Exhibit 99.3
REGISTRATION RIGHTS AGREEMENT
By and Among
THE PRINCIPAL SHAREHOLDERS (DEFINED HEREIN)
and
FLOTEK INDUSTRIES INC.
Common Stock, no par value
Dated as of October 16, 1997
TABLE OF CONTENTS
Page
1. Registration under Securities Act, Etc.. . . . . . . . . . . . . . . 1
1.1 Registration on Request.. . . . . . . . . . . . . . . . . . . . 1
1.2 Piggy-Back Registration . . . . . . . . . . . . . . . . . . . . 3
1.3 Registration Procedures . . . . . . . . . . . . . . . . . . . . 4
1.4 Underwritten Offerings. . . . . . . . . . . . . . . . . . . . . 7
1.5 Preparation; Reasonable Investigation.. . . . . . . . . . . . . 8
1.6 Qualification to Obligations under Registration Covenants . . . 8
1.7 Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . 9
2. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3. Rule 144 and Rule 144A . . . . . . . . . . . . . . . . . . . . . . .13
4. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . .13
5. Nominees for Beneficial Owners . . . . . . . . . . . . . . . . . . .13
6. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
7. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
8. Calculation of Percentage Interests in Registrable Securities. . . .14
9. No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . .14
10. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
11. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
12. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .15
13. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . .15
14. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
15. Counterparts; Partial Execution. . . . . . . . . . . . . . . . . . .15
16. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
REGISTRATION RIGHTS AGREEMENT, dated as of October 16, 1997, between
Flotek Industries Inc., an Alberta corporation (the "Company"), Xxxxxx
Investors, L.L.C., a Delaware limited liability company ("Xxxxxx"), Xxxxxxx
Xxxxxxxxx ("Xxxxxxxxx") and XXXX, X.X., a Texas limited partnership ("XXXX"
and, together with xxxxxx and Xxxxxxxxx, the "Principal Stockholders").
This Agreement is being entered into in connection with (i) the purchase
by Xxxxxx and Xxxxxxxxx of 11,666,667 shares of Common Stock of the Company
and Warrants to purchase another 11,666,667 shares of Common Stock of the
Company and Warrants to purchase another 11,666,667 shares of Common Stock
and (ii) the execution of a Convertible Loan Agreement providing for a loan
by XXXX to the company of $750,000 convertible into 7,000,000 shares of
Common Stock of the Company, and the issuance to XXXX of Warrants to purchase
another 7,000,000 shares of Common Stock. It is a condition precedent to the
closing of such transactions that the parties hereto enter into this
Agreement. Capitalized terms used herein but not otherwise defined shall
have the meanings given them in Section 2. All Dollar amounts referred to
herein are US Dollars, unless otherwise noted.
I. Registration under Securities Act, Etc.
1.1 Registration on Request.
(a) Request. At any time, or from time to time, upon the
written request of one or more of the Principal Shareholders holding 25% or
more of the Registrable Securities (the "Initiating Holders") that the
Company either, as directed by the Initiating Holders, (i) effect eh
registration under the Securities Act or (ii) file a prospectus (which for
the purposes of this agreement shall include a statement of material facts or
short form prospectus) for the purposes of qualifying for distribution in
British Columbia or Ontario pursuant to Applicable Canadian Securities Laws
(any such registration or prospectus filing being hereinafter referred to as
"registration," and any such registration statement or prospectus being
hereinafter referred to as a "registration statement") of all or part of such
Initiating Holders' Registrable Securities, the company promptly will give
written notice of such requested registration of all of the other Principal
Shareholders, and thereupon the Company will use reasonable efforts to
effect, at the earliest possible date, the registration under the Securities
Act or the Applicable Canadian Securities Laws, as directed by the Initiating
Holders in their request, of (i) the Registrable Securities which the Company
has been so requested to register by such Initiating Holders, and (ii) all
other Registrable Securities which the company has been requested to register
by the other Principal Shareholders (such holders together with the
Initiating Holders hereinafter are referred to as the "Selling Holders") by
written request given to the Company within 30 days after the giving of such
written notice by the Company, all to the extent requisite to permit the
disposition of the Registrable Securities so t be registered.
(b) Registration of Other Securities. Whenever the Company
shall effect a registration pursuant to this Section 1.1, no securities other
than Registrable Securities held by Principal Shareholders shall be included
among the securities covered by such registration unless Selling Holders of
greater than 51% of the registrable Securities to be included in such
registration shall have consented in writing to the inclusion of such other
securities, which consent shall not be unreasonably withheld or delayed,
provided, however, that no such other securities shall be included in such
registration to the extent that such inclusion would reduce the number of
Registrable Securities in such registration that any Selling Holder has
requested be included therein.
(c) Registration Statement Form. Registrations under this
Section 1.1 shall be on such appropriate registration form of the Commission
or the form required under Applicable Canadian Securities Laws, as the case
may be, as shall be reasonably selected by the Company.
(d) Effective Registration Statement. A registration
requested pursuant to this Section 1.1 shall not be deemed to have been
effected unless a registration statement with respect thereto has become
effective and remained effective in compliance with the provisions of the
Securities Act or Applicable Canadian Securities Laws, as the case may be,
with respect to the disposition of all Registrable Securities covered by such
registration statement for a period of at least 90 days.
(e) Section of Underwriters. The underwriter or underwriters
of each underwritten offering of the Registrable Securities so to be
registered shall be selected by the Selling Holders of at least 50% of the
registrable Securities to be included in such registration and shall be
reasonably acceptable to the Company.
(f) Priority in Requested Registration. If the managing
underwriter of an underwritten offering shall advise the Company in writing
(and the Company shall so advise each Selling Holder of Registrable
Securities requesting registration of such advice) that, in its opinion, the
number of securities requested to be included in such registration is
sufficiently large to materially adversely effect the success of the
offering, the Company, except as provided in the following sentence, will
include in such registration, to the extent of the number and type which the
Company is so advised can be sold in such offering, Registrable Securities
requested to be included in such registration on the following basis;
(i) first, pro rata among the Initiating Holders; and
(ii) second, pro rata among the other Selling Holders.
As used herein, the term "pro rata" among a particular group of shareholders
shall mean allocated among such shareholders proportionally, on the basis of
the number of Registrable Securities held by each shareholder in such group
as compared to the total number of Registrable Securities held by all
shareholders in such group. To the extent that all the Registrable
Securities of Selling Holders so requested to be registered are excluded from
the offering, the holders of such Registrable Securities shall be deemed not
to have used a demand registration pursuant to this Section 1.1.
(g) Limitations on Registration on Request. Notwithstanding
anything in this Section 1.1 to the contrary, the Company shall not be
required to take any action to file a registration statement pursuant to this
Section 1.1:
(i) within 120 days following the effective date of any registered
offering of the Company's securities;
(ii) with respect to any offering having an aggregate sales price
(before deduction of underwriting discounts and expenses of sale) of
less than $500,000;
(iii) with respect to any offering having an aggregate sales
price (before deduction of underwriting discounts and expenses of sale)
of more than $10,000,000 unless such offering is firmly underwritten; or
(iv) after (A), with respect to Xxxxxx and Xxxxxxxxx, the Company
has effected two such registrations at the request of Xxxxxx and/or
Xxxxxxxxx or their transferees and with respect to XXXX, the Company has
effected two such registrations at the request of XXXX or its
transferees (representing an aggregate of four such registrations on
behalf of all holders of Registrable Securities), (B) the Company has
effected such a registration at the request of any Principal Shareholder
within the previous six months, (C) the Principal Shareholders making
such request hold fewer than 100,000 shares of Registrable Securities,
or (D) the expiration of the term of this Agreement.
(h) Expenses. The Company will pay all Registration Expenses
in connection with any registration requested pursuant to this Section 1.1.
1.2 Piggy-Back Registration.
(a) Right to Include Registrable Securities. If the Company
at any time proposes to file a registration statement to register any of its
securities of the same class as the Registrable Securities under the
Securities Act or the Applicable Canadian Securities Laws (except for a
registration statement or prospectus filed in connection with an employee
benefit plan, a transaction relating to a merger or business combination, a
transaction relating to an exchange offer, a transaction relating to an
acquisition of assets or securities, or a transaction otherwise described in
Rule 145 of the Securities Act), whether or not for sale for its own account,
it will each such time give prompt written notice to all holders of
Registrable Securities of its intention to do so and of such holders' rights
under this Section 1.2. Upon the written request of nay such holder (a
"Requesting Holder") (which request shall specify the amount of Registrable
Securities intended to be disposed of by such Requesting Holder) made as
promptly as practicable and in any event within 20 days after the receipt of
any such notice (15 days if the Company states in such written notice or
gives telephonic notice to all registered holders of Registrable Securities,
with written confirmation to follow promptly thereafter, stating that (i)
such registration will be on Form S-3 and (ii) such shorter period of time is
required because of a planned filing date), the Company will use reasonable
efforts to effect the registration or file the prospectus under the
Securities Act or the Applicable Canadian Securities Laws, as the case may
be, of all Registrable Securities which the Company has been so requested to
register by the Requesting Holders thereof. No registration effected under
this Section 1.2 shall relieve the Company of its obligation to effect any
registration upon request under Section 1.1.
(b) Priority in Incidental Registrations. If the managing
underwriter of any underwritten offering shall deliver a written opinion to
the holders of registrable Securities that the total amount of Registrable
Securities requested to be included in such registration would have a
material adverse effect on such offering then the Company will include in
such registration, to the extent the number which the Company is so advised
can be sold in(or during the time of) such offering, first, all securities
proposed by the Company to be sold for its own account, and second, such
Registrable Securities requested to be include in such registration pursuant
to this Agreement, pro rata among Requesting Holders; provided that if
securities are being offered for the account of other persons or entities as
well as the Company, such reduction shall not represent a greater fraction of
the number of securities intended to be offered by holders of Registrable
Securities than the fraction of similar reductions imposed on such other
persons or entities over the amount of securities they intended to offer.
(c) Expenses. The Company will pay all Registration Expenses
in connection with any registration effected pursuant to this Section 1.2.
1.3 Registration Procedures. If and whenever the Company is
required to effect the registration of any registrable SECURITIES under the
Securities Act or the Applicable Canadian Securities Laws as provided in
Sections 1.1 and 1.2 the Company will, as expeditiously as possible, use
reasonable efforts to:
(i) prepare and (within 120 days after the end of the period
within which requests for registration may be given to the Company
or in any event as soon thereafter as practicable) file with the
Commission or the Canadian Securities regulations the requisite
registration statement to effect such registration and thereafter
use reasonable efforts to cause such registration statement to
become effective;
(ii) prepare and file with the Commission or the Canadian
Securities Regulators such amendments and supplements to such
registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act
or the Applicable Canadian Securities Laws, as the case may be,
with respect to the disposition of all Registrable Securities
covered by such registration statement for a period of at least 90
days;
(iii) furnish to each seller of Registrable Securities
covered by such registration statement, such number of conformed
copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits), such
number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under rule 424 under the
Securities Act, in conformity with the requirements of the
Securities Act or the Applicable Canadian Securities Laws, as the
case may be, and such other documents, as such seller may
reasonably request;
(iv) register or qualify all Registrable Securities and other
securities covered by any registration statement under the
Securities Act, under Applicable Canadian Securities Laws, under
such other securities or blue sky laws of such States of the United
States of America where an exemption is not available and as the
sellers of Registrable Securities covered by such registration
statement shall reasonably request; keep such registration or
qualification in effect for so long as such registration statement
remains in effect; and take any other action which may be
reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdiction of the securities
to be sold by such sellers, except that (x) the Company shall not
for any such purpose be required to qualify generally to do
business as foreign corporation in any jurisdiction wherein it
would not but for the requirements of this subdivision (iv) be
obligated to be so qualified or to consent to general service of
process in any such jurisdiction and (y) the Company shall not be
required to register or qualify Registrable Securities in any state
or province where such qualification or registration would place an
undue burden on the Company or which would require that the Company
consent or agree to restrictions, covenants, or qualifications
which the Company deems unacceptable;
(v) cause all registrable Securities covered by such
registration statement to be registered with or approved by such
other federal, provincial, or state governmental agencies or
authorities as may be necessary in the opinion of counsel to the
Company and counsel to the underwriters to enable the seller or
sellers thereof to consummate the disposition of such Registrable
Securities;
(vi) furnish at the effective date of such registration
statement and, if applicable, the date of the closing under the
underwriting agreement, to each seller of Registrable Securities,
and each such seller's underwriters, a signed counterpart of (x) an
opinion of counsel for the Company, dated the effective date of
such registration statement and (y) a "comfort" letter signed by
the independent public accountants who have certified the
Company's financial statements included or incorporated by
reference in such registration statement, covering substantially
the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of the
accountants' comfort letter, with respect to events subsequent to
the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' comfort letters
delivered to the underwriters in underwritten public offerings of
securities and, in the case of the accountants' comfort letter,
such other financial matters, and, in the case of the legal
opinion, such other legal matters, as the sellers of the
Registrable Securities covered by such registration statement, or
the underwriters, may reasonably request;
(vii) notify each seller of Registrable Securities covered
by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities
Act or the Applicable Canadian Securities Laws, upon discovery
that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary
to make the statements therein no misleading, in the light of the
circumstances under which they were made, and at the request of any
such seller promptly prepare and furnish to it a reasonable number
of copies of supplement to or an amendment of such prospectus as
may be necessary so that, thereafter delivered to the purchasers of
such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under
which they were made;
(viii) otherwise comply with all applicable rules and
regulations of the Commission and the Canadian Securities
regulators, and, if required, make available to its security
holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than
eighteen months, beginning with the first full calendar month after
the effective date of such registration statement, which earnings
statement shall satisfy the provision of Section 11(a) of the
Securities Act an Rule 158 promulgated thereunder, and promptly
furnish to each such seller of Registrable SECURITIES as a copy of
any amendment or supplement to such registration statement or
prospectus;
(ix) keep each Selling Holder and each Requesting Holder
advised in writing as to the initiation and progress of any
registration under Section 1.1 or 1.2 hereunder, as the case may
be;
(x) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all
Registrable Securities covered by such registration statement from
and after a date not later than the effective date of such
registration; and
(xi) list all Registrable Securities covered by such
registration statement on any securities exchange on which
Registrable Securities of the same class and, if applicable,
series, covered by such registration statement are then listed or
on the Nasdaq Stock Market ("Nasdaq") if the Registrable Securities
covered by such registration statement from and after a date not
later than the effective date of such registration; and
(xi) list all Registrable Securities covered by such
registration statement on any securities exchange on which
Registrable Securities of the same class and, if applicable,
series, covered by such registration statement are then listed or
on the Nasdaq Stock Market ("Nasdaq") if the Registrable Securities
are reported on Nasdaq.
The Company may require each seller of Registrable Securities, as to which
any registration is being effected, to furnish the Company such information
regarding such seller and the distribution of such securities, as required by
laws or the Commission or the Canadian Securities regulators, or which the
Company's counsel otherwise deems appropriate.
Each holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described
in subdivision (vii) of this Section 1.3, such holder will forthwith
discontinue such holder's disposition of Registrable Securities pursuant to
the registration statement relating to such Registrable Securities until such
holder's receipt of the copies of the supplemented or amended prospectus
contemplated by subdivision (vii) of this Section 1.3 and, if so directed by
the Company, will deliver to the company (at the Company's expense) all
copies, other than permanent file copies, then in such holder's possession of
the prospectus relating to such Registrable Securities current at the time of
receipt of such notice.
1.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by holders of Registrable
SECURITIES pursuant to a registration requested under Section 1.1, the
company will use all reasonable efforts to enter into an underwriting
agreement with such underwriters for such offering, such agreement to be
reasonably satisfactory in substance and form to each such holder and the
underwriters and to contain such representations and warranties by the
Company and such other terms as are generally prevailing in agreements of
that type, including, without limitation, indemnities to the effect and to
the extent provided in Section 1.7. The holders of the Registrable
Securities proposed to be sold by such underwriters will reasonably cooperate
with the Company in the negotiation of the underwriting agreement. Such
holders of Registrable Securities to be sold by such underwriters shall be
parties to such underwriting agreement and may, at their option, require that
any or all of the representations and warranties by, and the other agreements
on the part of, the Company to and for the benefit of such underwriters shall
also be made to and for the benefit of such holders of Registrable Securities
and that any or all of the conditions precedent to the obligations of such
holders of Registrable Securities. Any such holders of Registrable
Securities shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such
holder's registrable Securities and such holder's intended method of
distribution or any other representations required by applicable law.
(b) Incidental Underwritten Offerings. If the Company
proposes to register any of its securities under the Securities Act or the
Applicable Canadian Securities Laws as contemplated by Section 1.2 and such
securities are to be distributed by or through one or more underwriters, the
Company will, if requested by and Requesting Holder of Registrable
Securities, use reasonable efforts to arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such
Requesting Holder among the securities of the Company to be distributed by
such underwriters. The holders of Registrable Securities to be distributed
by such underwriters shall be parties to the underwriting agreement between
the Company and such underwriters and may, at their option, require that any
or all of the representations and warranties by, and the other agreements on
the part of, the Company to an for the benefit of such underwriters shall
also be made to and for the benefit of such holders of Registrable Securities
and that any or all of the conditions precedent to the obligations of such
holders of Registrable Securities. Any such Requesting Holder of Registrable
Securities shall not be required to make any representations or warranties or
agreements regarding such Requesting Holder, such Requesting Holder's
Registrable Securities and such Requesting Holder's intended method of
distribution or any other representations required by applicable law.
1.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities
Act or the Applicable Canadian Securities Laws pursuant to this agreement,
the Company (i) shall give the holders of Registrable Securities registered
under such registration statement, their underwriters, if any, and their
respective counsel and accountants the reasonable opportunity to participate
in the preparation of such registration statement, each prospectus included
therein or filed with the Commission or the Canadian Securities Regulators,
and each amendment thereof or supplement thereto, and (ii) shall promptly
notify the registered holders of Registrable Securities and their counsel of
any stop order issued or threatened by the commission or any Canadian
Securities Regulators and take all reasonable actions required to prevent
the entry of such stop order or to remove it if entered.
1.6 Qualification to Obligations under Registration Covenants.
The Company shall be entitled to postpone for a reasonable period of time
(but not exceeding 120 days) the filing of any registration statement
otherwise required to be prepared and filed by it pursuant to Section 1.1 if
(i) the Company determines, in its reasonable judgment, that such
registration and offering would interfere with any financing, acquisition,
corporate reorganization or other material transaction involving the Company
or any of its affiliates or (ii) the Company is in possession of information
concerning it or its business and affairs, the public disclosure of which
xxxx have a material adverse effect on the Company and which the Company has
determined it is not legally obligated to disclose, and the Company promptly
gives the holders of Registrable Securities requesting registration thereof
pursuant to Section 1.1 written notice of such determination, containing a
general statement of the reasons for such postponement and an approximation
of the anticipated delay. If the Company shall so postpone the filing of a
registration statement, Initiating Holders requesting registration thereof
pursuant to Section 1.1 shall have the right to withdraw the request for
registration by giving written notice to the Company within 30 days after
receipt of the notice of postponement and, in the event of such withdrawal,
such request shall not be counted for purposes of the requests for
registration to which holders of Registrable Securities are entitled pursuant
to Section 1.1 hereof.
1.7 Indemnification.
(a) Indemnification by the Company. The Company will, and
hereby does, indemnify and hold harmless, in the case of any registration
statement filed pursuant to Section 1.1 or 1.2, each seller of any
Registrable Securities covered by such registration statement and each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such seller or any
such underwriter within the meaning of the Securities Act or the Applicable
Canadian Securities Laws, and their respective directors, officers, partners,
employees and affiliates against any losses, claims damages or liabilities,
joint or several, to which such seller or underwriter or any such director,
officer, partner, employee, affiliate or controlling person may become
subject under the Securities Act or the Applicable Canadian Securities Laws
or otherwise, including, without limitation, the reasonable fees and expenses
of legal counsel, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Securities Act or the
Applicable Canadian Securities Laws, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading, and the Company will reimburse such seller or underwriter and
each such director, officer, partner, employee, affiliate and controlling
Person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided, that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by or on behalf of such seller or
underwriter, as the case may be, specifically stating that it is for use in
the preparation thereof. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such seller or
any such director, officer, employee, affiliate, partner or controlling
person and shall survive the transfer of such securities by such seller.
(b) Indemnification by the Sellers. As a condition to
including any Registrable Securities in any registration statement, the
Company shall have received an undertaking satisfactory to it from the
prospective seller of such Registrable Securities, to indemnify and hold
harmless the Company, and each director of the Company, each officer of the
Company and each other Person, if any, who participates as an underwriter in
the offering or sale of such securities and each other Person who controls
the Company or any such underwriter within the meaning of the Securities Act
or the Applicable Canadian Securities Laws, and their respective directors,
officers, partners, employees and affiliates, against any losses, claims,
damages or liabilities, joint or several, to which such person may become
subject under the Securities Act or the Applicable Canadian Securities Laws
or otherwise, including, without limitation, the reasonable fees and expenses
of legal counsel, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Securities Act or the
Applicable Canadian Securities Laws, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading, and to reimburse such person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; but only to the extent
that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and
in conformity with written information furnished to the Company through an
instrument duly executed by or on behalf of such seller, specifically stating
that it is for use in the preparation thereof; provided, however, that the
liability of such indemnifying party under this Section 1.7(b) shall be
limited to the amount of proceeds received by such indemnifying party in the
offering giving rise to such liability. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by such seller.
(c) Notices of Claims, etc. Within ten days of receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section
1.7, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 1.7, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such action
is brought against an indemnified party the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with
any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not
be liable to such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof,
provided, however, that if the indemnified party reasonably believes it is
advisable for it to be represented by separate counsel because there exists
a conflict of interest between its interests and those of the indemnifying
party with respect to such claim, or there exist defenses available to such
indemnified party which may not be available to the indemnifying party, or if
the indemnifying party shall fail to assume responsibility for such defense,
the indemnified party may retain counsel satisfactory to it and the
indemnifying party shall pay all reasonable fees and expenses of such
counsel. No indemnifying party shall be liable for any settlement of any
action proceeding effected without its written consent. No indemnifying
party shall, without the consent of the indemnified party, consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation or which requires action by the indemnified party.
(d) Contribution. If the indemnification provided for in
this Section 1.7 shall for any reason be held by a court to be unavailable to
an indemnified party under subparagraph (a) or (b) hereof in respect of any
loss, claim, damage or liability, or any action in respect thereof, then, in
lieu of the amount paid or payable under subparagraph (a) or (b) hereof, the
indemnified party and the indemnifying party under subparagraph (a) or (b)
hereof shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating the same), (i) in such proportion as is
appropriate to reflect the relative fault of the Company and the prospective
sellers of Registrable Securities covered by the registration statement which
resulted in such loss, claim damage or liability, or action in respect
thereof, with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received
by the Company and such prospective sellers from the offering of the
securities covered by such registration statement. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. Such prospective sellers'
obligations to contribute as provided in this subparagraph (d) are several in
proportion to the relative value of their respective Registrable Securities
covered by such registration statement and not joint. In addition, no Person
shall be obligated to contribute hereunder any amounts in payment for any
settlement of any action or claim effected without such Person's consent,
which consent shall not be unreasonably withheld or delayed.
(e) Other Indemnification. Indemnification and contribution
similar to that specified in the preceding subdivisions of this Section 1.7
(with appropriate modifications) shall be given by the Company and each
seller of Registrable Securities with respect to any required registration or
other qualification of securities under any federal or state law or
provincial law or any regulation of any governmental authority other than the
Securities Act or the Applicable Canadian Securities Laws.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 1.7 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as
and when bills are received or expense, loss, damage or liability is
incurred.
2. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"Affiliate" means, with respect to any person, any other person
that directly or indirectly controls or is controlled by or is under common
control with such person.
"Applicable Canadian Securities Laws" means the securities acts or
similar statutes in effect in each of British Columbia and Ontario, Canada,
and having application to the Company or any transaction or proposed
transaction to which the Company is a party, as they may be amended or
replaced from time to xxx, and includes the regulations and rules promulgated
thereunder, and further includes all policies, rules and mandatory guidelines
imposed by The Vancouver Stock Exchange, The Toronto Stock Exchange or any
other securities exchange on which the securities of the Company are, at any
relevant time, posted for trading.
"Canadian Securities Regulators" means the Securities Commissions
or similar regulatory authorities having jurisdiction in each of British
Columbia and Ontario, Canada, and further includes The Vancouver Stock
Exchange, The Toronto Stock Exchange or any other securities exchange on
which the securities of the Company are, at any relevant time, posted for
trading.
"Commission" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include a reference to the comparable section, if any, of any
such similar federal statute.
"Initiating Holder" is defined in Section 1.1.
"Person" means any individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other
entity of any kind.
"Regulation Securities" means (i) the shares of Common Stock owned
on the date hereof by the parties hereto or issued or issuable to the parties
hereto pursuant to the exercise of options (whether or not presently or then
exercisable) or warrants or the conversion of convertible securities owned by
them on the date hereof, and (ii) any Related Registrable Securities. As to
any particular Registrable Securities, such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act
or the Applicable Canadian Securities Laws and such securities shall have
been distributed to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act, (c) they shall have been otherwise
transferred, new certificates for them not bearing a legend restricting
further transfer shall have been delivered by the Company and subsequent
public distribution of them shall not require registration of them under the
Securities Act, or (d) they shall have ceased to be outstanding. All
references to percentages of Registrable Securities shall be calculated
pursuant to Section 8.
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with Section 1, including, without
limitation, all registration, filing and NASD fees, all fees and expenses of
complying with securities or blue sky laws, all word processing, duplicating
and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of "cold comfort" letters required by or
incident to such performance and compliance, and any fees and disbursements
of underwriters customarily paid by issuers or sellers of securities
(excluding any underwriting discounts or commissions with respect to the
Registrable Securities or any other fee measured by the number or amount of
Registrable Securities).
"Related Registrable Securities" means any securities of the
Company issued or issuable with respect to the securities by way of a
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
"Requesting Holder" is defined in Section 1.2.
"Securities Act" means the Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time. References to a particular
section of the Securities Act of 1933 shall include a reference to the
comparable section, if any, of any such similar statute.
"Selling Holder" is defined in Section 1.1.
3. Rule 144 and Rule 144A. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with the requirements of Rules 144 or
144A under the Securities Act.
4. Amendments and Waivers. This Agreement may be amended with
the written consent of the Company and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company shall have obtained the written consent to such
amendment, action or omission to act, of each holder or holders of the
Registrable Securities affected by such amendment, action or omission to act.
5. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its election in writing
delivered to the Company, be treated as the holder of such Registrable
Securities for purposes of any request or other action by any holder or
holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects,
the Company may require assurances and evidence reasonably satisfactory to it
of such owner's beneficial ownership of such Registrable Securities.
6. Notices. All notices, demands and other communications to any
party hereto provided for or permitted hereunder shall be made in writing and
shall be by registered or certified first-class mail, return receipt
requested, telex, telegram, telecopier, reputable courier service or personal
delivery, addressed to it in the manner set forth on the signature page
hereto, or at such other address as it shall have furnished to the other
parties hereto in writing. All such notices and communications shall be
deemed to have been duly given: when delivered by hand, if personally
delivered; one business day after being sent by reputable courier service;
three business days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; and when receipt is acknowledged, if
telecopied.
7. Assignment. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and, with respect to
the Company, its respective successors and assigns and, with respect to each
other party hereto, any holder who is an affiliate or successor entity to
such party or a transferee therefrom of any Registrable Securities, subject
to the provisions respecting the minimum numbers of percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions, contained herein. The parties hereto, other than the
Company (and not any other holder of Registrable Securities or any other
Person), shall be permitted, in connection with a transfer or disposition of
Registrable Securities, to eliminate or impose conditions or constraints on
the ability of the transferee, as a holder of Registrable Securities, to
request a registration pursuant to Sections 1.1 and 1.2 and shall provide the
Company with copies of such conditions or constraints and the identity of
such transferees.
8. Calculation of Percentage Interests in Registrable Securities.
For purposes of this Agreement, all references to a percentage of the
Registrable Securities shall be calculated based upon the number of shares of
Registrable Securities outstanding or issuable pursuant to outstanding
options (whether or not presently or then exercisable), warrants or
convertible securities at the time such calculation is made.
9. No Inconsistent Agreements. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement.
10. Remedies. Each party hereto and each holder of Registrable
securities is entitled to exercise all rights granted by law, including
recovery of damages; such rights not to extend to incidental or consequential
damages.
11. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any
way impaired thereby, it being intended that all of the rights and privileges
of the Purchaser shall be enforceable to the fullest extent permitted by law.
12. Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement supersedes all prior
agreements and understandings between the Company and any of the other
parties with respect to such subject matter.
13. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
14. Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the
laws of the State of Texas applicable to agreements made and to be performed
entirely within such State.
15. Counterparts: Partial Execution. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute one and the
same instrument. This Agreement shall be fully enforceable against the
Company by any Principal Shareholder who is a signatory hereto regardless of
whether any other Principal Shareholder is also a signatory hereto.
16. Term. This Agreement shall be effective for the period
commencing on the date hereof and expiring on the date six years from the
date hereof.
[The remainder of this page has intentionally been left blank]
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
Address
c/o Xxxxxx Xxxxxxx Xxxxxx Investors, L.L.C.
0000 Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
By: /s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx, Managing Member
00 Xxxxxxxx Xxxxxx
Xxxxxxxx, X. J. 07463
/s/ Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxxx
3900 Thanksgiving Tower XXXX, X.X., by Xxxxxx Property Corp.,
Xxxxxx, Xxxxx 00000 its General Partner
By: /s/ X. X. Xxxxxxx, Xx.
Name: X. X. Xxxxxxx, Xx.
Title: President
0000 Xxxxxx Xxxxxxx Xxxxx Flotek Industries Inc.
Xxxxxxx, Xxxxx 00000
By: /s/ Xxxx Xxxxxx
Xxxxxxx X. Xxxxxx, President and
Chief
Executive Officer
