SUBSCRIPTION AND REGISTRATION RIGHTS AGREEMENT
Exhibit
4.6
Private
Offering
of
Shares of
Common
Stock
This
Subscription and Registration Rights Agreement (this “Agreement”),
made
as of the date set forth below by and between Flotek Industries, Inc, a Delaware
corporation (the “Company”),
and
the undersigned (the “Subscriber”),
is
intended to set forth certain representations, covenants and agreements between
the Company and the Subscriber, with respect to the offering (the “Offering”)
for
sale by the Company of shares of Common Stock, par value $.0001 per share
(the
“Common
Stock”),
as
described in the Company’s Private Placement Memorandum dated August 17, 2005
(the “Memorandum”),
a
copy of which has been delivered to Subscriber. The Shares are being offered
by
the Company through Energy Capital Solutions, LP, as placement agent (the
“Placement
Agent”).
1. Subscription.
Subject
to the terms and conditions hereof, the Subscriber hereby irrevocably subscribes
for and agrees to purchase from the Company the number of shares of Common
Stock
(the “Shares”)
set
forth under the Subscriber’s name on the signature page hereto at a purchase
price of $16.30 per share (the “Offering
Price”),
and
the Company agrees to sell such Shares to the Subscriber at the Offering
Price,
subject to the Company’s right to sell to the Subscriber such lesser number of
Shares as the Company may, in its sole discretion, deem necessary or
desirable.
2. Delivery
of Subscription Amount; Acceptance of Subscription; Delivery of
Shares.
Subscriber understands and agrees that this subscription is made subject
to the
following terms and conditions:
(a) Subscriber
understands that separate subscription agreements will be executed with other
Subscribers for up to 1,300,000
shares of Common Stock to be sold in the Offering;
(b) Contemporaneously
with the execution and delivery of this Agreement, Subscriber shall execute
and
deliver the Certificate of Accredited Investor Status, and shall submit payment
in the form of a check made payable to Flotek Industries, Inc. or wire to
the
Company, to hold in a non-interest bearing account, immediately available
funds
in the amount equal to the Offering Price multiplied by the number of Shares
for
which the Subscriber has subscribed (the “Subscription
Amount”)
in
accordance with the Subscription Instructions set forth on Exhibit A
hereto;
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(c) The
subscription for Shares shall be deemed to be accepted only when this Agreement
has been signed by an authorized officer of the Company, and the deposit
of the
Subscription Amount for clearance will not be deemed an acceptance of this
Agreement;
(d) The
Company shall have the right to reject this subscription, in whole or in
part
and shall have the right to allocate Shares among subscribers in any manner
it
may desire;
(e) The
payment of the Subscription Amount (or, in the case of rejection of a portion
of
the Subscriber’s subscription, the part of the payment relating to such rejected
portion) will be returned promptly, without interest, if Subscriber’s
subscription is rejected in whole or in part or if the Offering is withdrawn
or
canceled;
(f) The
Placement Agent and the Company may conduct one or more closings of this
Offering (each a “Closing”)
until
all 1,300,000 Shares of Common Stock offered hereby are sold;
(g) The
Company may, in its sole discretion, terminate this Offering at any time
and
accept any subscriptions then in its receipt;
(h) Certificates
representing the Shares purchased will be issued in the name of each Subscriber
within 14 days of each Closing; and
(i) The
representations and warranties of the Company and Subscriber set forth herein
shall be true and correct as of the date that the Company accepts this
subscription.
3. Terms
of Subscription.
(a) The
subscription period will begin as of August
15, 2005, and will continue until such time as the Company terminates it
in its
sole discretion.
(b) The
Placement Agent will receive a servicing fee of $15,000 and a placement
management fee equal to six percent (6.0%) of the aggregate purchase price
of
the Shares sold. The Company shall also pay all expenses in connection with
the
Offering, except for those expenses that the Placement Agent has agreed to
pay.
(c) If
the
Subscriber is not a United States citizen, the Subscriber hereby represents
that
it has satisfied itself as to the full observance of the laws of its
jurisdiction in connection with any invitation to subscribe for the Shares
or
any use of this Agreement, including (i) the legal requirements within its
jurisdiction for the purchase of the Shares, (ii) any foreign exchange
restrictions applicable to such purchase, (iii) any governmental or other
consents that may need to be obtained, and (iv) the income tax and other
tax
consequences, if any, that may be relevant to the purchase, holding, redemption,
sale or transfer of the Shares. The Subscriber’s subscription and payment for,
and his or her continued beneficial ownership of the Shares, will not violate
any applicable securities or other laws of the Subscriber’s
jurisdiction.
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4. Registration
Rights.
(a) Subscriber
acknowledges that it is acquiring the Shares for its own account and for
the
purpose of investment and not with a view to any distribution or resale thereof
within the meaning of the Securities Act of 1933, as amended (the “Securities
Act”).
The
Subscriber further agrees that it will not sell, assign or transfer the Shares
at any time in violation of the Securities Act and acknowledges that, in
taking
unregistered securities, it must continue to bear the economic risk of its
investment for an indefinite period of time because of the fact that the
Shares
have not been registered under the Securities Act, and further realizes that
the
Shares cannot be sold unless subsequently registered under the Securities
Act or
an exemption from such registration is available. The Subscriber also
acknowledges that appropriate legends reflecting the status of the Shares
under
the Securities Act may be placed on the face of the certificates for such
shares
at the time of their transfer and delivery to the holder thereof.
(b) The
Shares may not be transferred except in a transaction which is in compliance
with the Securities Act. Except as provided hereafter with respect to
registration of the Shares, it shall be a condition to any such transfer
that
the Company shall be furnished with an opinion of counsel to the holder of
such
Shares, reasonably satisfactory to the Company, to the effect that the proposed
transfer would be in compliance with the Securities Act.
(c) Within
60
days after the last sale of shares of Common Stock in the Offering, the Company
shall use its commercially reasonable efforts to prepare and file with the
Securities and Exchange Commission (the “SEC”),
a
registration statement on Form S-3 (or any replacement thereof) and such
other
documents as may be necessary in the opinion of counsel for the Company,
and use
its commercially reasonable efforts to have such registration statement declared
effective as soon as reasonably practicable after such filing, in order to
comply with the provisions of the Securities Act so as to permit the registered
resale of the Shares, for a period of two (2) years following the last Closing
of the Offering by each and every holder of Shares, except for those holders
who
designate on the signature page hereto that they do not wish to have their
Shares included in the registration statement. The Shares that are registered
for resale under such registration statement are referred to herein as the
“Offering Shares,” and the Subscribers who are eligible to sell their Offering
Shares under such registration statement, together with their affiliates,
are
hereafter referred to as “Offering Holders.” The Company will include in such
registration statement (i) the information required under the Securities
Act to be so included concerning the Offering Holders, as provided by the
Offering Holders on the signature pages to this Agreement and the other
Subscription and Registration Rights Agreements entered into in connection
with
the Offering, including any changes in such information that may be provided
by
the Offering Holders in writing to the Company from time to time, and
(ii) a section entitled “Plan of Distribution,” substantially in the form
of Exhibit C hereto, that describes the various procedures that may
be used
by the Offering Holders in the sale of their Offering Shares.
(d) Notwithstanding
the foregoing provisions of this Section 4, the Company may voluntarily
suspend the effectiveness of any such registration statement for a limited
time,
which in no event shall be longer than 60 days in any three month period
and no
longer than 120 days in any twelve month period, if the Company has been
advised
in writing by counsel or underwriters to the Company that the offering of
any
Offering Shares pursuant to the registration statement would materially
adversely affect, or would be improper in view of (or improper without
disclosure in a prospectus), a proposed financing, reorganization,
recapitalization, merger, consolidation, or similar transaction involving
the
Company. The Company shall notify all Offering Holders to such effect, and,
upon
receipt of such notice, each such Offering Holder shall immediately discontinue
any sales of Offering Shares pursuant to such Registration Statement until
such
Offering Holder has received copies of a supplemented or amended prospectus
or
until such Offering Holder is advised in writing by the Company that the
then
current prospectus may be used and has received copies of any additional
or
supplemental filings that are incorporated or deemed incorporated by reference
in such prospectus.
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(e) If
any
event occurs that would cause any such registration statement to contain
a
material misstatement or omission or not to be effective and usable during
the
period that such registration statement is required to be effective and usable,
the Company shall promptly notify the Offering Holders of such event and,
if
requested, the Offering Holders shall immediately cease making offers of
Offering Shares and return all prospectuses to the Company. The Company shall
promptly file an amendment to the registration statement to correct such
misstatement or omission and use its commercially reasonable efforts to cause
such amendment to be declared effective as soon as practicable thereafter.
The
Company shall promptly provide the Offering Holders with revised prospectuses
and, following receipt of the revised prospectuses, the Offering Holders
shall
be free to resume making offers of the Offering Shares.
(f) Notwithstanding
any provision contained herein to the contrary, the Company’s obligation to
include, or continue to include, Offering Shares in any such registration
statement under this Section 4 shall terminate to the extent such
shares
are eligible for resale under Rule 144(k) promulgated under the Securities
Act.
(g) If
and
whenever the Company is required by the provisions of this Agreement to use
its
commercially reasonable efforts to effect the registration of the Offering
Shares under the Securities Act for the account of an Offering Holder, the
Company will, as promptly as possible:
(i) prepare
and file with the SEC a registration statement with respect to such securities
and use its commercially reasonable efforts to cause such registration statement
to become and remain effective;
(ii) prepare
and file with the SEC 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 requirements
of the Securities Act and the rules and regulations promulgated by the SEC
thereunder relating to the sale or other disposition of the securities covered
by such registration statement; and
(iii) furnish
to each Offering Holder such numbers of copies of a prospectus, including
a
preliminary prospectus, complying with the requirements of the Securities
Act,
and such other documents as such Offering Holder may reasonably request in
order
to facilitate the public sale or other disposition of the Offering Shares
owned
by such Offering Holder, but such Offering Holder shall not be entitled to
use
any selling materials other than a prospectus and such other materials as
may be
approved by the Company, which approval will not be unreasonably
withheld.
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(h) Except
as
provided below in this Section 4, the expenses incurred by the Company
in
connection with action taken by the Company to comply with this Section 4,
including, without limitation, all registration and filing fees, printing
and
delivery expenses, accounting fees, fees and disbursements of counsel to
the
Company, consultant and expert fees, premiums for liability insurance, if
the
Company chooses to obtain such insurance, obtained in connection with a
registration statement filed to effect such compliance and all expenses,
including counsel fees, of complying with any state securities laws, shall
be
paid by the Company. All fees and disbursements of any counsel, experts,
or
consultants employed by any Offering Holder shall be borne by such Offering
Holder. The Company shall not be obligated in any way in connection with
any
registration pursuant to this Section 4 for any selling commissions
or
discounts payable by any Offering Holder to any underwriter or broker of
securities to be sold by such Offering Holder. Subscriber agrees to pay all
expenses required to be borne by such Offering Holder.
(i) In
the
event of any registration of shares of Common Stock pursuant to this
Section 4, the Company will indemnify and hold harmless each Offering
Holder, its officers, directors and each underwriter of such securities,
and any
person who controls such Offering Holder or underwriter within the meaning
of
Section 15 of the Securities Act, against all claims, actions, losses,
damages, liabilities and expenses, joint or several, to which any of such
persons may become subject under the Securities Act or otherwise, insofar
as
such losses, claims, damages, liabilities or actions arise out of or are
based
upon any untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities
Act,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
to state therein a material fact required to be stated therein or necessary
to
make the statements therein, in light of the circumstances under which they
were
made, not misleading, and will reimburse such Offering Holder, its officers,
directors and each underwriter of such securities, and each such controlling
person or entity for any legal and any other expenses reasonably incurred
by
such Offering Holder, such underwriter, or such controlling person or entity
in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the Company will not be liable
in
any such case to the extent that any such loss, claim, damage, liability
or
action arises directly out of or is based primarily upon an untrue statement
or
omission made in said registration statement, said preliminary prospectus
or
said final prospectus, or said amendment of supplement in reliance upon and
in
conformity with written information furnished to the Company by any Offering
Holder or any such underwriter specifically for use in the preparation thereof;
and provided, further however, that the Company will not be liable in any
such
case to the extent that any such loss, claim, damage or liability or action
arises directly out of or is based primarily upon an untrue statement or
omission made in any preliminary prospectus or final prospectus if (i) such
Offering Holder failed to send or deliver a copy of the final prospectus
or
prospectus supplement with or prior to the delivery of written confirmation
of
the sale of the Offering Shares, and (ii) the final prospectus or prospectus
supplement would have corrected such untrue statement or omission.
(j) At
any
time when a prospectus relating to the Offering is required to be delivered
under the Securities Act, the Company will notify the Offering Holder of
the
happening of any event, upon the notification or awareness of such event
by an
executive officer of the Company, as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of material fact or omits to state a material fact required to be stated
therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing.
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(k) In
the
event of any registration of any securities under the Securities Act pursuant
to
this Section 4, Subscriber agrees to indemnify and hold harmless the
Company, its officers, directors and any person who controls the Company
within
the meaning of Section 15 of the Securities Act, against any losses,
claims, damages, liabilities, or actions, joint or several, to which the
Company, its officers, directors, or such controlling person or entity may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities, or actions arise out of or are based upon any
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission to
state
therein a material fact required to be stated therein or necessary to make
the
statements therein not misleading, in each case to the extent and only to
the
extent that any such loss, claim, damage, liability, or action arises out
of or
is based upon an untrue statement or omission made in said registration
statement, said preliminary prospectus or said final prospectus or said
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by Subscriber or any affiliate (as defined
in the Securities Act) of Subscriber specifically for use in the preparation
thereof.
(l) Any
party
entitled to indemnification hereunder will (i) give prompt written
notice
to the indemnifying party of any claim with respect to which it seeks
indemnification and (ii) unless in such indemnified party’s reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party
to
assume the defense of such claim with counsel reasonably satisfactory to
the
indemnified party. If such defense is assumed, the indemnifying party will
not
be subject to any liability for any settlement made by the indemnified party
without its consent (which consent may not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than
one
counsel for all parties indemnified by such indemnifying party with respect
to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other
of
such indemnified parties with respect to such claim.
(m) With
a
view to making available to the Offering Holder the benefits of Rule 144
promulgated under the Securities Act, the Company agrees that it will use
its
commercially reasonable efforts to maintain registration of its Common Stock
under Section 12 or 15 of the Securities and Exchange Act of 1934,
as
amended (the “Exchange
Act”),
and
to file with the SEC in a timely manner all reports and other documents required
to be filed by an issuer of securities registered under the Exchange Act
so as
to maintain the availability of Rule 144. Upon the request of any
record
owner, the Company will deliver to such owner a written statement as to whether
it has complied with the reporting requirements of Rule 144.
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5. Representations
and Warranties of the Subscriber.
Subscriber hereby represents and warrants to the Company as
follows:
(a) Subscriber
is acquiring the Shares for its own account, for investment and not with
a view
to, or for resale in connection with, any distribution or public offering
thereof within the meaning of the Securities Act, and applicable state
securities laws.
(b) The
Subscriber understands that (A) the Shares (1) have not been registered under
the Securities Act or any state securities laws, (2) will be issued in reliance
upon an exemption from the registration and prospectus delivery requirements
of
the Securities Act pursuant to Section 4(2) and/or Regulation D thereof,
(3)
will be issued in reliance upon exemptions from the registration and prospectus
delivery requirements of state securities laws which relate to private offerings
and (4) must be held by the Subscriber indefinitely, and (B) the Subscriber
must
therefore bear the economic risk of such investment indefinitely unless a
subsequent disposition thereof is registered under the Securities Act and
applicable state securities laws or is exempt therefrom. Subscriber further
understands that such exemptions depend upon, among other things, the bona
fide
nature of the investment intent of the Subscriber expressed herein. Pursuant
to
the foregoing, the Subscriber acknowledges that the certificates representing
the Shares acquired by the Subscriber shall bear a restrictive legend
substantially as follows:
“THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND STATE SECURITIES LAWS,
AND MAY
NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF UNLESS (I) REGISTERED UNDER THE APPLICABLE SECURITIES LAWS OR
(II)
AN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE BOTH REASONABLY
SATISFACTORY TO THE COMPANY, HAS BEEN DELIVERED TO THE COMPANY AND SUCH OPINION
STATES THAT THE SHARES MAY BE TRANSFERRED WITHOUT SUCH
REGISTRATION.”
(c) The
Subscriber has knowledge, skill and experience in financial, business and
investment matters relating to an investment of this type and is capable
of
evaluating the merits and risks of such investment and protecting the
Subscriber’s interest in connection with the acquisition of the Shares. The
Subscriber understands that the acquisition of the Shares is a speculative
investment and involves substantial risks and that the Subscriber could lose
the
Subscriber’s entire investment in the Shares. Further, the undersigned has
carefully read and considered the matters set forth under the section entitled
“Risk Factors” in the Memorandum, and has taken full cognizance of and
understands all of the risks related to the purchase of the Shares. To the
extent deemed necessary by the Subscriber, the Subscriber has retained, at
its
own expense, and relied upon, appropriate professional advice regarding the
investment, tax and legal merits and consequences of purchasing and owning
the
Shares. The Subscriber has the ability to bear the economic risks of the
Subscriber’s investment in the Company, including a complete loss of the
investment, and the Subscriber has no need for liquidity in such
investment.
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(d) The
Subscriber has been furnished by the Company all information (or provided
access
to all information) regarding the business and financial condition of the
Company, its expected plans for future business activities, the attributes
of
the Shares and the merits and risks of an investment in the Shares which
the
Subscriber has requested or otherwise needs to evaluate the investment in
the
Company.
(e) Subscriber
is in receipt of and has carefully read and understands the following
items:
(i) the
Memorandum;
(ii) the
Annual Report on Form 10-KSB of the Company filed with the SEC for
the year
ended December 31, 2004;
(iii) the
Amendment to the Annual report on Form 10-KSBA filed with the SEC for the
year
ended December 31, 2004;
(iv) the
Proxy
Statement on Schedule 14A filed with the SEC on May 16, 2005;
(v) the
Quarterly Reports of the Company on Form 10-QSB for the quarters ended March
31,
2005 and June 30, 2005; and
(vi) the
Current Report(s) on form 8-K of the Company filed with the SEC on January
24,
2005; February 22, 2005; April 25, 2005; May 24, 2005; July 1, 2005; August
9,
2005; and August 12, 2005.
(f) In
making
the proposed investment decision, the Subscriber is relying solely on
investigations made by the Subscriber and the Subscriber’s representatives. The
offer to sell the Shares was communicated to the Subscriber in such a manner
that the Subscriber was able to ask questions of and receive answers from
the
management of the Company concerning the terms and conditions of the proposed
transaction and that at no time was the Subscriber presented with or solicited
by or through any advertisement, article, leaflet, public promotional meeting,
notice or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or presented at any seminar or
meeting or any other form of general or public advertising or
solicitation.
(g) The
Subscriber acknowledges that the Subscriber has been advised that:
(i) The
Shares offered hereby have not been approved or disapproved by the SEC or
any
state securities commission nor has the SEC or any state securities commission
passed upon the accuracy or adequacy of any representations by the Company.
Any
representation to the contrary is a criminal offense.
(ii) In
making
an investment decision, the Subscriber must rely on its own examination of
the
Company and the terms of the Offering, including the merits and risks involved.
The Shares have not been recommended by any federal or state securities
commission or regulatory authority. Furthermore, the foregoing authorities
have
not confirmed the accuracy or determined the adequacy of any representation.
Any
representation to the contrary is a criminal offense.
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(iii) The
Shares will be “restricted securities” within the meaning of Rule 144 under the
Securities Act, are subject to restrictions on transferability and resale
and
may not be transferred or resold except as permitted under the Securities
Act
and applicable state securities laws, pursuant to registration or exemption
therefrom. The Subscriber is aware that the Subscriber may be required to
bear
the financial risks of this investment for an indefinite period of
time.
(h) The
Subscriber acknowledges and is aware that there has never been any
representation, guarantee or warranty made by the Company or any officer,
director, employee, agent or representative of the Company, expressly or
by
implication, as to (i) the approximate or exact length of time that the
Subscriber will be required to remain an owner of the Shares; (ii) the
percentage of profit and/or amount of or type of consideration, profit or
loss
to be realized, if any, as a result of this investment; or (iii) that the
limited past performance (if any) or experience on the part of the Company,
or
any future expectations will in any way indicate the predictable results
of the
ownership of Shares or of the overall financial performance of the
Company.
(i) The
Subscriber agrees to furnish the Company such other information as the Company
may reasonably request in order to verify the accuracy of the information
contained herein and agrees to notify the Company immediately of any material
change in the information provided herein that occurs prior to the Company’s
acceptance of this Agreement.
(j) The
Subscriber further represents and warrants that the Subscriber is an “accredited
investor” within the meaning of Rule 501 of Regulation D under the Securities
Act, and Subscriber has executed the Certificate of Accredited Investor Status,
attached hereto as Exhibit B.
(k) As
of the
date of this Agreement the Subscriber and its affiliates do not have, and
during
the 30 day period prior to the date of this Agreement the Subscriber and
its
affiliates have not entered into, any “put equivalent position” as such term is
defined in Rule 16a-1 of under the Exchange Act or short sale positions with
respect to the Common Stock of the Company.
(l) If
the
Subscriber is a natural person, the Subscriber has reached the age of majority
in the state in which the Subscriber resides, has adequate means of providing
for the Subscriber’s current financial needs and contingencies, is able to bear
the substantial economic risks of an investment in the Shares for an indefinite
period of time, has no need for liquidity in such investment and, at the
present
time, could afford a complete loss of such investment.
(m) If
this
Agreement is executed and delivered on behalf of a partnership, corporation,
trust, estate or other entity (an “Entity”):
(i)
such Entity has the full legal right and power and all authority and approval
required (a) to execute and deliver, or authorize execution and delivery
of,
this Agreement and all other instruments executed and delivered by or on
behalf
of such Entity in connection with the purchase of the Shares, (b) to delegate
authority pursuant to power of attorney and (c) to purchase and hold such
Shares, (ii) the signature of the party signing on behalf of such Entity
is
binding upon such Entity; and (iii) such Entity has not been formed for the
specific purpose of acquiring such Shares, unless each beneficial owner of
such
entity is qualified as an accredited investor within the meaning of Rule
501(a)
of Regulation D promulgated under the Securities Act and has submitted
information substantiating such individual qualification.
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(n) If
the
Subscriber is a retirement plan or is investing on behalf of a retirement
plan,
the Subscriber acknowledges that investment in the Common Stock poses additional
risks including the inability to use losses generated by an investment in
the
Common Stock to offset taxable income.
The
foregoing representations and warranties and undertakings are made by the
Subscriber with the intent that they be relied upon in determining its
suitability as an investor and the Subscriber hereby agrees that such
representations and warranties shall survive its purchase of the
Shares.
6. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Subscriber as
follows:
(a) The
Company is duly incorporated, validly existing and in good standing under
the
laws of its state of incorporation, and is duly qualified to do business
as a
foreign corporation in all jurisdictions in which the failure to be so qualified
would materially and adversely affect the business or financial condition,
properties or operations of the Company.
(b) The
Company has duly authorized the issuance and sale of the Shares in accordance
with the terms of this Agreement (as described herein) by all requisite
corporate action, including the authorization of the Company’s Board of
Directors of the issuance and sale of the Shares in accordance herewith,
and the
execution, delivery and performance of any other agreements and instruments
executed in connection herewith. This Agreement constitutes a valid and legally
binding obligation of the Company, enforceable in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained
herein may be limited by applicable federal or state securities
laws.
(c) As
of the
date of this Agreement, the Memorandum does not contain any untrue statement
of
a material fact or omit to state any material fact required to be stated
therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) The
documents incorporated by reference or included with the Memorandum, at the
time
they were filed with the SEC, complied in all material respects with the
requirements of the Exchange Act, and, when read together and with the other
information in the Memorandum, do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances
under
which they were made, not misleading.
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7. Understandings.
The
Subscriber understands, acknowledges and agrees with the Company as
follows:
(a) This
Subscription may be rejected, in whole or in part, by the Company in its
sole
and absolute discretion, at any time before the Closing, notwithstanding
prior
receipt by the undersigned of notice of acceptance of the undersigned’s
Subscription. The Company may terminate this Offering at any time in its
sole
discretion. The execution of this Agreement or solicitation of the investment
contemplated hereby, shall create no obligation of the Company to accept
any
subscription or complete the Offering.
(b) Except
as
set forth in Section 7(a) above, the Subscriber hereby acknowledges and agrees
that the subscription hereunder is irrevocable by the Subscriber, that, except
as required by law, the Subscriber is not entitled to cancel, terminate or
revoke this Agreement or any agreements of the Subscriber hereunder and that
this Agreement and such other agreements shall survive the death or disability
of the Subscriber and shall be binding upon and inure to the benefit of the
parties and their heirs, executors, administrators, successors, legal
representatives and permitted assigns. If the Subscriber is more than one
person, the obligations of the Subscriber hereunder shall be joint and several
and the agreements, representations, warranties and acknowledgments herein
contained shall be deemed to be made by and be binding upon each such person
and
his/her heirs, executors, administrators, successors, legal representatives
and
permitted assigns.
(c) No
federal or state agency has made any finding or determination as to the accuracy
or adequacy of the Memorandum or as to the suitability of this offering for
investment nor any recommendation or endorsement of the Shares.
(d) The
Offering is intended to be exempt from registration under the Securities
Act by
virtue of Section 4(2) of the Securities Act and the provisions of Regulation
D
thereunder, which is in part dependent upon the truth, completeness and accuracy
of the statements made by the Subscriber herein.
(e) There
is
only a limited public market for the Common Stock. There can be no assurance
that the Subscriber will be able to sell or dispose of the Shares. It is
understood that in order not to jeopardize the Offering’s exempt status under
Section 4(2) of the Securities Act and Regulation D, any transferee will,
at a
minimum, be required to fulfill the investor suitability requirements
thereunder.
(f) The
Subscriber acknowledges that the information contained in the Memorandum
is
confidential and non-public and agrees that all such information shall be
kept
in confidence by the Subscriber and neither used for the Subscriber’s personal
benefit (other than in connection with this subscription) nor disclosed to
any
third party for any reason; provided, however, that this confidentiality
obligation shall not apply to any such information that (i) is part of the
public knowledge or literature, (ii) becomes part of the public knowledge
or
literature (except as a result of a breach of this provision) or (iii) is
received from third parties (except third parties who disclose such information
in violation of any confidentiality agreements or obligations, including,
without limitation, any subscription agreement entered into with the Company).
In addition, the Subscriber may disclose any information as may be required
by
law or applicable legal process; provided, however, to the extent permitted
by
law or applicable legal process, the Subscriber shall provide the Company
at
least five business days prior written notice before making any such
disclosure.
11
(g) The
representations, warranties and agreements of the Subscriber contained herein
and in any other writing delivered in connection with the transactions
contemplated hereby shall be true and correct in all respects on and as of
the
date of the Closing of the sale of the Shares as if made on and as of such
date
and shall survive the execution and delivery of this Agreement and the purchase
of the Shares.
8. Survival;
Indemnification.
All
representations, warranties and covenants contained in this Agreement and
the
indemnification contained in this Section 8 shall survive (i) the acceptance
of
this Agreement by the Company, (ii) changes in the transactions, documents
and
instruments described herein which are not material or which are to the benefit
of Subscriber, and (iii) the death or disability of Subscriber. Subscriber
acknowledges the meaning and legal consequences of the representations,
warranties and covenants in Section 5 hereof and that the Company has relied
upon such representations, warranties and covenants in determining Subscriber’s
qualification and suitability to purchase the Shares. Subscriber hereby agrees
to indemnify, defend and hold harmless the Company, its officers, directors,
employees, agents and controlling persons, from and against any and all losses,
claims, damages, liabilities, expenses (including attorneys’ fees and
disbursements), judgments or amounts paid in settlement of actions arising
out
of or resulting from the untruth of any representation of Subscriber herein
or
the breach of any warranty or covenant herein by Subscriber. Notwithstanding
the
foregoing, however, no representation, warranty, covenant or acknowledgment
made
herein by Subscriber shall in any manner be deemed to constitute a waiver
of any
rights granted to it under the Securities Act or state securities
laws.
9. Notices.
All
notices and other communications provided for herein shall be in writing
and
shall be deemed to have been duly given if delivered personally or sent by
registered or certified mail, return receipt requested, postage
prepaid:
(a) if
to the
Company, to the following address:
Flotek
Industries, Inc.
0000
Xxxxxx Xxxxxxx Xxxxx
Xxxxxxx,
Xxxxx 00000
Attn:
Xxxx Xxxxxxxx Xxxxx
(000)
000-0000
(b) if
to
Subscriber, to the address set forth on the signature page hereto.
(c) or
at
such other address as any party shall have specified by notice in writing
to the
others.
10. Notification
of Changes.
Subscriber agrees and covenants to notify the Company immediately upon the
occurrence of any event prior to the consummation of this Offering that would
cause any representation, warranty, covenant or other statement contained
in
this Agreement to be false or incorrect or of any change in any statement
made
herein occurring prior to the consummation of this Offering.
12
11. Assignability.
This
Agreement is not assignable by the Subscriber, and may not be modified, waived
or terminated except by an instrument in writing signed by the party against
whom enforcement of such modification, waiver or termination is
sought.
12. Binding
Effect.
Except
as otherwise provided herein, this Agreement shall be binding upon and inure
to
the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives and assigns, and the agreements,
representations, warranties and acknowledgments contained herein shall be
deemed
to be made by and be binding upon such heirs, executors, administrators,
successors, legal representatives and assigns.
13. Obligations
Irrevocable.
The
obligations of the Subscriber shall be irrevocable, except with the consent
of
the Company, until the consummation or termination of the Offering.
14. Entire
Agreement.
This
Agreement constitutes the entire agreement of the Subscriber and the Company
relating to the matters contained herein, superseding all prior contracts
or
agreements, whether oral or written.
15. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of Delaware, without regard to the principles of conflicts of law thereof
that would require the application of the laws of any jurisdiction other
than
Delaware. In addition, the laws of the State of Delaware shall apply to any
claims brought by any parties hereto which relate to the Offering whether
or not
such claim is based on contract law. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated
hereby
shall be brought in the courts of the State of Delaware or of the United
States
of America for the District of Delaware and hereby expressly submits to the
personal jurisdiction and venue of such courts for the purposes thereof and
expressly waives any claim of improper venue and any claim that such courts
are
an inconvenient forum.
16. Severability.
If any
provision of this Agreement or the application thereof to Subscriber or any
circumstance shall be held invalid or unenforceable to any extent, the remainder
of this Agreement and the application of such provision to other subscriptions
or circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
17. Headings.
The
headings in this Agreement are inserted for convenience and identification
only
and are not intended to describe, interpret, define, or limit the scope,
extent
or intent of this Agreement or any provision hereof.
18. Counterparts.
This
Agreement may be executed in any number of counterparts, each of which when
so
executed and delivered shall be deemed to be an original and all of which
together shall be deemed to be one and the same agreement.
19. Counsel.
Subscriber hereby acknowledges that the Company and its counsel, Xxxxxxx
&
Xxxxxxx LLP, represent the interests of the Company and not those of the
Subscriber in any agreement (including this Agreement) to which the Company
is a
party.
[Signature
Page to follow]
13
IN
WITNESS WHEREOF, Subscriber has executed this Subscription and Registration
Rights Agreement as of August 29, 2005.
SUBSCRIBER
Number
of
Shares: ____________________
Offering
Price per Share: $______
Subscription
Amount: $_________________
By:
________________________________
Name:______________________________
Title:_______________________________
Address:
____________________________
___________________________________
___________________________________
The
Company hereby accepts the foregoing subscription subject to the terms and
conditions hereof as of August 29, 2005.
Flotek
Industries, Inc.
a
Delaware corporation
By:
/s/
Xxxxx X. Xxxxx, Xx.
Name:
Xxxxx X. Xxxxx, Xx.
Title:
Chief Executive Officer
Exhibit
A
SUBSCRIPTION
INSTRUCTIONS
(1) If
you
are subscribing for the purchase of Shares, please date and sign the signature
page to this Subscription and Registration Rights Agreement in the applicable
spaces. Please signify the amount of Shares you are purchasing by inserting
such
amount in the space provided for on the signature page to the Agreement.
(2) Complete
and sign the accompanying Accredited Investor Certificate.
(3) Send
all
completed documents to:
Energy
Capital Solutions
0000
X.
Xxxxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Attn:
Xxxx
Xxxxxx
Phone:
000-000-0000
Fax:
000-000-0000
(4) Transmit
funds via wire to the following account of Flotek Industries, Inc.
Bank: Xxxxx
Fargo Bank
ABA
#
000000000
Acct
#
4121097299
in
an
amount equal to the number of shares you are purchasing multiplied by the
Offering Price.
ATTENTION
SUBSCRIBERS:
NO SUBSCRIPTION WILL BE ACCEPTED UNLESS ALL DOCUMENTATION PRESCRIBED HEREIN
IS
FULLY COMPLETED AND EXECUTED. ANY MATERIALS RECEIVED THAT ARE INCOMPLETE
IN ANY
RESPECT WILL BE RETURNED BY THE COMPANY.
Exhibit
B
CERTIFICATE
OF ACCREDITED INVESTOR STATUS
Except
as
may be indicated by the undersigned below, the undersigned is an “accredited
investor,” as that term is defined in Regulation D under the Securities Act of
1933, as amended (the “Securities
Act”).
The
undersigned has checked the box below indicating the basis on which he is
representing his status as an “accredited investor”:
|
□
|
a
bank as defined in Section 3(a)(2) of the Securities Act, or any
savings
and loan association or other institution as defined in Section
3(a)(5)(A)
of the Securities Act whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15
of the
Securities Exchange Act of 1934, as amended; an insurance company
as
defined in Section 2(13) of the Securities Act; an investment company
registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of that Act;
a small
business investment company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; a plan established and maintained by a
state, its
political subdivisions, or any agency or instrumentality of a state
or its
political subdivisions, for the benefit of its employees, and such
plan
has total assets in excess of $5,000,000; an employee benefit plan
within
the meaning of the Employee Retirement Income Security Act of 1974,
if the
investment decision is made by a plan fiduciary, as defined in
Section
3(21) of such Act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the
employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons
that
are “accredited investors”;
|
|
□
|
a
private business development company as defined in Section 202(a)(22)
of
the Investment Advisers Act of
1940;
|
|
□
|
an
organization described in Section 501(c)(3) of the Internal Revenue
Code,
corporation, Massachusetts or similar business trust, or partnership,
not
formed for the specific purpose of acquiring the securities offered,
with
total assets in excess of
$5,000,000;
|
|
□
|
a
natural person whose individual net worth, or joint net worth with
the
undersigned’s spouse, at the time of this purchase exceeds
$1,000,000;
|
|
□
|
a
natural person who had an individual income in excess of $200,000
in each
of the two most recent years or joint income with the undersigned’s spouse
in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current
year;
|
|
□
|
a
trust with total assets in excess of $5,000,000, not formed for
the
specific purpose of acquiring the securities offered, whose purchase
is
directed by a person who has such knowledge and experience in financial
and business matters that he is capable of evaluating the merits
and risks
of the prospective investment;
|
|
□
|
an
entity in which all of the equity holders are “accredited investors” by
virtue of their meeting one or more of the above standards;
or
|
|
□
|
an
individual who is a director or executive officer of
____________________.
|
IN
WITNESS WHEREOF, the undersigned has executed this Certificate of Accredited
Investor Status effective as of the __ day of ___________, 200__.
Name
of
Subscriber
By:
________________________
Name:
______________________
Title:
_______________________
2
Exhibit
C
PLAN
OF DISTRIBUTION
As
of the
date of this prospectus, we have not been advised by the selling stockholders
as
to any plan of distribution. Distributions of the shares by the selling
stockholders, or by their partners, pledgees, donees (including charitable
organizations), transferees or other successors in interest, may from time
to
time be offered for sale either directly by such individual, or through
underwriters, dealers or agents or on any exchange on which the shares may
from
time to time be traded, in the over-the-counter market, or in independently
negotiated transactions or otherwise. The methods by which the shares may
be
sold include:
| § |
a
block trade (which may involve crosses) in which the broker or
dealer so
engaged will attempt to sell the securities as agent but may position
and
resell a portion of the block as principal to facilitate the transaction;
|
| § |
purchases
by a broker or dealer as principal and resale by such broker or
dealer for
its own account pursuant to this
prospectus;
|
| § |
exchange
distributions and/or secondary
distributions;
|
| § |
sales
in the over-the-counter market;
|
| § |
underwritten
transactions;
|
| § |
ordinary
brokerage transactions and transactions in which the broker solicits
purchasers; and
|
| § |
privately
negotiated transactions.
|
Such
transactions may be effected by the selling stockholders at market prices
prevailing at the time of sale or at negotiated prices. The selling stockholders
may effect such transactions by selling the common stock to underwriters
or to
or through broker-dealers, and such underwriters or broker-dealers may receive
compensations in the form of discounts or commissions from the selling
stockholders and may receive commissions from the purchasers of the common
stock
for whom they may act as agent. The selling stockholders may agree to indemnify
any underwriter, broker-dealer or agent that participates in transactions
involving sales of the shares against certain liabilities, including liabilities
arising under the Securities Act. We have agreed to register the shares for
sale
under the Securities Act and to indemnify the selling stockholders and each
person who participates as an underwriter in the offering of the shares against
certain civil liabilities, including certain liabilities under the Securities
Act.
In
connection with sales of the common stock under this prospectus, the selling
stockholders may enter into hedging transactions with broker-dealers, who
may in
turn engage in short sales of the common stock in the course of hedging the
positions they assume. The selling stockholders also may sell shares of common
stock short and deliver them to close out the short positions, or loan or
pledge
the shares of common stock to broker-dealers that in turn may sell
them.
The
selling stockholders and any underwriters, dealers or agents that participate
in
distribution of the shares may be deemed to be underwriters, and any profit
on
sale of the shares by them and any discounts, commissions or concessions
received by any underwriter, dealer or agent may be deemed to be underwriting
discounts and commissions under the Securities Act.
There
can
be no assurances that the selling stockholders will sell any or all of the
shares offered under this prospectus.
