates such adjustment and (ii) the Termination Date.
(5) If as a result of an adjustment made pursuant to section 4.1 or 4.2, the
holder of any Right thereafter exercised shall become entitled to receive any
shares other than Common Shares, thereafter the number of such other shares so
receivable upon exercise of any Right and the Exercise Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Shares
contained in subsections 3.2(1), (2), (3), (4), (5), (6)) (7), (8) and (9), and
the provisions of this Agreement with respect to the Common Shares shall apply
on like terms to any such other shares.
(6) All Rights originally issued by the Corporation subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of Common Shares
purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
(7) Unless the Corporation shall have exercised its election as provided in
subsection 3.2(8), upon each adjustment of the Exercise Price as a result of
the calculations made in subsections 3.2(2) and (3), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence
the right to purchase, at the adjusted Exercise Price, that number of Common
Shares (calculated to the nearest one ten-thousandth) obtained by:
(a) multiplying (x) the number of Common Shares covered by a
Right immediately prior to this adjustment by (y) the
Exercise Price in effect immediately prior to such adjustment
of the Exercise Price; and
(b) dividing the product so obtained by the Exercise Price in
effect immediately after such adjustment of the Exercise
Price.
(8) The Corporation may elect on or after the date of any adjustment of the
Exercise Price to adjust the number of Rights, in lieu of any adjustment in the
number of Common Shares purchasable upon the exercise of a Right. Each of the
Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of Common Shares for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that
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number of Rights (calculated to the nearest one ten-thousandth) obtained by
dividing the Exercise Price in effect immediately prior to adjustment of the
Exercise Price by the Exercise Price in effect immediately after adjustment of
the Exercise Price. The Corporation shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for the
adjustment and, if known at the time, the amount of the adjustment to be made.
This record date may be the date on which the Exercise Price is adjusted or any
day thereafter, but, if the Rights Certificates have been issued, shall be at
least ten days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment to the number of Rights
pursuant to this subsection 3.2(8), the Corporation shall, as promptly as
practicable, cause to be distributed to holders of record of Rights
Certificates on such record date, Rights Certificates evidencing, subject to
section 7.4, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Corporation, shall cause to
be distributed to such holders of record in substitution and replacement for
the Rights Certificates held by such holders prior to the date of adjustment,
and upon surrender thereof, if required by the Corporation, new Rights
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Rights Certificates so to be distributed shall be
issued, executed and countersigned in the manner provided for herein and may
bear, at the option of the Corporation, the adjusted Exercise Price and shall
be registered in the names of holders of record of Rights Certificates on the
record date specified in the public announcement.
(9) Irrespective of any adjustment or change in the Exercise Price or the
number of Common Shares issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Exercise Price per Common Share and the number of Common Shares which were
expressed in the initial Rights Certificates issued hereunder.
(10) In any case in which this section 3.2 shall require that an adjustment in
the Exercise Price be made effective as of a record date for a specified event,
the Corporation may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date the number
of Common Shares and other securities of the Corporation, if any, issuable upon
such exercise over and above the number of Common Shares and other securities
of the Corporation, if any, issuable upon such exercise on the basis of the
Exercise Price in effect prior to such adjustment; provided, however, that the
Corporation shall deliver to such holder an instrument evidencing such holder's
right to receive such additional shares (fractional or otherwise) or securities
upon the occurrence of the event requiring such adjustment.
(11) Notwithstanding anything in this section 3.2 to the contrary, the
Corporation shall be entitled to make such reductions in the Exercise Price, in
addition to those adjustments expressly required by this section 3.2, as and to
the extent that in their good faith judgment the Board of Directors shall
determine to be advisable in order that any (a) consolidation or subdivision of
the Common Shares, (b) issuance wholly for cash of any Common Shares at less
than the applicable Market Price, (c) issuance wholly for cash of any Common
Shares or securities that by their terms are convertible into or exchangeable
for Common Shares, (d) stock dividends or (e) issuance of rights, options or
warrants referred to in this section 3.2, hereafter made by the Corporation to
holders of its Common Shares, shall not be taxable to such shareholders.
(12) The Corporation covenants and agrees that, after the Separation Time, it
will not, except as permitted by section 7.1 or 7.7, take (or permit any
Subsidiary of the Corporation to take) any action if at
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the time such action is taken it is reasonably foreseeable that such action
will diminish substantially or otherwise eliminate the benefits intended to be
afforded by the Rights.
3.3 DATE ON WHICH EXERCISE IS EFFECTIVE
Each Person in whose name any certificate for Common Shares is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder
of record of the Common Shares represented thereby on, and such certificate
shall be dated, the date upon which the Rights Certificate evidencing such
Rights was duly surrendered (together with a duly completed Election to
Exercise and Declaration) and payment of the Exercise Price for such Rights
(and any applicable transfer taxes and other governmental charges payable by
the exercising holder hereunder) was made; provided, however, that if the date
of such surrender and payment is a date upon which the relevant Common Share
transfer books of the Corporation are closed, such Person shall be deemed to
have become the record holder of such Common Shares on, and such certificate
shall be dated, the next succeeding Business Day on which the relevant Common
Share transfer books of the Corporation are open.
ARTICLE 4- ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF
CERTAIN TRANSACTIONS
4.1 FLIP-OVER EVENT
(1) Subject to sections 4.3 and 4.4 and subsection 7.1(2), in the event that
prior to the Expiration Time the Corporation enters into, consummates or
permits or suffers to occur any Flip-Over Event, the Corporation shall take
such action as shall be necessary to ensure that:
(a) each Right shall from and after the date upon which any
Flip-Over Event shall become effective constitute the right
to purchase from such Person into which or with which the
Corporation shall be consolidated, merged or amalgamated or
with which the Corporation shall enter into a statutory
arrangement or to which the Corporation shall sell assets
(such Person being herein referred to as the "Flip-Over
Entity"), upon exercise thereof in accordance with the terms
hereof, that number of Common Shares of the Flip-Over Entity
having an aggregate Market Price on the date of consummation
or occurrence of such Flip-Over Event equal to twice the
Market Price for an amount in cash equal to the Exercise
Price (such right to be appropriately adjusted in a manner
analogous to the applicable adjustments to the Rights
provided for in section 3.2 in the event that after such date
of consummation or occurrence an event analogous to any of
the events described in section 3.2 shall have occurred with
respect to such Common shares); and
(b) the Flip-Over Entity shall be subject to all of the
obligations, liabilities and duties of the Corporation
pursuant to this Agreement;
(2) The Corporation shall not enter into, consummate or permit or suffer to
occur any Flip-Over Event unless and until it shall have entered into an
agreement with the Flip-Over Entity supplemental to this
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Agreement pursuant to which the Flip-Over Entity shall covenant and agree, for
the benefit of the holders from time to time of the Rights, to the matters
contemplated by subsection 4.1(1) of this Agreement.
(3) The Corporation shall do all such acts and things and shall ensure that the
Flip-Over Entity does all such acts and things as shall be necessary to ensure
compliance with the provisions of subsection 4.1(1) of this Agreement.
4.2 FLIP-IN EVENT
(1) Subject to subsection 4.2(2), section 4.4 and subsections 7.1(2) and
7.1(3), in the event that prior to the Expiration Time a Flip-In Event shall
occur, each Right shall constitute, effective on the Stock Acquisition Date,
the right to purchase from the Corporation, upon payment of the Exercise Price
and exercise of such Right on or after the Separation Time and in accordance
with the terms hereof, that number of Common Shares having an aggregate Market
Price on the date of consummation or occurrence of such Flip-In Event equal to
twice the Exercise Price for an amount in cash equal to the Exercise Price
(such right to be appropriately adjusted in a manner analogous to the
applicable adjustments provided for in section 3.2 in the event that after the
Stock Acquisition Date an event analogous to any of the events described in
section 3.2 shall have occurred).
(2) Notwithstanding anything in this Agreement to the contrary, upon the
occurrence of any Flip-in Event, any Rights that are Beneficially Owned by (a)
an Acquiring Person (or any Affiliate or Associate of an Acquiring Person or
any Person acting jointly or in concert with an Acquiring Person or any
Affiliate or Associate of an Acquiring Person), or (b) a transferee or other
successor in title directly or indirectly (a "Transferee") of Rights held by an
Acquiring Person (or any Affiliate or Associate of an Acquiring Person or any
Person acting jointly or in concert with an Acquiring Person or any Affiliate
or Associates of an Acquiring Person) who becomes a Transferee concurrently
with or subsequent to the Acquiring Person becoming such shall become null and
void without any further action, and any holder of such Rights (including
Transferees) shall not have any rights whatsoever to exercise such Rights under
any provision of this Agreement and shall not have thereafter any other rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise.
(3) In the event that there shall not be sufficient Common Shares authorized
for issuance to permit the exercise in full of the Rights in accordance with
this section 4.2, the Corporation shall take all such action as may be
necessary to authorize additional Common Shares for issuance upon the exercise
of the Rights.
(4) From and after the Separation Time, the Corporation shall do all such acts
and things as shall be necessary and within its power to ensure compliance with
provisions of this section 4.2, including without limitation, all such acts and
things as may be required to satisfy the requirements of the Company Act (B.C.)
and the Securities Act (B.C.) and the Securities Acts or comparable legislation
in each of the Provinces of Canada in respect of the issue of Common Shares
upon the exercise of Rights in accordance with this Agreement.
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4.3 OBLIGATIONS OF THE CORPORATION
The Corporation covenants and agrees that it shall not enter into or engage in
any transaction of the kind referred to in section 4.1 if (a) at the time of or
immediately after such transaction there are any rights, options, warrants,
securities or other instruments outstanding or any other arrangements,
agreements or instruments in effect which would eliminate or otherwise diminish
in any respect the benefits intended to be afforded by the Rights and this
Agreement to the holders of Rights upon consummation of such transaction, or
(b) prior to, simultaneously with or immediately after any transaction of the
kind referred to in section 4.1, the shareholders or holders of rights or
interest in or to any other Person shall have received a distribution of Rights
previously owned by such other Person or any of its Affiliates or Associates.
The provisions of this section 4.3 shall apply to successive transactions of
the kind referred to in section 4.1.
4.4 EXCHANGE OPTION
(1) In the event that the Board of Directors acting in good faith shall
determine that conditions exist which would eliminate or otherwise materially
diminish in any respect the benefits intended to be afforded to the holders of
Rights pursuant to this Agreement, the Board of Directors may, at its option,
at any time after a Flip-In Event has occurred, authorize the Corporation to
issue or deliver in respect of each Right which is not void pursuant to
subsection 4.2(2), either (a) in return for the applicable Exercise Price and
the Right, debt or equity securities or assets (or a combination thereof)
having a value equal to twice the applicable Exercise Price, or (b) in return
for the Right, subject to any amounts that may be required to be paid under
applicable law, debt or equity securities or assets (or a combination thereof)
having a value equal to the value of the Right, in full and final settlement of
all rights attaching to the Rights, where in either case the value of such debt
or equity securities or other assets (or a combination thereof) and, in the
case of paragraph (b), the value of the Right, shall be determined by the Board
of Directors which may rely upon the advice of a nationally or internationally
recognized firm of investment dealers or investment bankers selected by the
Board of Directors.
(2) If the Board of Directors authorizes the exchange of debt or equity
securities or assets for Rights pursuant to subsection 4.4(1), without any
further action or notice the right to exercise the Rights will terminate and
the only right thereafter of a holder of Rights shall be to receive the debt or
equity securities or assets in accordance with the exchange formula authorized
by the Board of Directors. Within ten Business Days after the Board of
Directors has authorized the exchange of debt or equity securities or assets
for Rights pursuant to subsection 4.4(1), the Corporation shall give notice of
exchange to the holders of such Rights by mailing such notice to all such
holders at their last addresses as they appear upon the register of Rights
holders maintained by the Rights Agent. Each such notice of exchange will state
the method by which the exchange of debt or equity securities or assets for
Rights will be effected.
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ARTICLE 5- SPECIAL MEETINGS OF INDEPENDENT SHAREHOLDERS
TO CONSIDER PERMITTED BIDS
5.1 MEETINGS OF INDEPENDENT SHAREHOLDERS
In the event that an Offeror makes a Takeover Bid which is a Permitted Bid, the
Board of Directors shall call and hold a special meeting (the "Special
Meeting") of Independent Shareholders to consider and if thought fit to approve
a resolution (the "Referendum") on the question whether such Takeover Bid (as
such Takeover Bid may be amended or revised by the Offeror from time to time
either to waive a condition thereof or to increase the price per Common Share
to be paid to holders of Common Shares without reduction in amount or change in
terms of any security or reduction in amount of cash that are components
thereof) should be approved. The Special Meeting shall be held on a date fixed
by the Board of Directors, which date shall be as soon as practicable after the
date of mailing of the Takeover Bid, taking into account:
(a) the time required to prepare a management proxy circular and
to comply with applicable securities laws and other
regulatory requirements relating to the holding of meetings
of shareholders, record dates and a distribution of
proxy-related materials to shareholders and intermediaries;
(b) other actual or pending Takeover Bids including Permitted
Bids, if any; and
(c) other factors considered relevant by the Board of Directors;
and not more than 110 days after the date (the "Offer Date") on which all of
the documents referred to in subsection 1.1(25) or which have otherwise been
sent to the holders of Common Shares by the Offeror in connection with such
Takeover Bid have been delivered to the Corporation; provided that if a special
meeting of Independent Shareholders has already been called for the purpose of
considering a referendum approving another Takeover Bid and such other special
meeting is scheduled for a date not less than 45 days following the Offer Date,
then, subject to compliance with applicable securities laws and other
regulatory requirements, both the Referendum and such other referendum shall be
voted on at such other special meeting. The Board of Directors shall fix a
record date for determining the Independent Shareholders entitled to receive
notice of the Special Meeting in accordance with applicable law and regulatory
requirements and the articles of the Corporation. The Special Meeting shall be
conducted in accordance with the rules for holding meetings of shareholders set
forth in the articles of the Corporation applied mutatis mutandis. At the
Offeror's written request, the Corporation shall include with its management
proxy circular prepared in connection with the Special Meeting, proxy
solicitation materials submitted by the Offeror provided that the Offeror by
written agreement with the Corporation in form and substance satisfactory to
the Corporation shall have indemnified the Corporation from and against all
costs and liabilities whatsoever, directly or indirectly, resulting from or
arising out of any misstatements, misrepresentations, misleading statements or
untrue statements contained in or omissions to state any fact in the Offeror's
proxy solicitation materials necessary to make any statement contained therein
not misleading in light of the circumstances in which it was made and shall
have agreed to pay the Corporation's incremental costs incurred as a result of
including such materials with the Corporation's management information
circular. Notwithstanding the foregoing, no Special Meeting shall be held from
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and after such time as any Person becomes an Acquiring Person and any Special
Meeting scheduled prior to such time and not theretofore held shall be
canceled.
5.2 APPROVAL
If at the Special Meeting the Referendum receives the affirmative vote
of Independent Shareholders holding or representing by proxy more than 50
percent of the Common Shares of the Corporation in respect of which votes are
cast at such meeting, then acquisitions of Voting Shares made under the
Permitted Bid approved by the Referendum shall be deemed to be Permitted Bid
Acquisitions provided that such Takeover Bid (a) is not thereafter amended or
varied (except to waive any condition, to extend the deposit period or to
increase the consideration to be paid to holders of Common Shares without
reduction in amount or change in terms of any security or reduction in amount
of cash that are components thereof), and (b) thereafter complies with all of
the requirements set out in subsection 1.1(25), and provided that all Common
Shares of the Corporation deposited pursuant to such Takeover Bid are taken up
and paid for not later than the eleventh Business Day after the date of the
Special Meeting
5.3 FIDUCIARY DUTIES OF THE BOARD OF DIRECTORS OF THE CORPORATION
For clarification it is understood that nothing contained in this article 5
shall be deemed to affect the obligation of the Board of Directors to exercise
its fiduciary duties. Without limiting the generality of the foregoing, nothing
contained herein shall be construed to suggest or imply that the Board of
Directors shall not be entitled to recommend that shareholders of the
Corporation reject any Takeover Bid, or to take any other action (including,
without limitation, the commencement, prosecution, defense or settlement of any
litigation or regulatory proceedings and the submission of additional or
alternative Takeover Bids or other proposals to the Special Meeting or
otherwise) with respect to any Takeover Bid that the Board of Directors
believes is necessary or appropriate in the exercise of its fiduciary duties.
5.4 FURTHER ACTS
Nothing contained in this article 5 shall be construed as limiting or
prohibiting the Corporation or any Offeror from proposing or engaging in any
acquisition, disposition or other transfer of any securities of the
Corporation, any merger, amalgamation or arrangement involving the Corporation,
any sale or other transfer of assets of the Corporation, any liquidation,
dissolution or winding-up of the Corporation or any other business combination
or other transaction, or any other action by the Corporation or such Offeror;
provided that the holders of Rights shall have the rights set forth in this
Agreement with respect to any such acquisition, disposition, transfer, merger,
amalgamation, arrangement, sale, liquidation, dissolution, winding-up, business
combination, transaction or action.
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ARTICLE 6- THE RIGHTS AGENT
6.1 GENERAL
(1) The Corporation hereby appoints the Rights Agent to act as agent for the
Corporation and the holders of Rights in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Corporation may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable. In the event the Corporation appoints one or more
Co-Rights Agents, the respective duties of the Rights Agent and the Co-Rights
Agents shall be as the Corporation may determine. The Corporation also agrees
to indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability or expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Right Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability, which right to indemnification will survive the termination of this
Agreement.
(2) The Rights Agent shall be protected and shall incur no liability for or in
respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any certificate for Common
Shares, Rights Certificate, certificate for other securities of the
Corporation, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.
6.2 MERGER OR AMALGAMATION OR CHANGE OF NAME OF RIGHTS AGENT
(1) Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or amalgamated or with which it may be consolidated, or any
corporation resulting from any merger, amalgamation or consolidation to which
the Rights Agent or any successor Rights Agent is a party, or any corporation
succeeding to the shareholder or stockholder services business of the Rights
Agent or any successor Rights Agent, will be the successor to the Rights Agent
under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of section 6.4 hereof. In case at the time such successor Rights
Agent succeeds to the agency created by this Agreement any of the Rights
Certificates have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates has not been countersigned, any successor Rights
Agent may countersign such Rights Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates will have the full force provided in
the Rights Certificates and in this Agreement.
(2) In case at any time the name of the Rights Agent is changed and at such
time any of the Rights Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Rights Certificates so countersigned; and in case at that
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time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
6.3 DUTIES OF RIGHTS AGENT
The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the
Corporation and the holders of Rights Certificates, by their acceptance
thereof, shall be bound:
(a) the Rights Agent may consult with legal counsel (who may be
legal counsel for the Corporation) and the opinion of such
counsel will be full and complete authorization and
protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such
opinion;
(b) whenever in the performance of its duties under this
Agreement the Rights Agent deems it necessary or desirable
that any fact or matter be provided or established by the
Corporation prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a
certificate signed by a Person believed by the Rights Agent
to be the Chairman of the Board, the President or any
Vice-President and by the Treasurer or any
Assistant-Treasurer or the Secretary or any
Assistant-Secretary of the Corporation and delivered to the
Rights Agent; and such certificate will be full authorization
to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in
reliance upon such certificate;
(c) the Rights Agent will be liable hereunder only for its own
negligence, bad faith or willful misconduct;
(d) the Rights Agent will not be liable for or by reason of any
of the statements of fact or recitals contained in this
Agreement or in the certificates for Common Shares or the
Rights Certificates (except its countersignature thereof) or
be required to verify the same, but all such statements and
recitals are and will be deemed to have been made by the
Corporation only;
(e) the Rights Agent will not be under any responsibility in
respect of the validity of this Agreement or the execution
and delivery hereof (except the due authorization, execution
and delivery hereof by the Rights Agent) or in respect of the
validity or execution of any Common Share certificate or
Rights Certificate (except its countersignature thereof); nor
will it be responsible for any breach by the Corporation of
any covenant or condition contained in this Agreement or in
any Rights Certificate; nor will it be responsible for any
change in the exercisability of the Rights [including the
Rights becoming void pursuant to subsection 4.2(2)] or any
adjustment required under the provisions of section 3.2 or
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responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the
exercise of Rights, after receipt of the certificate
contemplated by section 3.2 describing any such adjustment);
nor will it by any act hereunder be deemed to make any
representation or warranty as to the authorization of any
Common Shares to be issued pursuant to this Agreement or any
Rights or as to whether any Common Shares will, when issued,
be duly and validly authorized, executed, issued and
delivered as fully paid and non-assessable;
(f) the Corporation agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by
the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement;
(g) the Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties
hereunder from any Person believed by the Rights Agent to be
the Chairman of the Board, the President, any Vice-President
or the Secretary or any Assistant-Secretary or the Treasurer
or any Assistant-Treasurer of the Corporation, and to apply
to such Persons for advice or instructions in connection with
its duties, and it shall not be liable for any action taken
or suffered by it in good faith in accordance with
instructions of any such Person;
(h) the Rights Agent and any shareholder or stockholder,
director, officer or employee of the Rights Agent may buy,
sell or deal in Common Shares, Rights or other securities of
the Corporation or become pecuniarily interested in any
transaction in which the Corporation may be interested, or
contract with or lend money to the Corporation or otherwise
act as fully and freely as though it were not the Rights
Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the
Corporation or for any other legal entity; and
(i) the Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and
the Rights Agent will not be answerable or accountable for
any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Corporation resulting from
any such act, default, neglect or misconduct, provided
reasonable care was exercised in the selection and continued
employment thereof.
6.4 CHANGE OF RIGHTS AGENT
The Rights Agent may resign and be discharged from its duties under this
Agreement upon 90 days' notice (or such lesser notice as is acceptable to the
Corporation) in writing mailed to the Corporation and to the transfer agent for
the Common Shares by registered or certified mail, and to the holders of the
Rights in accordance with section 7.8. The Corporation may remove the Rights
Agent upon 30 days' notice in writing, mailed to the Rights Agent and to the
transfer agent for the Common Shares by registered or
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certified mail, and to the holders of the Rights in accordance with section
7.8. If the Rights Agent should resign or be removed or otherwise become
incapable of acting, the Corporation will appoint a successor to the Rights
Agent. If the Corporation fails to make such appointment within a period of 30
days after such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of any Rights (which holder shall, with such notice, submit such
holder's Rights Certificate for inspection by the Corporation), then the holder
of any Rights may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Corporation or by such a court, shall be a corporation
incorporated under the laws of Canada or a province thereof authorized to carry
on the business of a trust company in the province of British Columbia. After
appointment, the successor Rights Agent will be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Rights Agent without further act or deed; but if the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, the Corporation will file notice thereof in
writing with the predecessor Rights Agent and the transfer agent for the Common
Shares, and mail a notice thereof in writing to the holders of the Rights.
Failure to give any notice provided for in this section 6.4, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
ARTICLE 7- MISCELLANEOUS
7.1 REDEMPTION AND WAIVER
(1) The Board of Directors may, at its option, at any time prior to the
occurrence of a Flip-In Event, elect to redeem all but not less than all of the
then outstanding Rights at a redemption price of $0.001 per Right appropriately
adjusted in a manner analogous to the applicable adjustment provided for in
section 3.2 if an event of the type analogous to any of the events described in
section 3.2 shall have occurred (such redemption price being herein referred to
as the "Redemption Price"). The redemption of the Rights by the Board of
Directors may be made effective at such time, on such basis and with such
condition as the Board of Directors in it sole discretion may establish.
(2) The Board of Directors may, until the Stock Acquisition Date, upon written
notice delivered to the Rights Agent, waive the application of section 4.1 or
4.2 to any particular Flip-Over Event or Flip-In Event.
(3) The Board of Directors may prior to the Stock Acquisition Date waive the
application of section 4.2 to any particular Flip-In Event, provided that both
of the following condition are satisfied:
(a) the Board of Directors has determined that the Acquiring
Person became an Acquiring Person by inadvertence and without
any intent or knowledge that he would become an Acquiring
Person; and
(b) such Acquiring Person has reduced his Beneficial Ownership of
Voting Shares such that at the time of waiver pursuant to
this subsection 7.1(3) he is no longer an Acquiring Person.
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(4) In the event that a Person makes a Permitted Bid which, within 120 days
after the date of the Permitted Bid, has been accepted by the holders of not
less than 90 percent of the then outstanding Common Shares and other than the
Common Shares held at the date of the Permitted Bid by or on behalf of the
Offeror or an Affiliate or Associate of the Offeror, then the Board of
Directors shall, immediately upon the consummation of such acquisition, without
further formality be deemed to have elected to redeem the Rights at the
Redemption Price.
(5) If the Board of Directors elects or is deemed to have elected to redeem the
Rights, the right to exercise the Rights will thereupon, without further action
and without notice, terminate and the only right thereafter of the holders of
Rights shall be to receive the Redemption Price.
(6) Within 30 days after the Board of Directors electing or having been deemed
to have elected to redeem the Rights, the Corporation shall give notice of
redemption to the holders of the then outstanding Rights by mailing such notice
to each such holder at his last address as it appears upon the registry books
of the Rights Agent or, prior to the Separation Time, on the registry books of
the transfer agent for the Common Shares. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made. The Corporation may not
redeem, acquire or purchase for value any Rights at any time in any manner
other than that specifically set forth in this section 7.1 or, prior to the
Separation Time, in connection with the purchase of Common Shares.
7.2 EXPIRATION
No Person shall have any rights pursuant to this Agreement or in respect of any
Right after the Expiration Time, except the Rights Agent as specified in
section 6.1.
7.3 ISSUANCE OF NEW RIGHTS CERTIFICATES
Notwithstanding any provision of this Agreement or of the Rights to the
contrary, the Corporation may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by the Board of Directors to
reflect any adjustment or change in the number or kind or class of shares
purchasable upon exercise of Rights made in accordance with the provisions of
this Agreement.
7.4 FRACTIONAL RIGHTS AND FRACTIONAL SHARES
(1) The Corporation shall not be required to issue fractions of Rights or to
distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Right would otherwise
be issuable, an amount in cash equal to the same fraction of the Market Price
of a whole Right.
(2) The Corporation shall not be required to issue fractions of Common Shares
upon exercise of the Rights or to distribute certificates which evidence
fractional Common Shares. In lieu of issuing fractional
36
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Common Shares, the Corporation shall pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided, an
amount in cash equal to the same fraction of the Market Price of a whole Common
Share.
7.5 SUPPLEMENTS AND AMENDMENTS
(1) The Corporation may from time to time supplement or amend this Agreement:
(a) to make any changes, which the Board of Directors acting in
good faith may deem necessary or desirable, provided that no
such supplement or amendment made on or after the Stock
Acquisition Date shall materially adversely affect the
interests of the holders of Rights generally and provided
further that no such supplement or amendment shall be made to
the provisions of Article 6 except with the written
concurrence of the Rights Agent to such supplement or
amendment;
(b) without the approval of the holders of Rights, to provide for
the issuance of Rights to holders of any Voting Shares or
equity securities (other than Common Shares) in the capital
of the Corporation or securities convertible into Voting
Shares, equity securities or Common Shares, and for the
purposes of this clause 7.5(l)(b) "equity security" shall
have the meaning ascribed thereto in subsection 74(1) of the
Securities Act (British Columbia); and
(c) without the approval of the holders of Rights, in order to
cure any ambiguity or to correct or supplement any provision
contained herein which may be inconsistent with any other
provisions herein or otherwise defective.
(2) Any supplement or amendment to this Agreement made by the Board of
Directors pursuant to clause (a) of subsection 7.5(1) shall, if made prior to
the Separation Time, be submitted to the shareholders of the Corporation at the
next meeting of shareholders and the shareholders may, by ordinary resolution,
confirm or reject such supplement or amendment; if made at or after the
Separation Time such supplement or amendment shall be submitted to the holders
of the Rights at a meeting to be called for on a date not later than
immediately following the next meeting of shareholders and the holders of
Rights may, by ordinary resolution, confirm or reject such supplement or
amendment.
(3) A supplement or amendment to this Agreement made by the Board of Directors
pursuant to clause (a) of subsection 7.5(1) shall be effective from the date of
the relevant resolution of the Board of Directors until it is confirmed or
rejected under subsection 7.5(2) or until it ceases to be effective under
subsection 7.5(4) and, where the supplement or amendment is confirmed, it
continues in effect in the form in which it was so confirmed.
(4) If a supplement or amendment to this Agreement made by the Board of
Directors pursuant to clause (a) of subsection 7.5(1) is rejected by the
shareholders or holders of Rights or is not submitted to the shareholders or
holders of Rights as required by subsection 7.5(2), then such supplement or
amendment shall cease to be effective from and after the termination of the
meeting at which it was rejected or to which it should have been but was not
submitted, or from and after the last date for which a meeting of holders of
37
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Rights should have been but was not called, and no subsequent resolution of the
directors to supplement or amend the Agreement to substantially the same effect
shall be effective until confirmed by the shareholders or holders of Rights, as
the case may be.
7.6 RIGHTS OF ACTION
Subject to the terms of this Agreement, all rights of action in respect of this
Agreement, other than rights of action vested solely in the Rights Agent, are
vested in the respective holders of the Rights; and any holder of any Right,
without the consent of the Rights Agent or the holder of any other Right, may,
on such holder's own behalf and for such holder's own benefit and the benefit
of other holders of Rights, enforce, and may institute and maintain any suit,
action or proceeding against the Corporation to enforce, or otherwise act in
respect of, such holder's right to exercise Rights in the manner provided in
such holder's Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
7.7 NOTICE OF PROPOSED ACTIONS
In case the Corporation shall propose after the Separation Time and prior to
the Expiration Time:
(a) to effect or permit (in cases where the Corporation's
permission is required) any Flip-In Event or Flip-Over Event;
or
(b) to effect the liquidation, dissolution or winding-up of the
Corporation or the sale of all or substantially all of the
Corporation's assets;
then, in each such case, the Corporation shall give to each holder of a Right,
in accordance with section 7.8, a notice of such proposed action, which shall
specify the date on which such Flip-In Event or Flip-Over Event, liquidation,
dissolution or winding-up is to take place, and such notice shall be so given
at least 20 Business Days prior to the date of taking such proposed action.
7.8 NOTICES
Notices or demands authorized or required by this Agreement to be given or made
by the Rights Agent or by the holder of any Rights to or on the Corporation
shall be sufficiently given or made if delivered or sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:
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Flotek Industries Inc.
305 - 0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Xxxxxx
Attention: President
Any notice or demand authorized or required by this Agreement to be given or
made by the Corporation or by the holder of any Rights to or on the Rights
Agent shall be sufficiently given or made if delivered or sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing
with the Corporation) as follows:
Pacific Corporate Trust Company
000 - 000 Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Xxxxxx
Attention: President
Notices or demands authorized or required by this Agreement to be given or made
by the Corporation or the Rights Agent to or on the holder of any Rights shall
be sufficiently given or made if delivered or sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as it appears
upon the registry books of the Rights Agent or, prior to the Separation Time,
on the registry books of the Corporation for the Common Shares. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice.
7.9 COSTS OF ENFORCEMENT
The Corporation agrees that if the Corporation or any other Person the
securities of which are purchasable upon exercise of Rights fails to fulfill
any of its obligations pursuant to this Agreement, then the Corporation or such
Person will reimburse the holder of any Rights for the costs and expenses
(including legal fees) incurred by such holder in actions to enforce his rights
pursuant to any Rights or this Agreement.
7.10 SUCCESSORS
All the covenants and provisions of this Agreement by or for the benefit of the
Corporation or the Rights Agent shall bind and ensure to the benefit of their
respective successors and assigns hereunder.
39
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7.11 BENEFITS OF THIS AGREEMENT
Nothing in this Agreement shall be construed to give to any Person other than
the Corporation, the Rights Agent and the holders of the Rights any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Corporation, the Rights Agent and
the holders of the Rights.
7.12 GOVERNING LAW
This Agreement and each Right issued hereunder shall be deemed to be a contract
made under the laws of the Province of British Columbia and for all purposes
shall be governed by and construed in accordance with the laws of such province
applicable to contracts to be made and performed entirely within such province.
7.13 COUNTERPARTS
This Agreement may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument.
7.14 SEVERABILITY
If any section, clause, term or provision hereof or the application thereof to
any circumstance shall, in any jurisdiction and to any extent, be invalid or
unenforceable, such section, clause, term or provision shall be ineffective as
to such jurisdiction to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable the remaining sections,
clauses, terms and provisions hereof or the application of such section,
clause, term or provision to circumstances other than those as to which it is
held invalid or unenforceable.
7.15 EFFECTIVE DATE
This Agreement is in full force and effect in accordance with its terms from
the date hereof.
7.16 DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS
The Board of Directors shall have the exclusive power and authority to
administer and amend this Agreement in accordance with the terms hereof and to
exercise all rights and powers specifically granted to the Board of Directors
or the Corporation, or as may be necessary or advisable in the administration
of this Agreement, including, without limitation, the right and power to (a)
interpret the provisions of this
40
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Agreement (including a determination to terminate or not to terminate the
Rights or to amend the Agreement in accordance with the terms hereof). All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (ii) below, all omissions with respect to the foregoing)
which are done or made by the Board of Directors, in good faith, shall (i) be
final, conclusive and binding on the Corporation, the Rights Agent, the holders
of the Rights Certificates and all other parties and (ii) not subject the Board
of Directors to any liability to the holders of the Rights Certificates.
7.17 SUCCESSOR CORPORATIONS
The Corporation shall not consummate or permit or suffer to occur any
consolidation, amalgamation, merger or transfer of the undertaking or assets of
the Corporation as an entirety or substantially as an entirety to another
Corporation (the "Successor Corporation") unless the Successor Corporation
resulting from such consolidation, amalgamation, merger or transfer (if not the
Corporation) shall expressly assume, by supplemental agreement in form
satisfactory to the Rights Agent and executed and delivered to the Rights
Agent, the due and punctual performance and observance of each and every
covenant and condition of this Agreement to be performed and observed by the
Corporation.
7.18 MEETINGS OF HOLDERS OF RIGHTS
Any meeting of holders of Rights required or permitted to be held hereunder
shall be called, convened and held, as nearly as may be possible, as if it
were, and subject to the rules and regulations that would govern, a meeting of
the holder of Common Shares.
7.19 SHAREHOLDER REVIEW
At the first annual meeting (the "Annual Meeting") of shareholders of the
Corporation held after July 28, 1993 or at a special meeting (the "Special
Meeting") called thereafter and before the close of business on the fifth
anniversary of the date hereof for such purpose, provided that a Flip-In Event
has not occurred prior to such meeting, the Board of Directors may submit a
resolution to the holders of Voting Shares of the Corporation for their
consideration and, if thought advisable, approval ratifying the continued
existence of the Rights. If a majority of the votes cast on such resolution,
excluding votes cast by any Grandfathered Person or Grandfathered Person
Transferee who as at the record date for voting at such meeting Beneficially
Owns 20 percent or more of the outstanding Voting Shares of the Corporation
then outstanding, are voted against such resolution, the close of business on
the day of such meeting shall be and be deemed for all purposes to be the
Expiration Time.
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7.20 TIME OF THE ESSENCE
Time shall be of the essence in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
FLOTEK INDUSTRIES INC.
By: /s/ Wm. X. XxXXX c/s
---------------------------
Wm. X. XxXxx
President
PACIFIC CORPORATE TRUST COMPANY
By: /s/ Illegible c/s
------------------------------------
Authorized Signatory
By: /s/ Illegible
------------------------------------
Authorized Signatory
42
EXHIBIT "A"
[FORM OF RIGHTS CERTIFICATE]
Certificate No. _______________ _______________ Rights
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
CORPORATION, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES (SPECIFIED IN SUBSECTION 4.2(2) OF THE RIGHTS
AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ITS
AFFILIATES OR ASSOCIATES OR ANY PERSON ACTING JOINTLY OR IN CONCERT
WITH AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE OF AN ACQUIRING
PERSON OR ANY TRANSFEREES OF RIGHTS HELD BY THE FOREGOING (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) SHALL BECOME VOID WITHOUT
ANY FURTHER ACTION.
RIGHTS CERTIFICATE
This certifies that _________________________________ , or registered assigns,
is the registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms, provisions and
conditions of the Shareholder Protection Rights Plan Agreement dated as of the
28th day of July, 1993, (the "Rights Agreement") between Flotek Industries
Inc., a corporation incorporated under the Company Act (B.C.) (the
"Corporation"), and Pacific Corporate Trust Company, a trust company
incorporated under the laws of British Columbia, as rights agent (the "Rights
Agent" which term shall include any successor Rights Agent under the Rights
Agreement) to purchase from the Corporation at any time after the Separation
Time (as such term is defined in the Rights Agreement) and prior to the close
of business on the 31st day of July, 1998, or any earlier Expiration Date (as
such term is defined in the Rights Agreement, one fully paid common share of
the Corporation (a "Common Share") at the Exercise Price referred to below,
upon presentation and surrender of this Rights Certificate together with the
Form of Election to Exercise and Declaration of Ownership duly executed and
submitted to the Rights Agent at its principal office in Vancouver. The
Exercise Price shall initially be $10.00 per Right and shall be subject to
adjustment in certain events as provided in the Rights Agreement.
In certain circumstances described in the Rights Agreement, each Right
evidenced hereby may entitle the registered holder thereof to purchase or
receive more than one Common Share or to purchase and receive securities of an
entity other than the Corporation or securities or assets of the Corporation
other than Common Shares, all as provided in the Rights Agreement.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Rights Agent, the Corporation and the holders of the Rights Certificates.
43
- 2 -
The Rights Certificate, with or without other Rights Certificates, upon
surrender at any of the offices of the Rights Agent designated for such
purpose, may be exchanged for another Rights Certificate or Rights Certificates
of like tenor and date evidencing an aggregate number of Rights equal to the
aggregate number of Rights evidenced by the Rights Certificate or Rights
Certificates surrendered. If this Rights Certificate shall be exercised in
part, the registered holder shall be entitled to receive, upon surrender
hereof, another Rights Certificate or Rights Certificates for the number of
whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by this
Rights Certificate (i) may be, and under certain circumstances are required to
be, redeemed by the Corporation at a redemption price of $0.001 per Right and
(ii) may be exchanged at the option of the Corporation for debt or other equity
securities or assets of the Corporation.
No fractional Common Shares will be issued upon the exercise of any Right or
Rights evidenced hereby, but in lieu thereof a cash payment will be made, as
provided in the Rights Agreement. A holder of this Rights Certificate who
wishes to exercise the Rights evidenced hereby must complete, sign and deliver
a Declaration of Ownership in the form attached hereto.
No holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Common Shares or
of any other shares of the Corporation which may at any time be issuable upon
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the
rights of a shareholder of the Corporation or any right to vote for the
election of directors or upon any matter submitted to shareholders of the
Corporation at any meeting thereof, or to give or withhold consents to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders of the Corporation (except as provided in the Rights Agreement),
or to receive dividends or subscription rights, or otherwise, until the Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose until
it shall have been manually countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officer of the Corporation and of
its corporate seal.
Date: ____________________________________
FLOTEK INDUSTRIES INC.
By: ______________________________ c/s
President
44
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Countersigned:
PACIFIC CORPORATE TRUST COMPANY
By: _________________________________
Authorized Signatory
45
FORM OF ASSIGNMENT
(To be attached to each Rights Certificate)
(to be executed by the registered holder if such
holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED ____________________________________________________________
hereby sells, assigns and transfers unto
----------------------------------------
(Please print name and address of transferee)
--------------------------------------------
--------------------------------------------
--------------------------------------------
the Rights represented by this Rights Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
____________________________________ , as attorney, to transfer the within
rights on the books of the Corporation, with full power of substitution.
Date: _________________________
Signature Guaranteed: ___________________________________
Signature
(Signature must correspond to name
as written upon the face of this
Rights Certificate in every
particular, without alteration or
enlargement or any change
whatsoever.)
Signature must be guaranteed by a member firm of a recognized stock exchange in
Canada or a commercial bank or trust company having an office or correspondent
in Canada.
--------------------------------------------------------------------------------
(to be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights and
Common Shares, that the Rights evidenced by this Rights Certificate are not,
and, to the knowledge of the undersigned, have never been, Beneficially Owned
by an Acquiring Person or an Affiliate or Associate thereof or any Person
acting jointly or in concert with any of the foregoing (as defined in the
Rights Agreement).
-----------------------------------
Signature
46
(To be attached to each Rights Certificate)
FORM OF ELECTION TO EXERCISE
TO:
The undersigned hereby irrevocably elects to exercise _________________________
whole Rights represented by the attached Rights Certificate to purchase the
Common Shares issuable upon the exercise of such Rights and requests that
certificates for such Common Shares be issued to:
------------------------------------------------
(Name)
------------------------------------------------
(Address)
------------------------------------------------
(City, Province and Postal Code)
------------------------------------------------
(Social Insurance, Social Security or other
Taxpayer Identification Number)
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
------------------------------------------------
(Name)
------------------------------------------------
(Address)
------------------------------------------------
(City, Province and Postal Code)
Date: _________________________
Signature Guaranteed: ___________________________________
Signature
(Signature must correspond to name
as written upon the face of this
Rights Certificate in every
particular, without alteration or
enlargement or any change
whatsoever.)
47
- 2 -
Signature must be guaranteed by a member firm of a recognized stock exchange in
Canada or a commercial bank or trust company having an office or correspondent
in Canada.
--------------------------------------------------------------------------------
(to be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights and
Common Shares, that the Rights evidenced by this Rights Certificate are not,
and, to the knowledge of the undersigned, have never been, Beneficially Owned
by an Acquiring Person or an Affiliate or Associate thereof or any Person
acting jointly or in concert with any of the foregoing (as defined the Rights
Agreement).
-----------------------------------
Signature
--------------------------------------------------------------------------------
NOTICE
In the event the certification set forth above in the Forms of Assignment and
Election is not completed, the Company will deem the Beneficial Owner of the
Rights evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and
accordingly such Rights will be null and void.
48
(To be attached to each Rights Certificate)
FLOTEK INDUSTRIES INC.
DECLARATION OF OWNERSHIP
IN RESPECT OF CANADIAN* STATUS
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
(name and address for which registration has been requested)
A request has been received to register _______________________ common shares
of Flotek Industries Inc. in your name on the exercise of the Rights
represented by the attached Rights Certificate.
In order for these shares to be registered in your name, it will be necessary
for you to complete and return this declaration to PACIFIC CORPORATE TRUST
COMPANY, Transfer Agent for Flotek Industries Inc.
-------------------------------------------------------------------------------
TO: FLOTEK INDUSTRIES INC.
The person whose name appears above make this declaration for the purpose of
enabling the directors of Flotek Industries Inc. to establish the Canadian
status of the proposed shareholder:
1. The person whose name appears above
________ is to be the beneficial owner ________ will hold such shares
of the shares of Flotek for a beneficial owner
Industries Inc.
2. The beneficial owner is a(n)
_______ individual _______ corporation _____ partnership
_______ trust _______ other (describe) ______________________________
3. The beneficial owner _______ is Canadian* _____ is not Canadian*
49
- 2 -
4. The beneficial owner ______ is an associate _____ is not an associate*
of one or more
other shareholders
5. The associate shareholder(s) ______ is/are Canadian* ______ is not/are not Canadian*
DATED _____________________ , 19 ____ ___________________________
Signature of the person whose name and address
appears above
If the signatory is other than an individual, this declaration must be signed
in the name of the signatory by a person whose office or authority must be
shown.
* Applicable definitions of Canadian and associate accompany this form.
50
- 3 -
Definition of Canadian
Canadian means:
(a) a resident Canadian,
(b) a partnership of which a majority of the members are resident
Canadians and in which interests representing in value more than 50%
of the total value of the partnership property are owned by resident
Canadians,
(c) a trust established by a resident Canadian
(i) a majority of the trustees of which are resident Canadians, or
(ii) in which beneficial interest representing in value more than
50% of the total value of the trust property are owned by
resident Canadians, or
(d) a body corporate
(i) incorporated under the laws of Canada or a province,
(ii) of which a majority of the directors are Canadian, and
(iii) of which more than 50% of the voting shares are beneficially
owned or over which control or direction is exercised by
Canadians.
Definition of Associate
Associate, when used to indicate a relationship with any shareholder, means:
(a) a corporation of which that shareholder beneficially owns or controls,
directly or indirectly, shares carrying more than 10% of the voting
rights (or securities convertible into such shares or an option or
right to purchase such shares),
(b) a partner of that shareholder acting on behalf of the partnership of
which they are partners,
(c) a trust or estate in which that shareholder has a substantial
beneficial interest or in respect of which he serves as a trustee or
in a similar capacity,
(d) a spouse or child of that shareholder, and
(e) a relative of that shareholder or of his spouse if that relative has
the same residence as that shareholder.
