Exhibit 4.2
NEITHER THE WARRANTS REPRESENTED
BY THIS WARRANT CERTIFICATE NOR THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES
ACT ”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH
CASE IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS AND
THE SECURITIES LAWS OF OTHER JURISDICTIONS, AND IN THE CASE OF A
TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES
ACT AND SUCH OTHER APPLICABLE LAWS OR THE COMPANY HAS RECEIVED FROM
THE HOLDER REASONABLE ASSURANCE THAT THE SECURITIES CAN BE SOLD,
ASSIGNED OR TRANSFERRED PURSUANT TO RULE 144 UNDER THE SECURITIES
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
FLOTEK INDUSTRIES,
INC.
WARRANT TO PURCHASE COMMON
STOCK
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Warrant Shares:
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Issue Date:
August 11, 2009
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THIS WARRANT TO PURCHASE COMMON
STOCK (the “ Warrant ”) certifies that, for
value received,
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(the “ Holder ”) is entitled, upon the terms and
subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date Flotek
Industries, Inc., a Delaware corporation (the “
Company ”) obtains the Stockholder Approval described
in Section 5 hereof (the “ Initial Exercise
Date ”) and on or prior to the earlier of (i) 5:00
p.m. Eastern time on the 60-month anniversary of the date the
Company obtains the Stockholder Approval, or (ii) 5:00 p.m.
Eastern time on the 98-month anniversary of the date hereof (the
“ Termination Date ”) but not thereafter, to
subscribe for and purchase from the Company
[ ]
fully paid nonassessble shares of Common Stock of the Company (the
“ Warrant Shares ”). The purchase price of one
share of Common Stock under this Warrant shall be equal to the
Exercise Price, as defined in Section 2(b) .
Section 1. Definitions .
As used herein, the following terms shall have the following
respective meanings:
a) “ Affiliate ”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
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b) “ Board of Directors
” means the board of directors of the Company.
c) “ Business Day
” means any day except any Saturday, any Sunday, any day
which is a federal legal holiday in the United States or any day on
which banking institutions in the State of New York are authorized
or required by law or other governmental action to
close.
d) “ Certificate of
Designations ” means the Certificate of Designations of
the Company establishing the Preferred Stock.
e) “ Certificate of
Incorporation ” means the Amended and Restated
Certificate of Incorporation of the Company, as such may be
amended, modified or restated from time to time.
f) “ Closing Sale Price
” means, for any security as of any date, the last closing
trade price for such security on the Principal Market, as reported
by Bloomberg, L.P. (“ Bloomberg ”), or, if the
Principal Market begins to operate on an extended hours basis and
does not designate the closing trade price, then the last trade
price of such security prior to 4:00 p.m., New York Time, as
reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security,
the last trade price of such security on the principal securities
exchange or Trading Market where such security is listed or traded
as reported by Bloomberg, or if the foregoing do not apply, the
last trade price of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by
Bloomberg, or, if no last trade price is reported for such security
by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.).
g) “ Commission ”
means the United States Securities and Exchange
Commission.
h) “ Common Stock
” means the common stock, par value $0.0001 per share, of the
Company.
i) “ Convertible
Securities ” means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or
exchangeable for Common Stock.
j) “ Exchange Act
” means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
k) “ Excluded
Securities ” means any Common Stock issued or issuable:
(i) in connection with any stock plan of the Company;
(ii) upon exercise of the Warrants; (iii) pursuant to a
bona fide firm commitment underwritten public offering with a
nationally recognized underwriter that generates gross proceeds to
the Company in excess of $25,000,000 (other than an
“at-the-market offering” as defined in Rule 415(a)(4)
under the Securities Act and “equity lines”);
(iv) upon conversion of any Options or Convertible Securities
that are outstanding on the day immediately preceding the Initial
Exercise
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Date, provided that the terms of
such Options or Convertible Securities are not amended, modified or
changed on or after the Initial Exercise Date; (v) in
connection with any acquisition, merger, joint venture or strategic
investment that has been approved by the Board of Directors of the
Company; (vi) securities issued to commercial banks or
financial institutions, the primary business of which is not making
equity-related loans; (vii) securities issued to lessors in
connection with commercial credit arrangements, equipment
financings or similar transactions or to independent contractors or
vendors of the Company in connection with bona fide business
transactions; or (viii) in connection with the conversion of
the Preferred Stock or exercise of the warrants issued in
connection with the Warrants (including warrants issued after the
date hereof to the placement agent pursuant to the agreement
between the Company and the placement agent entered into in
connection with the issuance of Warrants, not to exceed 175,000
shares at an exercise price of not less than $2.31 per
share).
l) “ Options ”
means any right, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities.
m) “ Person ”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or agency or
subdivision thereof) or other entity of any kind.
n) “ Preferred Stock
” means the Series A Cumulative Convertible Preferred Stock
of the Company established pursuant to the Certificate of
Designations.
o) “ Principal Market
” means the New York Stock Exchange.
p) “ Purchase Agreement
” means the Unit Purchase Agreements, dated as of
August 11, 2009, among the Company and the purchasers
signatory thereto.
q) “ Securities Act
” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
r) “ Trading Day
” means a day on which the Principal Market is open for
trading.
s) “ Trading Market
” means any of the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in
question: the NYSE Alternext, the Nasdaq Capital Market, the Nasdaq
Global Market, the Nasdaq Global Select Market or the New York
Stock Exchange (or any successors to any of the
foregoing).
t) “ Transfer Agent
” means American Stock Transfer & Trust Company, the
current transfer agent of the Company, and any successor transfer
agent of the Company.
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Section 2. Exercise
.
a) Exercise of Warrant .
Exercise of the purchase rights represented by this Warrant may be
made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by
delivery to the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered
Holder at the address of the Holder appearing on the books of the
Company) of a duly executed facsimile copy of the Notice of
Exercise Form annexed hereto; and, within three Trading Days of the
date said Notice of Exercise is delivered to the Company, the
Company shall have received payment of the aggregate Exercise Price
of the shares thereby purchased by wire transfer or cashier’s
check drawn on a United States bank. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within three
Trading Days of the date the final Notice of Exercise is delivered
to the Company. Partial exercises of this Warrant resulting in
purchases of a portion of the total number of Warrant Shares
available hereunder shall have the effect of reducing the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise
Form within one Business Day of receipt of such notice. In the
event of any dispute or discrepancy, the records of the Company
shall be controlling and determinative in the absence of manifest
error. The Holder and any assignee, by acceptance of this Warrant,
acknowledge and agree that, by reason of the provisions of this
paragraph, following the purchase of a portion of the Warrant
Shares hereunder, the number of Warrant Shares available for
purchase hereunder at any given time may be less than the amount
stated on the face hereof.
b) Exercise Price . The
exercise price per share of the Common Stock under this Warrant
shall be $2.45, subject to adjustment hereunder (the “
Exercise Price ”).
c) Mechanics of Exercise
.
i. Delivery of Certificates Upon
Exercise . Certificates for shares purchased hereunder shall be
transmitted by the Transfer Agent to the Holder by physical
delivery to the address specified by the Holder in the Notice of
Exercise by the date that is three Trading Days after the latest of
(A) the delivery to the Company of the Notice of Exercise
Form, (B) surrender of this Warrant (if required) and
(C) payment of the aggregate Exercise Price as set forth above
(such date, the “ Warrant Share Delivery Date
”). This Warrant shall be deemed to have been exercised on
the first date on which all of the foregoing have been delivered to
the Company. The Warrant Shares shall be deemed to have been
issued, and the Holder or any other person so designated to be
named therein shall be deemed to have become a holder of record of
such shares for all purposes, as of the date the Warrant has been
exercised, with payment to the Company of the Exercise Price and
all taxes required to be paid by the Holder, if any, pursuant to
Section 2(c)(iv) prior to the issuance of such shares,
having been paid.
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ii. Delivery of New Warrants Upon
Exercise . If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant certificate, at the time of delivery of the
certificate or certificates representing Warrant Shares, deliver to
the Holder a new Warrant evidencing the rights of the Holder to
purchase the unpurchased Warrant Shares called for by this Warrant,
which new Warrant shall in all other respects be identical with
this Warrant.
iii. No Fractional Shares or
Scrip . No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which the Holder would otherwise be entitled to
purchase upon such exercise, the Company shall, at its election,
either pay a cash adjustment in respect of such final fraction in
an amount equal to such fraction multiplied by the Exercise Price
or round up to the next whole share.
iv. Charges, Taxes and
Expenses . Issuance of certificates for Warrant Shares shall be
made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the
Company, and such certificates shall be issued in the name of the
Holder or in such name or names as may be directed by the Holder;
provided, however, that in the event certificates for Warrant
Shares are to be issued in a name other than the name of the
Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
v. Closing of Books . The
Company will not close its stockholder books or records in any
manner which prevents the timely exercise of this Warrant, pursuant
to the terms hereof.
d) Cashless Exercise .
Notwithstanding anything contained herein requiring the payment of
the Exercise Price in cash upon exercise of the Warrants, if at any
time that the Warrants are exercisable the Company is in breach of
its obligations to provide an effective registration statement
covering the resale of the Warrant Shares that are the subject of
the Notice of Exercise (the “ Unavailable Warrant
Shares ”) pursuant to Section 7 of the Purchase
Agreement, the Holder may, in its sole discretion, but only during
the continuation of such breach, exercise this Warrant in whole or
in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in
payment of the Exercise Price, elect instead to receive upon such
exercise the “Net Number” of shares of Common Stock
determined according to the following formula (a “
Cashless Exercise ”):
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Net Number = (A × B) - (A
× C)
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B
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For purposes of the foregoing
formula:
A = the total number of shares with
respect to which this Warrant is then being exercised.
B = the Closing Sale Price of the
shares of Common Stock on the date immediately preceding the date
of the Notice of Exercise.
C = the Exercise Price then in
effect for the applicable Warrant Shares at the time of such
exercise.
e) Holder’s Exercise
Limitations . The Company shall not effect any exercise of this
Warrant, and a Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise,
the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of
the Holder’s Affiliates), would beneficially own in excess of
the Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its Affiliates shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by the
Holder or any of its Affiliates and (B) exercise or conversion
of the unexercised or nonconverted portion of any other securities
of the Company subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by
the Holder or any of its Affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 2(e) ,
beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder, it being acknowledged by the
Holder that the Company is not representing to the Holder that such
calculation is in compliance with Section 13(d) of the
Exchange Act and the Holder is solely responsible for any schedules
required to be filed in accordance therewith. To the extent that
the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates) and of which portion of this Warrant is exercisable
shall be in the sole discretion of the Holder, and the submission
of a Notice of Exercise shall be deemed to be the Holder’s
determination of whether this Warrant is exercisable (in relation
to other securities owned by the Holder together with any
Affiliates) and of which portion of this Warrant is exercisable, in
each case subject to the Beneficial Ownership Limitation, and the
Company shall have no obligation to verify or confirm the accuracy
of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this
Section 2(e) , in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written
notice by the Company or the Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the written or
oral request of a Holder, the Company shall within two Trading Days
confirm orally and in writing to the Holder the
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number of shares of Common Stock
then outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this
Warrant, by the Holder or its Affiliates since the date as of which
such number of outstanding shares of Common Stock was reported. The
“ Beneficial Ownership Limitation ” shall be
4.99% of the number of shares of Common Stock outstanding
immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant. The Holder, upon not
less than 61 days’ prior notice to the Company, may increase
or decrease the Beneficial Ownership Limitation provisions of this
Section 2(e) , provided that the Beneficial Ownership
Limitation in no event exceeds 9.99% of the number of shares of
Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of this Warrant
held by the Holder and the provisions of this
Section 2(e) shall continue to apply. Any such increase
or decrease will not be effective until the 61st day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this
Section 2(e) to correct this paragraph (or any portion
hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes
or supplements necessary or desirable to properly give effect to
such limitation. The limitations contained in this paragraph shall
apply to a successor holder of this Warrant.
Section 3. Certain
Adjustments . The Exercise Price shall be adjusted from time to
time as follows:
a) Adjustment upon Issuance of
Common Stock . If at any time on or after the date upon which
these Warrants were first issued, the Company issues or sells, or
in accordance with this is deemed to have issued or sold, any
shares of Common Stock (including the issuance or sale of shares of
Common Stock owned or held by or for the account of the Company,
but excluding Excluded Securities) for a consideration per share
(the “ New Issuance Price ”) less than a price
(the “ Applicable Price ”) equal to the Exercise
Price in effect immediately prior to such issue or sale or deemed
issuance or sale (the foregoing, a “ Dilutive Issuance
”), then immediately after such Dilutive Issuance the
Exercise Price then in effect shall be reduced to an amount equal
to the New Issuance Price. For purposes of determining the adjusted
Exercise Price under this Section 3(a) , the following
shall be applicable:
i. Issuance of Options . If
the Company in any manner grants any Options and the lowest price
per share for which one share of Common Stock is issuable upon the
exercise of any such Option or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of
any such Option is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the granting or sale
of such Option for such price per share. For purposes of this
Section 3(a)(i) , the “lowest price per share for
which one share of Common Stock is issuable upon exercise of such
Options or upon conversion, exercise or exchange of such
Convertible Securities” shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by
the Company with
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respect to any one share of Common
Stock upon the granting or sale of the Option, upon exercise of the
Option and upon conversion, exercise or exchange of any Convertible
Security issuable upon exercise of such Option. No further
adjustment of the Exercise Price shall be made upon the actual
issuance of such Common Stock or of such Convertible Securities
upon the exercise of such Options or upon the actual issuance of
such Common Stock upon conversion, exercise or exchange of such
Convertible Securities.
ii. Issuance of Convertible
Securities . If the Company in any manner issues or sells any
Convertible Securities and the lowest price per share for which one
share of Common Stock is issuable upon the conversion, exercise or
exchange thereof is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the issuance or sale
of such Convertible Securities for such price
