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Exhibit 10.6
WARRANT TO PURCHASE COMMON STOCK OF
FLOTEK INDUSTRIES INC.
VOID AFTER 4:00 P.M. VANCOUVER
TIME ON THE EXPIRATION DATE
2,333,333 Shares of
Warrant No. 3 Warrant Stock
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND HAVE BEEN ISSUED PURSUANT TO A CLAIM OF EXEMPTION
FROM THE REGISTRATION OR QUALIFICATION PROVISIONS OF FEDERAL AND STATE
SECURITIES LAWS BASED, IN PART, ON AN INVESTMENT REPRESENTATION OF THE PART OF
THE PURCHASER THEREOF. THESE SECURITIES MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE
SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
FLOTEK INDUSTRIES INC. (the "Company"), a corporation organized under
the laws of the Province of Alberta, Canada, for value received, hereby agrees
to sell upon the terms and on the conditions hereinafter set forth to CHARLES
A. DICKINSON, the registered holder hereof (the "Holder"), having an address
set forth in the Warrant Register maintained by the Company, under the terms as
hereinafter set forth, Two Million Three Hundred Thirty-Three Thousand Three
Hundred Thirty-Three (2,333,333) fully paid and non-assessable shares of the
Company's Common Stock, no par value (the "Warrant Stock"), at a purchase price
per share of Fifteen Canadian Cents (CDN $0.15) at any time prior to 4:00 p.m.,
Vancouver Time, on September 14, 1998, and at a purchase price per share of
Seventeen Canadian Cents (CDN $0.17) at any time thereafter, but no later than
4:00 p.m., Vancouver Time, on the Expiration Date (as hereinafter defined) (as
adjusted as provided herein, the "Warrant Price") pursuant to this Warrant (the
"Warrant"). The number of shares of Warrant Stock to be so issued and the
Warrant Price are subject to adjustment as hereinafter set forth. The term
"Common Stock" shall mean, when used herein, unless the context otherwise
requires, the stock and other securities and property at the time receivable
upon the exercise of this Warrant.
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1. Exercise of Warrant.
(a) The Holder may exercise this Warrant according to its terms by
surrendering this Warrant to the Company at the address set forth in Section
10, the subscription form attached hereto having then been duly executed by the
Holder, accompanied by the purchase price for the number of shares of the
Warrant Stock specified in the subscription form, or as otherwise provided in
this Warrant prior to 4:00 p.m., local Vancouver time, on the Expiration Date.
The Expiration Date shall be September 14, 1998. The purchase price of the
shares of Warrant Stock as to which this Warrant shall be exercised shall be
paid to the Company at the time of exercise either in cash, in Common Stock of
the Company already owned by the Holder, by the relinquishment of a portion of
this Warrant having a total fair market value equal to the purchase price, or
any combination of the foregoing. For purposes of this Section, the fair
market value of the portion of this Warrant that is relinquished shall be the
excess of
(x) the fair market value at the time of exercise of the
number of shares of Warrant Stock subject to the portion
of this Warrant that is relinquished over
(y) the aggregate exercise price specified in this Warrant
with respect to such shares.
The fair market value of the Warrant Stock shall be equal to the most recent
sales price of the Company's Common Stock on the Vancouver Stock Exchange or on
any other stock exchange or market on which the Company's Common Stock is then
traded. If the exchange or market does not report sales prices, the fair
market value of the Warrant Stock shall be equal to the average of the most
recent bid and ask prices of the Company's Common Stock. If the Company's
Common Stock is then traded on more than one exchange or market, the fair
market value shall be the highest of such sales prices or averages of the bid
and ask prices.
(b) This Warrant may be exercised in whole or in part so long as any
exercise in part hereof would not involve the issuance of fractional shares of
Warrant Stock. If exercised in part, the Company shall deliver to the Holder a
new Warrant, identical in form, in the name of the Holder, evidencing the right
to purchase the number of shares of Warrant Stock as to which this Warrant has
not been exercised, which new Warrant shall be signed by the Chairman and CEO
or the President and the Secretary or the Assistant Secretary of the Company.
The term Warrant as used herein shall include any subsequent Warrant issued as
provided herein.
(c) No fractional share or scrip representing fractional shares shall
be given upon the exercise of this Warrant. The Company shall pay cash in lieu
of fractions with respect to the Warrants based upon the Warrant Price at the
time of exercise of this Warrant.
(d) In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the Warrant Stock so purchased,
registered in the name of the Holder, shall be delivered to the Holder within a
reasonable time after such rights shall have been so exercised.
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The person or entity in whose name any certificate for the Warrant Stock is
issued upon exercise of the rights represented by this Warrant shall for all
purposes be deemed to have become the holder of record of such shares
immediately prior to the close of business on the date on which the Warrant was
surrendered and payment of the Warrant Price and any applicable taxes was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date when the stock transfer books of
the Company are closed, such person shall be deemed to have become the holder
of such shares at the opening of business on the next succeeding date on which
the stock transfer books are open.
2. Disposition of Warrant Stock and Warrant.
(a) By the acceptance of this Warrant, the Holder hereby acknowledges
and covenants that this Warrant and any Warrant Stock purchased pursuant
thereto are and will be held for investment and not for distribution; provided
that:
(i) the Warrant and/or Warrant Stock may not be transferred by
the Holder, (A) unless an exemption is available under the
Securities Act of 1933, as amended, and the rules and
regulations promulgated by the Securities and Exchange
Commission thereunder (collectively the "Act"), and to a
person who, in the opinion of counsel to the Company, is a
person to whom the Warrant and/or Warrant Stock may be
transferred legally without registration and without the
delivery of a current prospectus under the Act with respect
thereto and then only against receipt of (x) an agreement
of such person to comply with the provisions of this
Section 2 with respect to any resale or other disposition
of such securities and (y) an agreement by such person that
he is acquiring such securities for investment and not for
distribution except in compliance with the Act; or (B)
except to a person upon delivery of a prospectus relating
to the Warrant and/or Warrant Stock then meeting the
requirements of the Act;
(ii) the Warrant Stock shall be issued upon exercise of this
Warrant only in compliance with the Act;
(iii) so long as the Warrant Stock is listed on the Vancouver
Stock Exchange, the Warrant may not be transferred without
the consent of the Vancouver Stock Exchange, except that
the Holder , which is a Delaware limited liability company,
may make an in kind distribution of the Warrant to its
members in proportion to their membership interests,
provided that such members take the Warrant subject to all
the transfer restrictions set forth herein; and
(iv) this Warrant and the Warrant Stock may be pledged to a
lender to secure the debt of the Holder.
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(b) If, at the time of issuance of the shares issuable upon exercise
of this Warrant, no registration statement is in effect with respect to such
shares under applicable provisions of the Act, the Company may at its election
require that the Holder provide the Company with written reconfirmation of the
Holder's investment intent and that any stock certificate delivered to the
Holder of a surrendered Warrant shall bear legends reading substantially as
follows:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES,
AGREES FOR THE BENEFIT OF THE ISSUER THAT SUCH SHARES MAY BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (a) TO THE ISSUER, (b)
OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S
UNDER THE 1933 ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAW, (c) PURSUANT TO THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER THE 1933 ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (d) IN A
TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR ANY
APPLICABLE STATE LAWS AND REGULATIONS GOVERNING THE OFFER AND SALE OF
SECURITIES, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE
ISSUER AN OPINION OF COUNSEL, OF RECOGNIZED STANDING, OR OTHER EVIDENCE
OF EXEMPTION, REASONABLY SATISFACTORY TO THE ISSUER. DELIVERY OF THIS
CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW CERTIFICATE, BEARING
NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE "GOOD DELIVERY", MAY BE
OBTAINED FROM THE REGISTRAR AND TRANSFER AGENT OF THE ISSUER UPON
DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM
SATISFACTORY TO THE ISSUER AND ITS REGISTRAR AND TRANSFER AGENT, TO THE
EFFECT THAT THE SALE OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE
IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS."
In addition, so long as the foregoing legend may remain on any stock
certificate delivered to the Holder, the Company may maintain appropriate "stop
transfer" orders with respect to such certificates and the shares represented
thereby on its books and records and with those to whom it may delegate
registrar and transfer functions.
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(c) If this Warrant is exercised prior to 4:00 p.m. local Vancouver
time on September 14, 1998, any stock certificate delivered to the Holder of a
surrendered Warrant shall bear a legend reading substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A HOLD
PERIOD AND MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL THE EXPIRY OF THE
HOLD PERIOD, EXCEPT AS PERMITTED BY THE SECURITIES ACT (BRITISH
COLUMBIA) AND RULES MADE UNDER THE ACT. THE HOLD PERIOD EXPIRES AT
12:00 A.M. (MIDNIGHT) ON SEPTEMBER 14, 1998."
3. Reservation of Shares.
The Company hereby agrees that at all times there shall be reserved for
issuance upon the exercise of this Warrant such number of shares of its Common
Stock as shall be required for issuance upon exercise of this Warrant and that
the par value of such shares will at all times be less than or equal to the
applicable Warrant Price. The Company further agrees that all shares which may
be issued upon the exercise of the rights represented by this Warrant will,
upon issuance, be validly issued, fully paid and non-assessable, free from all
taxes, liens and charges with respect to the issuance thereof other than taxes,
if any, in respect of any transfer occurring contemporaneously with such
issuance and other than transfer restrictions imposed by federal and state
securities laws.
4. Capital Adjustments.
This Warrant is subject to the following further provisions:
(a) Recapitalization, Reclassification and Succession. If any
recapitalization of the Company or reclassification of its Common Stock or any
merger or consolidation of the Company into or with a corporation or other
business entity, or the sale or transfer of all or substantially all of the
Company's assets or of any successor corporation's assets to any other
corporation or business entity (any such corporation or other business entity
being included within the meaning of the term "successor corporation") shall be
effected, at any time while this Warrant remains outstanding and unexpired,
then, as a condition of such recapitalization, reclassification, merger,
consolidation, sale or transfer, lawful and adequate provision shall be made
whereby the Holder of this Warrant thereafter shall have the right to receive
upon the exercise hereof as provided in Section 1 and in lieu of the shares of
Common Stock immediately theretofore issuable upon the exercise of this
Warrant, such shares of capital stock, securities or other property as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of Common Stock equal to the number of shares of Common Stock
immediately theretofore issuable upon the exercise of this Warrant had such
recapitalization, reclassification, merger, consolidation, sale or transfer not
taken place, and in each such case, the terms of this Warrant shall be
applicable to the shares of stock or other securities or property receivable
upon the exercise of this Warrant after such consummation.
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(b) Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the number of shares of Warrant Stock purchasable upon
exercise of this Warrant shall be proportionately adjusted.
(c) Certain Dividends and Distributions. If the Company at any time
while this Warrant is outstanding and unexpired shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend payable in, or other distribution of, Common Stock, then the number of
shares of Warrant Stock purchasable upon exercise of this Warrant shall be
adjusted to that number determined by multiplying the number of shares of
Warrant Stock so purchasable immediately prior to such record date by a
fraction (i) the numerator of which shall be the sum of (A) the total number of
outstanding shares of Common Stock immediately prior to such record date and
(B) the total number of shares of Common Stock issuable pursuant to such
dividend or distribution, and (ii) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately prior to such record
date.
(d) Corresponding Warrant Price Adjustment. Whenever the number of
shares of Warrant Stock purchasable upon the exercise of the rights granted to
the Holder herein is increased or decreased as provided in Section 4(b) or (c),
the Warrant Price payable for the exercise of such rights shall be adjusted by
multiplying such Warrant Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of shares of Warrant Stock
purchasable upon the exercise of such rights immediately prior to such
adjustment, and of which the denominator shall be the number of shares of
Warrant Stock purchasable immediately thereafter.
(e) Certain Shares Excluded. The number of shares of Common Stock
outstanding at any given time for purposes of the adjustments set forth in this
Section 4 shall exclude any shares then directly or indirectly held in the
treasury of the Company.
(f) Deferral and Cumulation of De Minimis Adjustments. The Company
shall not be required to make any adjustment of the Warrant Price pursuant to
this Section 4 if the amount of such adjustment would be less than one percent
(1%) of the Warrant Price in effect immediately before the event that would
otherwise have given rise to such adjustment. In such case, however, any
adjustment that would otherwise have been required to be made shall be made at
the time of and together with the next subsequent adjustment which, together
with any adjustment or adjustments so carried forward, shall amount to not less
than one percent (1%) of the Warrant Price in effect immediately before the
event giving rise to such next subsequent adjustment.
(g) Duration of Adjusted Warrant Price. Following each computation
or readjustment of an adjusted Warrant Price as provided in this Section 4, the
new adjusted Warrant Price shall remain in effect until a further computation
or readjustment thereof is required.
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5. Notices to Holders.
(a) Notice of Record Date. In case:
(i) the Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time
receivable upon the exercisable of this Warrant) for the
purpose of entitling them to receive any dividend (other
than a cash dividend payable out of earned surplus of the
Company) or other distribution, or any right to subscribe
for or purchase any shares of stock of any class or any
other securities, or to receive any other right; or
(ii) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any
consolidation with or merger of the Company into another
corporation, or any conveyance of all or substantially all
of the assets of the Company to another corporation; or
(iii) of any voluntary dissolution, liquidation or winding-up of
the Company;
then, and in each such case, the Company will mail or cause to be mailed to the
Holder hereof at the time outstanding a notice specifying, as the case may be,
(i) the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation
or winding-up is to take place, and the time, if any, is to be fixed, as of
which the holders of record of Common Stock (or such stock or securities at the
time receivable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation
or winding-up. Such notice shall be mailed at least 30 days prior to the
record date therein specified, or if no record date shall have been specified
therein, at least 30 days prior to such other specified date.
(b) Notice of Adjustments. Whenever any Warrant Price shall be
adjusted, pursuant to Section 4 hereof, the Company shall promptly make a
certificate signed by its Chairman, its CEO, its President or a Vice President
and by its Treasurer or Assistant Treasurer or its Secretary or Assistant
Secretary, setting forth in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated and the Warrant Price after giving effect to such adjustment,
and shall promptly cause copies of such certificates to be mailed (by first
class mail, postage prepaid) to the Holder of this Warrant.
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6. Loss, Theft, Destruction or Mutilation.
Upon receipt by the Company of evidence satisfactory to it, in the
exercise of its reasonable discretion, of the ownership and the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to the Company and, in the
case of mutilation, upon surrender and cancellation thereof, the Company will
execute and deliver in lieu thereof, without expense to the Holder, a new
Warrant of like tenor dated the date hereof.
7. Warrant Holder Not a Stockholder.
The Holder of this Warrant, as such, shall not be entitled by reason of
this Warrant to any rights whatsoever as a stockholder of the Company.
8. Transfer; Register.
Subject to the provisions of Section 2 above, this Warrant is
transferable in the same manner and with the same effect as in the case of a
negotiable instrument payable to a specified person. This Warrant shall be
issued in registered form only and the Company shall keep a register (the
"Warrant Register") in which provisions shall be made for the registration of
this Warrant and the registration of transfers thereof. Such Register shall be
kept at the principal office of the Company and the Company is hereby appointed
the "Warrant Registrar" for the purpose of registering the Warrants and
transfers of the Warrants. Subject to compliance with the provisions of
Section 2 hereof by a transferee, upon surrender for registration of transfer
of any Warrant at the principal office of the Company and compliance with the
provisions of Section 2 hereof, if applicable, the Company shall execute and
deliver, in the name of the designated transferee, a new Warrant. The Company
shall treat the individual or entity in whose name each Warrant is registered
on the Warrant Register as the sole and absolute owner thereof, notwithstanding
any contrary notice.
9. Registration Rights.
The Holder shall have certain registration rights with respect to the
Warrant Shares, all as set forth in a Registration Rights Agreement of even
date herewith among the Company, the Holder and certain other Holders.
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10. Notices.
Any notice required or contemplated by this Warrant shall be deemed to
have been duly given if transmitted by registered or certified mail, return
receipt requested, to the Company at 7030 Empire Central Drive, Houston, Texas,
77040, Attention: President, or to the Holder at the name and address set
forth in the Warrant Register maintained by the Company.
11. Choice of Law.
This Warrant shall be governed by the local laws of the State of Texas.
IN WITNESS WHEREOF, the undersigned has duly signed this Warrant and
Pacific Corporate Trust Company has caused this Warrant Certificate to be
countersigned by an authorized officer as of this 14th day of September, 1997.
FLOTEK INDUSTRIES INC.
By: /s/ William G. Jayroe
Name: William G. Jayroe
Title: President and CEO
This Warrant Certificate is not valid until and unless countersigned by Pacific
Corporate Trust Company.
Countersigned:
PACIFIC CORPORATE TRUST COMPANY
Per:
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Authorized Signatory
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ASSIGNMENT FORM
FOR VALUE RECEIVED, the Undersigned Holder of the attached Warrant,
hereby sells, assigns and transfers unto _______________________________ the
right to purchase ______________________________ shares of Common Stock of
FLOTEK INDUSTRIES INC. evidenced by the attached Warrant, and does hereby
irrevocably constitute and appoint _________________________________ Attorney
to transfer the said Warrant on the books of the Company with full power of
substitution.
HOLDER:
Name:
Dated: ,
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In the presence of:
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Name:
(NOTE: The signature of the Holder on the foregoing Assignment must correspond
exactly to the name as written on the face of the Warrant, without any
alteration, enlargement or change whatsoever.)
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SUBSCRIPTION FORM
The Undersigned, the Holder of the attached Warrant, hereby irrevocably
elects to exercise purchase rights represented by such Warrant for, and to
purchase thereunder, the following shares of Common Stock of FLOTEK INDUSTRIES
INC.:
Number of Shares Purchase Price Per Share
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The undersigned herewith makes payment of $_____________________
therefor, and requests that certificates for such shares (and any warrants or
other property issuable upon such exercise) be issued in the name of and
delivered to ____________________________________ whose address is
___________________________________________ and, if such shares shall not
include all of the shares issuable under such warrant, that a new warrant of
like tenor and date for the balance of the shares issuable thereunder be
delivered to the undersigned.
HOLDER:
Name:
Dated: ,
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