Exhibit 10.5

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT, dated as of March 31, 2010 (this
“Agreement”), is made by and among Flotek Industries, Inc., a Delaware
corporation, with headquarters located at 2930 W. Sam Houston Parkway North,
Suite 300, Houston, Texas 77043 (the “Company”), and the investors named on the
signature pages hereto (the “Investors”).

RECITALS:

A. Pursuant to a Securities Exchange Agreement dated as of the date hereof (the
“Exchange Agreement”) by and among the Company and the Investors, the Company
will issue to the Investors 1,568,874 shares (the “Initial Shares”) of common
stock, par value $0.0001 per share, of the Company (the “Common Stock”) and up
to $36,004,000 principal amount of its 5.25% Convertible Senior Secured Notes
due 2028 (the “2010 Convertible Senior Notes”) which are convertible into Common
Stock, in exchange for $40,000,000 aggregate principal amount of the Company’s
5.25% Convertible Senior Notes due 2028.

B. In order to induce the Investors to execute and deliver the Exchange
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act and applicable state securities laws with respect to the
Common Shares (as hereinafter defined).

In consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Investors hereby agree as follows:

ARTICLE I

DEFINITIONS

Capitalized terms used and not otherwise defined herein have the respective
meanings given them set forth in the Exchange Agreement. In addition, as used in
this Agreement, the following terms have the following meanings:

1.1 “Common Shares” means the Initial Shares and the shares of Common Stock
issued or issuable upon conversion of the 2010 Convertible Senior Notes.

1.2 “Exchange Price” means the greater of (i) the 95% of the Volume Weighted
Average Price of the Common Stock, as determined using Bloomberg function VWAP
for the 10 consecutive trading days ending two days before the Closing Date,
beginning at 9:30 a.m. (New York time) on the first day of the period and ending
at 4:30 p.m. (New York time) on the last day of the period, or (ii) 95% of the
closing price of the Common Stock on the day before the Closing Date.

1.3 “FINRA” means the Financial Industry Regulatory Authority, Inc.

1.4 “Investors” means the investors named on the signature pages hereto and any
of their transferees or assignees who agree to become bound by the provisions of
this Agreement in accordance with Article IX hereof.

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1.5 “National Securities Exchange” means any national securities exchange under
Section 12(b) of the Exchange Act.

1.6 “OTC Bulletin Board” means the OTC Bulletin Board service of broker-dealers
admitted the membership in FINRA and their associated person.

1.7 “Registrable Securities” means the 2010 Convertible Senior Notes, the Common
Shares (without regard to any limitations on conversion or exercise) and any
shares of capital stock issued or issuable from time to time (with any
adjustments) in exchange for, or otherwise with respect to, the 2010 Convertible
Senior Notes or the Common Shares.

1.8 “Registration Period” means the period between the date of this Agreement
and the earlier of (i) the date on which all of the Registrable Securities have
been sold under a Registration Statement and no further Registrable Securities
may be issued in the future, or (ii) the date on which all the Registrable
Securities (in the opinion of the Investors’ counsel) may be immediately sold
without registration and without restriction (including without limitation as to
sale volume by each holder thereof) as to the number of Registrable Securities
to be sold, pursuant to Rule 144 or otherwise and no further Registrable
Securities may be issued in the future.

1.9 “Registration Statement” means a Registration Statement of the Company filed
under the Securities Act.

1.10 The terms “register,” “registered,” and “registration” refer to a
registration effected by preparing and filing a Registration Statement or
statements in compliance with the Securities Act and pursuant to Rule 415 and
the declaration or ordering of effectiveness of such Registration Statement by
the SEC.

1.11 “Restricted Securities” means restricted securities as defined in Rule 144
under the Securities Act.

1.12 “Rule 415” means Rule 415 under the Securities Act, or any successor Rule
providing for offering securities on a continuous basis, and applicable rules
and regulations thereunder.

1.13 “SEC” means the United States Securities and Exchange Commission.

ARTICLE II

REGISTRATION

2.1 Mandatory Registration.

(a) The Company will file with the SEC a Registration Statement on Form S-3
registering the Registrable Securities and no securities other than additional
securities held by Investors for resale by April 30, 2010 (the “Required Filing
Date”). If Form S-3 is not available at that time, then the Company will file a
Registration Statement on such form as is then available to effect a
registration of the Registrable Securities by such date, subject to the consent
of the Investors, which consent will not be unreasonably withheld.

 

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(b) To the extent allowable under the Securities Act and the rules promulgated
thereunder (including Rule 416 under the Securities Act), the Registration
Statement will include the Registrable Securities and such indeterminate number
of additional shares of Common Stock as may become issuable upon conversion of
the 2010 Convertible Senior Notes (i) to prevent dilution resulting from stock
splits, stock dividends or similar transactions, or (ii) by reason of changes in
the conversion price of the 2010 Convertible Senior Notes in accordance with the
terms thereof.

(c) Notwithstanding anything to the contrary contained in this Agreement, but
subject to the payment of the Late Payments pursuant to Section 2.4 hereof, if
the staff of the SEC (the “Staff”) or the SEC seeks to characterize any offering
pursuant to a Registration Statement filed pursuant to this Agreement as
constituting an offering of securities by or on behalf of the Company, or in any
other manner, such that the Staff or the SEC do not permit such Registration
Statement to become effective and used for resales in a manner that does not
constitute such an offering and that permits the continuous resale at the market
by the Investors participating therein (or as otherwise may be acceptable to
each Investor) without being named therein as “underwriters,” then the Company
shall reduce the amount of Registrable Securities to be included in such
Registration Statement by all Investors to such amount as the Staff and the SEC
will permit for such Registration Statement to become effective without such
Investors being so named. In making such reduction, the Company shall reduce the
amount of Registrable Securities to be included by all Investors on a pro rata
basis (based upon the number of Registrable Securities otherwise required to be
included for each Investor) unless the inclusion of Registrable Securities by a
particular Investor or a particular set of Investors are resulting in the Staff
or the SEC’s “by or on behalf of the Company” offering position, in which event
the Registrable Securities held by such Investor or set of Investors shall be
the only Registrable Securities subject to reduction (and if by a set of
Investors on a pro rata basis by such Investors or on such other basis as would
result in the exclusion of the least amount of Registrable Securities by all
such Investors). In addition, if the Staff or the SEC requires any Investor
seeking to sell Registrable Securities under a Registration Statement filed
pursuant to this Agreement to be specifically identified as an “underwriter” in
order to permit such Registration Statement to become effective, and such
Investor does not consent to being so named in such Registration
Statement, then, in each such case, the Company shall reduce the total amount of
Registrable Securities to be registered on behalf of such Investor, to such
amount as the Staff or the SEC will permit without requiring such
identification. In the event of any reduction in Registrable Securities pursuant
to this paragraph, an affected Investor shall have the right to require, upon
delivery of a written request to the Company signed by such Investor, the
Company to file a Registration Statement within 30 days of such request (subject
to any restrictions imposed by Rule 415 or required by the Staff or the SEC) for
resale of Registrable Securities by such Investor in a manner reasonably
acceptable to such Investor, and the Company shall following such request cause
to be and keep effective such Registration Statement in the same manner as
otherwise contemplated in this Agreement for Registration Statements hereunder,
in each case until such time as: (i) all Registrable Securities held by such
Investor have been registered and sold pursuant to an effective Registration
Statement in a manner acceptable to such Investor, or

 

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(ii) the Registrable Securities may be immediately sold without registration and
without restriction (including without limitation as to manner of sale volume by
each holder thereof) as to the number of Registrable Securities to be sold,
pursuant to Rule 144 or otherwise (it being understood that the special demand
right under this sentence may be exercised by an Investor multiple times and
with respect to limited amounts of Registrable Securities in order to permit the
resale thereof by such Investor as contemplated above).

2.2 Effectiveness of the Registration Statement.

(a) The Company will use its best efforts to cause the Registration Statement
contemplated by Section 2.1 to be declared effective by the SEC as soon as
practicable after filing, and in any event no later than the 90th day after the
Required Filing Date (the “Required Effective Date”). If the SEC takes the
position that under Rule 415 of the Securities Act, the amount of Registrable
Securities needs to be reduced to clear the SEC review, the Investors shall
agree to reduce their Registrable Securities to be registered pro rata to meet
the SEC requirement with the understanding the Company shall promptly file
another Registration Statement to register the Registrable Securities not
registered at a time when such Registration Statement is allowed.

(b) The Company’s best efforts will include, but not be limited to, promptly
responding to all comments received from the staff of the SEC. If the Company
receives notification from the SEC that the Registration Statement will receive
no action or review from the SEC, then the Company will cause the Registration
Statement to become effective as soon as practicable after such SEC
notification.

(c) Once the Registration Statement is declared effective by the SEC, the
Company will cause the Registration Statement to remain effective throughout the
Registration Period, except as permitted under Section 3.1.

2.3 Payments by the Company. If (i) at any time after effectiveness of the
Registration Statement, sales cannot be made thereunder during the Registration
Period for any reason (including any suspension of the use of the Registration
Statement under Section 3.6 hereof) for a period of more than 10 consecutive
business days, or 30 days in the aggregate, during any 12-month period or
(ii) the Common Stock is not listed on a National Securities Exchange or
included for quotation on the OTC Bulletin Board for more than an aggregate of
10 business days in any 12-month period, then the Company will thereafter make a
payment (by wire transfer or check) to each Investor as partial compensation for
such delay. The amount of the payment made to each Investor will be equal to
0.5% of the Outstanding Principal Amount (as hereinafter defined) for the each
month that sales cannot be made under the effective Registration Statement or
the Common Stock is not listed on a National Securities Exchange or included for
quotation on the OTC Bulletin Board, continuing through the date that sales can
be made under the effective Registration Statement or the Common Stock is listed
on a National Securities Exchange or included for quotation on the OTC Bulletin
Board. The term “Outstanding Principal Amount” for purposes of computing the
amount of payment to be made to an Investor under Section 2.3 and Section 2.4
shall mean the sum of (x) the number of Initial Shares that are Restricted
Securities held by such Investor multiplied by the Exchange Price (the

 

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“Outstanding Exchange Stock Amount”), (y) the principal amount of the
then-outstanding 2010 Convertible Senior Notes that are Restricted Securities
held by such Investor (the “Outstanding Note Amount”), and (z) in the case of
Common Shares or other Registrable Securities held by such Investor issued upon
conversion of 2010 Convertible Senior Notes that are Restricted Securities, the
principal amount of the 2010 Convertible Senior Notes from which such Common
Shares or other Registrable Securities were converted (the “Outstanding Note
Conversion Amount”). Such payments will be prorated on a daily basis for partial
months and will be paid to each Investor by wire transfer or check within five
business days following the end of each month.

2.4 Effect of Late Filing or Effectiveness. If (a) the Company fails to file the
Registration Statement by the time required by Section 2.1 (a “Filing Failure”);
(b) the Registration Statement required pursuant to Section 2.1 above has not
been declared effective by the Required Effective Date for any reason,
including, without limitation, by reason of the inability of the Company to
utilize a particular registration statement form that would provide for a
shorter time to effectiveness, the failure by the Company to file its reports
required under the Exchange Act or the Company’s failure to fulfill its
obligations under Section 2.1(a) and Section 2.2(b) (an “Effectiveness
Failure”), then the Company shall pay to each Investor, for each day of such
Filing Failure or Effectiveness Failure, an amount equal to (i) the product of
(A) such Investor’s Outstanding Exchange Stock Amount and (B) the quotient
obtained by dividing 6% by 360 (the “Exchange Stock Late Payments”), plus
(ii) the product of (A) such Investor’s Outstanding Note Amount plus such
Investor’s Outstanding Note Conversion Amount and (B) the Exchange Note Late
Payment Quotient (as defined below) (the “Exchange Note Late Payments” and
together with the Exchange Stock Late Payments, the “Late Payments”). The Late
Payments will be paid to the Investors by wire transfer or check within five
business days after the earlier of (i) the end of each month following the
Required Filing Date or Required Effective Date or (ii) the effective date of
the Registration Statement. Nothing herein limits any Investor’s right to pursue
actual damages for the Company’s failure to file a Registration Statement on or
prior to the Required Filing Date or to have it declared effective by the SEC on
or prior to the Required Effective Date in accordance with the terms of this
Agreement.

The “Exchange Note Late Payment Quotient” shall mean: (a) for the first 30 days
of such Filing Failure or Effectiveness Failure, the quotient obtained by
dividing 3% by 360, (b) for the period from the 31st day to 60th day of such
Filing Failure or Effectiveness Failure, the quotient obtained by dividing 4.2%
by 360, (c) for all days following the 60th day of such Filing Failure or
Effectiveness Failure, the quotient obtained by dividing 6% by 360.

2.5 Piggyback Registrations.

(a) If, at any time prior to the expiration of the Registration Period, the
Company decides to register any of its securities for its own account or for the
account of others, then the Company will promptly give the Investors written
notice thereof and will use its best efforts to include in such registration all
or any part of the Registrable Securities requested by such Investors to be
included therein (excluding any Registrable Securities previously included in a
Registration Statement). This requirement does not apply to Company
registrations on Form S-4 or S-8 or their equivalents relating to equity
securities to be issued solely in connection with

 

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an acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans. Each Investor must
give its request for registration under this paragraph to the Company in writing
within 15 days after receipt from the Company of notice of such pending
registration. If the registration for which the Company gives notice is a public
offering involving an underwriting, the Company will so advise the Investors as
part of the above-described written notice. In that event, if the managing
underwriter(s) of the public offering impose a limitation (which may be a
complete exclusion) on the number of shares of Common Stock that may be included
in the Registration Statement because, in such underwriter(s)’ judgment, such
limitation would be necessary to effect an orderly public distribution or reduce
the number of securities which could be sold by the Company, then the Company
will be obligated to include only such limited portion, if any, of the
Registrable Securities with respect to which such Investors have requested
inclusion hereunder. Any exclusion of Registrable Securities will be made pro
rata among all holders of the Company’s securities seeking to include shares of
Common Stock in proportion to the number of shares of Common Stock sought to be
included by those holders. However, the Company will not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities the
holders of which are not entitled by right to inclusion of securities in such
Registration Statement or are not entitled pro rata inclusion with the
Registrable Securities. If any Investor or other person does not agree to the
terms of such underwriting or otherwise fails to comply with the terms of this
Agreement, such Investor or other person shall be excluded therefrom upon
written notice from the Company or underwriter. Any Registrable Securities or
other securities excluded or withdrawn from such underwriting shall be withdrawn
from such registration.

(b) No right to registration of Registrable Securities under this Section 2.5
limits in any way the registration required under Section 2.1 above. The
obligations of the Company under this Section 2.5 expire upon the expiration of
the Registration Period.

(c) The Company shall have the right to terminate or withdraw any registration
initiated by it under this Section 2.5 prior to the effectiveness of such
registration whether or not any Investor has elected to include securities in
such registration. The expenses of such withdrawn registration shall be borne by
the Company.

2.6 Eligibility to use Form S-3. The Company represents and warrants that it
meets the requirements for the use of Form S-3 for registration of the resale by
the Investors of the Registrable Securities. The Company will use its best
efforts to file all reports required to be filed by the Company with the SEC in
a timely manner so as to preserve its eligibility for the use of Form S-3.

ARTICLE III

ADDITIONAL OBLIGATIONS OF THE COMPANY

3.1 Continued Effectiveness of Registration Statement. The Company will keep the
Registration Statement covering the Registrable Securities effective under
Rule 415 at all times during the Registration Period. In the event that the
number of shares available under a Registration Statement filed pursuant to this
Agreement is insufficient to cover all of the Registrable Securities, the
Company will (if permitted) amend the Registration Statement or file

 

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a new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover all of the Registrable Securities. The
Company will file such amendment or new Registration Statement as soon as
practicable, but in no event later than 20 business days after the necessity
therefor arises (based upon the market price of the Common Stock and other
relevant factors on which the Company reasonably elects to rely). The Company
will use its best efforts to cause such amendment or new Registration Statement
to become effective as soon as is practicable after the filing thereof, but in
no event later than 90 days after the date on which the Company reasonably first
determines (or reasonably should have determined) the need therefor.

3.2 Accuracy of Registration Statement. Any Registration Statement (including
any amendments or supplements thereto and prospectuses contained therein) filed
by the Company covering Registrable Securities will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading. The Company will promptly
prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to permit
sales pursuant to the Registration Statement at all times during the
Registration Period, and, during such period, will comply with the provisions of
the Securities Act with respect to the disposition of all Registrable Securities
of the Company covered by the Registration Statement until the termination of
the Registration Period, or if earlier, until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement.

3.3 Furnishing Documentation. The Company will furnish to each Investor whose
Registrable Securities are included in a Registration Statement, and to its
legal counsel, (a) promptly after each document is prepared and publicly
distributed, filed with the SEC or received by the Company, one copy of any
Registration Statement filed pursuant to this Agreement and any amendments
thereto, each preliminary prospectus and final prospectus and each amendment or
supplement thereto; and, in the case of a Registration Statement filed under
Section 2.1 above, each letter written by or on behalf of the Company to the SEC
and each item of correspondence from, or order issued by, the SEC or the staff
of the SEC, in each case relating to such Registration Statement (other than any
portion of any item thereof which contains information for which the Company has
sought confidential treatment); and (b) a number of copies of a prospectus,
including a preliminary prospectus (if any), and all amendments and supplements
thereto, and such other documents as the Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by the
Investor. The Company will promptly notify in writing each Investor whose
Registrable Securities are included in any Registration Statement of the
effectiveness of the Registration Statement and any post-effective amendment.

3.4 Additional Obligations. The Company will use its best efforts to
(a) register and qualify the Registrable Securities covered by a Registration
Statement under such other securities or blue sky laws of such jurisdictions as
each Investor who holds (or has the right to hold) Registrable Securities being
offered reasonably requests, (b) prepare and file in those jurisdictions any
amendments (including post-effective amendments) and supplements to such

 

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registrations and qualifications as may be necessary to maintain their
effectiveness during the Registration Period, (c) take any other actions
necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period, and (d) take any other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions. Notwithstanding the foregoing, the Company is not required, in
connection such obligations, to (i) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 3.4,
(ii) subject itself to general taxation in any such jurisdiction, (iii) file a
general consent to service of process in any such jurisdiction, (iv) provide any
undertakings that cause material expense or burden to the Company, or (v) make
any change in its charter or bylaws, which in each case the Board of Directors
of the Company determines to be contrary to the best interests of the Company
and its stockholders.

3.5 Underwritten Offerings. If the Investors who hold a majority in interest of
the Registrable Securities being offered in an offering pursuant to a
Registration Statement or any amendment or supplement thereto under this
Agreement select underwriters reasonably acceptable to the Company for such
offering, the Company will enter into and perform its obligations under an
underwriting agreement in usual and customary form including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering, but the Company will not be obligated to
pay any fees or expenses of such underwriters related to the offering.

3.6 Suspension of Registration.

(a) The Company will notify (by telephone and also by facsimile and reputable
overnight courier) each Investor who holds Registrable Securities being sold
pursuant to a Registration Statement of the happening of any event of which the
Company has knowledge as a result of which the prospectus included in the
Registration Statement as then in effect includes an untrue statement of a
material fact or omits to state 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. The Company will make such notification as
promptly as practicable after the Company becomes aware of the event (but in no
event will the Company disclose to any Investor any of the facts or
circumstances regarding the event), will promptly (but in no event more than ten
business days) prepare and file with the SEC a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and will
deliver a number of copies of such supplement or amendment to each Investor as
such Investor may reasonably request. The Company will use its best efforts to
keep the length of any such suspension to as short a period as is practicable
given the then existing circumstances and may so defer or suspend the use of the
Registration Statement no more than two times in any 18-month period, and
provided, further, that, after deferring or suspending the use of the
Registration Statement, the Company may not again defer or suspend the use of
the Registration Statement until a period of thirty days has elapsed after
resumption of the use of the Registration Statement. Notwithstanding anything to
the contrary contained herein or in the Exchange Agreement, if the use of the
Registration Statement is suspended by the Company, the Company will promptly
give notice of the suspension to all Investors whose securities are covered by
the Registration Statement, and will promptly notify each such Investor as soon
as the use of the Registration Statement may be resumed. Notwithstanding
anything to the contrary contained herein or in the

 

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Exchange Agreement, the Company will cause the Transfer Agent to deliver
unlegended shares of Common Stock to a transferee of an Investor in accordance
with the terms of the Exchange Agreement in connection with any sale of
Registrable Securities with respect to which such Investor has entered into a
contract for sale prior to receipt of notice of such suspension and for which
such Investor has not yet settled unless, in the opinion of Company’s legal
counsel, such delivery without legends would be in violation of applicable
securities laws and/or otherwise subject the Company to liability.

(b) Notwithstanding anything to the contrary herein (but subject to the last
sentence of this Section 3.6(b)), at any time after the Effective Date of the
applicable Registration Statement, the Company may delay the disclosure of
material, non-public information concerning the Company or any of its
Subsidiaries the disclosure of which at the time is not, in the good faith
opinion of the Board of Directors of the Company, in the best interest of the
Company and, in the opinion of counsel to the Company, otherwise required (a
“Grace Period”); provided, that the Company shall promptly (i) notify the
Investors in writing of the existence of material, non-public information giving
rise to a Grace Period (provided that in each notice the Company will not
disclose the content of such material, non-public information to the Investors)
and the date on which the Grace Period will begin, and (ii) notify the Investors
in writing of the date on which the Grace Period ends; and, provided further,
that no Grace Period shall exceed ten (10) consecutive days and during any three
hundred sixty five (365) day period such Grace Periods shall not exceed an
aggregate of thirty (30) days and the first day of any Grace Period must be at
least five (5) Trading Days after the last day of any prior Grace Period;
provided, that no Grace Period may exist during the first sixty (60) Business
Days after the Effective Date of the applicable Registration Statement. For
purposes of determining the length of a Grace Period above, the Grace Period
shall begin on and include the date the Investors receive the notice referred to
in clause (i) and shall end on and include the later of the date the Investors
receive the notice referred to in clause (ii) and the date referred to in such
notice. The provisions of Section 3.6(a) hereof shall not be applicable during
any Grace Period. Upon expiration of the Grace Period, the Company shall again
be bound by Section 3.6(a) with respect to the information giving rise thereto
unless such material, nonpublic information is no longer applicable.

(c) Subject to the Company’s rights under Section 3.1, the Company will use its
best efforts to prevent the issuance of any stop order or other suspension of
effectiveness of a Registration Statement and, if such an order is issued, will
use its best efforts to obtain the withdrawal of such order at the earliest
possible time and will promptly notify each Investor that holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.

3.7 Review by the Investors. The Company will permit each Investor’s legal
counsel to review the Registration Statement and all amendments and supplements
thereto (as well as all requests for acceleration or effectiveness thereof) a
reasonable period of time prior to their filing with the SEC, and will not file
any document in a form to which such counsel reasonably objects unless such
counsel fails to notify the Company of his or her objection within 3 business
days after receipt of the proposed Registration Statement, and unless otherwise
required by law in the

 

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opinion of the Company’s counsel. The sections of any such Registration
Statement including information with respect to the Investors, the Investors’
beneficial ownership of securities of the Company or the Investors’ intended
method of disposition of Registrable Securities must conform to the information
provided to the Company by each of the Investors.

3.8 Information. The Company will make generally available to its security
holders as soon as practicable, but not later than 90 days after the close of
the period covered thereby, an earnings statement (in a form complying with the
provisions of Rule 158 under the Securities Act) covering a 12-month period
beginning not later than the first day of the Company’s fiscal quarter next
following the effective date of the Registration Statement.

3.9 Comfort Letter; Legal Opinion. If the Investors request an underwritten
offering in accordance with Section 3.5 above, then, at the request of the
underwriters for the offering, on the date that Registrable Securities are
delivered to the underwriters for sale in connection with the Registration
Statement, the Company will furnish to the Investors and the underwriters (i) a
letter, dated such date, from the Company’s independent certified public
accountants, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters; and (ii) an opinion, dated such date, from
counsel representing the Company for purposes of the Registration Statement, in
form and substance as is customarily given in an underwritten public offering,
addressed to the underwriters and Investors.

3.10 Due Diligence; Confidentiality.

(a) The Company will make available for inspection by any Investor whose
Registrable Securities are being sold pursuant to a Registration Statement, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney or accountant retained by any such Investor or
underwriter (collectively, the “Inspectors”), all pertinent financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the “Records”), as each Inspector reasonably deems necessary to
enable the Inspector to exercise its due diligence responsibility in connection
with or related to the contemplated offering. The Company will cause its
officers, directors and employees to supply all information that any Inspector
may reasonably request for purposes of performing such due diligence.

(b) Each Inspector will hold in confidence, and will not make any disclosure
(except to an Investor) of, any Records or other information that the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (ii) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, (iii) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement (to the
knowledge of the relevant Inspector), (iv) the Records or other information was
developed independently by an Inspector without breach of this Agreement,
(v) the information was known to the Inspector before receipt of such
information from the Company, or (vi) the information was disclosed to the
Inspector by a third party not

 

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under an obligation of confidentiality. The Company is not required to disclose
any confidential information in the Records to any Inspector unless and until
such Inspector has entered into a confidentiality agreement (in form and
substance satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3.10. Each Investor will, upon
learning that disclosure of Records containing confidential information is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company, at
the Company’s expense, to undertake appropriate action to prevent disclosure of,
or to obtain a protective order for, the Records deemed confidential. Nothing
herein will be deemed to limit the Investor’s ability to sell Registrable
Securities in a manner that is otherwise consistent with applicable laws and
regulations.

(c) The Company will hold in confidence, and will not make any disclosure of,
information concerning an Investor provided to the Company under this Agreement
unless (i) disclosure of such information is necessary to comply with federal or
state securities laws, or any exchange listing or similar rules and regulations,
(ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, (iv) such information has been
made generally available to the public other than by disclosure in violation of
this Agreement or any other agreement or (v) such Investor consents to the form
and content of any such disclosure. If the Company learns that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, the Company
will give prompt notice to such Investor prior to making such disclosure and
allow such Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.

3.11 Listing. The Company will (i) cause all of the Common Shares covered by
each Registration Statement to be listed on each National Securities Exchange on
the Common Stock is then listed, if any, if the listing of such Common Shares is
then permitted under the rules of such exchange, or (ii) to the extent the
Common Stock is not then listed on a National Securities Exchange, use its best
efforts to secure the quotation of all of the Common Shares covered by each
Registration Statement on the OTC Bulletin Board and, without limiting the
generality of the foregoing, arrange for at least two market makers, meeting the
applicable FINRA requirements, to display two-sided markets for the Common
Stock.

3.12 Transfer Agent; Registrar. The Company will provide a transfer agent and
registrar, which may be a single entity, for the Registrable Securities not
later than the effective date of the Registration Statement.

3.13 Notes/Share Certificates. The Company will cooperate with the Investors who
hold Registrable Securities being sold and with the managing underwriter(s), if
any, to facilitate the timely preparation and delivery of notes or certificates
(in each case not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to a Registration Statement and will enable
such notes or certificates to be in such denominations or amounts as the case
may be, and registered in such names as the Investors or the managing
underwriter(s), if any, may reasonably request.

 

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3.14 Plan of Distribution. Subject to Section 3.17 hereof, at the request of an
Investor holding an interest of the Registrable Securities registered pursuant
to a Registration Statement, the Company will promptly prepare and file with the
SEC such amendments (including post-effective amendments) and supplements to the
Registration Statement, and the prospectus used in connection with the
Registration Statement, as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.

3.15 Securities Laws Compliance. The Company will comply with all applicable
laws related to any Registration Statement relating to the sale of Registrable
Securities and to offering and sale of securities and with all applicable rules
and regulations of governmental authorities in connection therewith (including,
without limitation, the Securities Act, the Exchange Act and the rules and
regulations promulgated by the SEC).

3.16 Further Assurances. The Company will take all other reasonable actions as
any Investor or the underwriters, if any, may reasonably request to expedite and
facilitate disposition by such Investor of the Registrable Securities pursuant
to the Registration Statement.

3.17 No Additional Selling Securityholders. The Company will not, and will not
agree to, allow the holders of any securities of the Company to include any of
their securities in any Registration Statement under Section 2.1 hereof, or any
amendment or supplement thereto under Section 3.2 hereof, without the consent of
the holders of a majority the Registrable Securities (determined on an
as-if-converted basis).

ARTICLE IV

OBLIGATIONS OF THE INVESTORS

4.1 Investor Information. As a condition to the obligations of the Company to
complete any registration pursuant to this Agreement with respect to the
Registrable Securities of each Investor, such Investor will furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it
as is reasonably required by the Company to effect the registration of the
Registrable Securities. At least 10 business days prior to the first anticipated
filing date of a Registration Statement for any registration under this
Agreement, the Company will notify each Investor of the information the Company
requires from that Investor if the Investor elects to have any of its
Registrable Securities included in the Registration Statement. If, within three
business days prior to the filing date, the Company has not received the
requested information from an Investor, then the Company may file the
Registration Statement without including Registrable Securities of that
Investor. Any and all information provided by the Investor pursuant to this
Section 4.1 shall be true, accurate, correct and complete in all material
respects.

4.2 Further Assurances. Each Investor will cooperate with the Company, as
reasonably requested by the Company, in connection with the preparation and
filing of any Registration Statement hereunder, unless such Investor has
notified the Company in writing of such Investor’s election to exclude all of
such Investor’s Registrable Securities from the Registration Statement.

 

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4.3 Suspension of Sales. Upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3.6, each Investor will
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until (i) it
receives copies of a supplemented or amended prospectus contemplated by
Section 3.6 or (ii) the Company advises the Investor that a suspension of sales
under Section 3.6 has terminated. If so directed by the Company, each Investor
will deliver to the Company (at the expense of the Company) or destroy (and
deliver to the Company a certificate of destruction) all copies in the
Investor’s possession (other than a limited number of file copies) of the
prospectus covering such Registrable Securities that is current at the time of
receipt of such notice.

4.4 Underwritten Offerings.

(a) If Investors holding a majority in interest of the Registrable Securities
being registered (with the approval of a majority in interest of the Investors)
elect to engage the services of an underwriter, each Investor will enter into
and perform such Investor’s obligations under an underwriting agreement, in
usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing underwriter of
such offering, and will take such other actions as are reasonably required in
order to expedite or facilitate the disposition of the Registrable Securities,
unless such Investor has notified the Company in writing of such Investor’s
election to exclude all of its Registrable Securities from such Registration
Statement.

(b) Without limiting any Investor’s rights under Section 2.1 hereof, no Investor
may participate in any underwritten distribution hereunder unless such Investor
(i) agrees to sell such Investor’s Registrable Securities on the basis provided
in any underwriting arrangements approved by the Investors entitled hereunder to
approve such arrangements, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and
(iii) agrees to pay its pro rata share of all underwriting discounts and
commissions and other fees and expenses of investment bankers and any manager or
managers of such underwriting, and legal expenses of the underwriter, applicable
with respect to its Registrable Securities, in each case to the extent not
payable by the Company under the terms of this Agreement.

ARTICLE V

EXPENSES OF REGISTRATION

The Company will bear all reasonable expenses, other than underwriting discounts
and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Articles II and III of this Agreement, including,
without limitation, all registration, listing and qualifications fees, printers
and accounting fees, the fees and disbursements of counsel for the Company, and
the reasonable fees and disbursements of each Investor’s legal counsel to review
the Registration Statement and all amendments and supplements thereto pursuant
to Section 3.7 hereof.

 

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ARTICLE VI

INDEMNIFICATION

In the event that any Registrable Securities are included in a Registration
Statement under this Agreement:

6.1 To the extent permitted by law, the Company will indemnify and hold harmless
each Investor that holds such Registrable Securities, any underwriter (as
defined in the Securities Act) for the Investors, any directors, officers or
advisors of such Investor or such underwriter and any person who controls such
Investor or such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an “Indemnified Person”) against any losses, claims,
damages, expenses or liabilities (joint or several) (collectively, and together
with actions, proceedings or inquiries by any regulatory or self-regulatory
organization, whether commenced or threatened in respect thereof, “Claims”) to
which any of them become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such Claims arise out of or are based upon any of the
following statements, omissions or violations in a Registration Statement filed
pursuant to this Agreement, any post-effective amendment thereof or any
prospectus included therein: (a) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (b) any untrue statement or alleged untrue
statement of a material fact contained in the prospectus (as it may be amended
or supplemented) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(c) any violation or alleged violation by the Company of the Securities Act, the
Exchange Act or any other law, including without limitation any state securities
law or any rule or regulation thereunder (the matters in the foregoing clauses
(a) through (c) being, collectively, “Violations”). The Company will reimburse
the Investors and each such underwriter or controlling person and each such
other Indemnified Person, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any Claim. Notwithstanding anything
to the contrary contained herein, the indemnification agreement contained in
this Section 6.1 (i) does not apply to Claims arising out of or based upon a
Violation that occurs in reliance upon and in conformity with information
furnished in writing to the Company by an Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3.3 hereof; and (ii) does not apply
to amounts paid in settlement of any Claim if such settlement is made without
the prior written consent of the Company, which consent will not be unreasonably
withheld. This indemnity obligation will remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Persons
and will survive the transfer of the Registrable Securities by the Investors
under Article IX of this Agreement.

6.2 In connection with any Registration Statement in which an Investor is
participating, each such Investor will indemnify and hold harmless, to the same
extent and in the same manner set forth in Section 6.1 above, the Company, each
of its directors, each of its officers who signs the Registration Statement,
each person, if any, who controls the Company

 

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within the meaning of the Securities Act or the Exchange Act, and any other
shareholder selling securities pursuant to the Registration Statement and any of
its directors and officers and any person who controls such shareholder within
the meaning of the Securities Act or the Exchange Act (each an “Indemnified
Person”) against any Claim to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement. Subject to the restrictions set
forth in Section 6.3, such Investor will promptly reimburse the Company and each
such other Indemnified Person, any legal or other expenses (promptly as such
expenses are incurred and due and payable) reasonably incurred by them in
connection with investigating or defending any such Claim. However, the
indemnity agreement contained in this Section 6.2 does not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent will not be unreasonably
withheld, and no Investor will be liable under this Agreement (including this
Section 6.2 and Article VII) for the amount of any Claim that exceeds the net
proceeds actually received by such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. This indemnity
will remain in full force and effect regardless of any investigation made by or
on behalf of an Indemnified Party and will survive the transfer of the
Registrable Securities by the Investors under Article IX of this Agreement.

6.3 Promptly after receipt by an Indemnified Person under this Article VI of
notice of the commencement of any action (including any governmental action),
such Indemnified Person will, if a Claim in respect thereof is to be made
against any indemnifying party under this Article VI, deliver to the
indemnifying party a written notice of the commencement thereof. The
indemnifying party may participate in, and, to the extent the indemnifying party
so desires, jointly with any other indemnifying party similarly given notice,
assume control of the defense thereof with counsel mutually satisfactory to the
indemnifying parties and the Indemnified Person. In that case, the indemnifying
party will diligently pursue such defense. If, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person and the indemnifying party would be inappropriate due
to actual or potential conflicts of interest between the Indemnified Person and
any other party represented by such counsel in such proceeding or the actual or
potential defendants in, or targets of, any such action including the
Indemnified Person, and such Indemnified Person reasonably determines that there
may be legal defenses available to such Indemnified Person that are different
from or in addition to those available to the indemnifying party, then the
Indemnified Person is entitled to assume such defense and may retain its own
counsel, with the fees and expenses to be paid by the indemnifying party
(subject to the restrictions on settlement under Section 6.1 or Section 6.2, as
applicable). The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action does not relieve
an indemnifying party of any liability to an Indemnified Person under this
Article VI, except to the extent that the indemnifying party is prejudiced in
its ability to defend such action. The indemnification required by this
Article VI will be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable. Each Indemnified Person shall
furnish such

 

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information regarding itself or the claim in question as an Indemnifying Person
may reasonably request in writing and shall be reasonably required in connection
with the defense of such claim and litigation resulting therefrom.

ARTICLE VII

CONTRIBUTION

To the extent that any indemnification provided for herein is prohibited or
limited by law, the indemnifying party will make the maximum contribution with
respect to any amounts for which it would otherwise be liable under Article VI
to the fullest extent permitted by law. However, (a) no contribution will be
made under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Article VI, (b) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (c) contribution (together with any indemnification or
other obligations under this Agreement) by any seller of Registrable Securities
will be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.

ARTICLE VIII

EXCHANGE ACT REPORTING

In order to make available to the Investors the benefits of Rule 144 or any
similar rule or regulation of the SEC that may at any time permit the Investors
to sell securities of the Company to the public without registration, the
Company will:

(a) Use its best efforts to file with the SEC in a timely manner, and make and
keep available, all reports and other documents required of the Company under
the Securities Act and the Exchange Act so long as the Company remains subject
to such requirements and the filing and availability of such reports and other
documents is required for the applicable provisions of Rule 144; and

(b) Furnish to each Investor who so requests, so long as such Investor holds
2010 Convertible Senior Notes or Registrable Securities, promptly upon the
Investor’s request, (i) a written statement by the Company regarding whether it
has complied with the reporting requirements of Rule 144, the Securities Act and
the Exchange Act, (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents filed by the Company with the
SEC and (iii) such other information as may be reasonably requested to permit
the Investors to sell such securities pursuant to Rule 144 without registration.

ARTICLE IX

ASSIGNMENT OF REGISTRATION RIGHTS

The rights of the Investors hereunder, including the right to have the Company
register Registrable Securities pursuant to this Agreement, will be
automatically assigned by the Investors

 

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to transferees or assignees of all or any portion of the Investors rights under
the Exchange Agreement, the 2010 Convertible Senior Notes or Registrable
Securities, but only if (a) the Investor agrees in writing with the transferee
or assignee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being transferred
or assigned, (c) after such transfer or assignment, the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, (d) at or before the time the Company
received the written notice contemplated by clause (b) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (e) such transfer is made in accordance with
the applicable requirements of the Exchange Agreement, and (f) the transferee is
an “accredited investor” as that term is defined in Rule 501 under the Exchange
Act. Any transferee or assignee of an Investor under this Article IX shall be
deemed an “Investor” for all purposes of this Agreement, and shall be entitled
to all rights of, and subject to all obligations (including indemnification
obligations) of, an Investor hereunder; provided, however, that such a
transferee will not be eligible to be named in a Registrations Statement or an
amendment thereto until such transferee has completed a Questionnaire of Selling
Securityholders in the form of Exhibit A and delivered it to the Company.

ARTICLE X

AMENDMENT OF REGISTRATION RIGHTS

This Agreement may be amended and the obligations hereunder may be waived
(either generally or in a particular instance, and either retroactively or
prospectively) only with the written consent of the Company and Investors
holding a majority (determined on an as-if-converted basis) of the Registrable
Securities (but not including any Investor who is not affected by such amendment
or waiver). Any amendment or waiver effected in accordance with this Article X
is binding upon each Investor (and each future holder of all such Registrable
Securities) and the Company. Notwithstanding the foregoing, no amendment or
waiver will retroactively affect any Investor without its consent, or will
prospectively adversely affect any Investor who no longer owns any 2010
Convertible Senior Notes or Registrable Securities without its consent. Neither
Article VI nor Article VII hereof may be amended or waived in a manner adverse
to an Investor without its consent.

ARTICLE XI

MISCELLANEOUS

11.1 Conflicting Instructions. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company will act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.

 

17

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11.2 Notices. Any notices required or permitted to be given under the terms of
this Agreement will be given and deemed received as set forth in Section 7.7 of
the Exchange Agreement.

11.3 Waiver. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
does not operate as a waiver thereof.

11.4 Governing Law. This Agreement will be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws.

11.5 Severability. If any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
will be deemed modified in order to conform to such statute or rule of law. Any
provision hereof that may prove invalid or unenforceable under any law will not
affect the validity or enforceability of any other provision hereof.

11.6 Entire Agreement. This Agreement, the Exchange Agreement, the 2010
Indenture and the 2010 Convertible Senior Notes (including all schedules and
exhibits thereto) (the “Transaction Documents”) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein or therein. This Agreement supersedes all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof.

11.7 Successors and Assigns. Subject to the requirements of Article IX hereof,
this Agreement inures to the benefit of and is binding upon the successors and
assigns of each of the parties hereto. Notwithstanding anything to the contrary
herein, including, without limitation, Article IX, the rights of an Investor
hereunder are assignable to and exercisable by a bona fide pledgee of the
Registrable Securities in connection with an Investor’s margin or brokerage
accounts.

11.8 Use of Pronouns. All pronouns refer to the masculine, feminine or neuter,
singular or plural, as the context may require.

11.9 Headings. The headings of this Agreement are for convenience of reference
only, are not part of this Agreement and do not affect its interpretation.

11.10 Counterparts. This Agreement may be executed in two or more counterparts,
each of which is deemed an original but all of which constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission, and facsimile signatures are
binding on the parties hereto.

11.11 Further Assurances. Each party will do and perform, or cause to be done
and performed, all such further acts and things, and will execute and deliver
all other agreements,

 

18

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certificates, instruments and documents, as another party may reasonably request
in order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.

11.12 Consents. All consents and other determinations to be made by the
Investors pursuant to this Agreement will be made by the Investors holding a
majority in interest of the then-outstanding Registrable Securities, determined
as if all 2010 Convertible Senior Notes then outstanding had been converted into
or exercised for Registrable Securities.

11.13 No Strict Construction. The language used in this Agreement is deemed to
be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

11.14 No Third-Party Beneficiaries. Other than as specifically provided herein,
this Agreement is intended to inure to the benefit of the parties hereto only,
and no other party shall have any rights, express or implied, by reason of this
Agreement.

11.15 Saturdays, Sundays, Holidays, Etc. If the last or appointed day for the
taking of any action required or permitted hereby shall be a Saturday, Sunday, a
nationally recognized holiday, or a state holiday in the State of Minnesota,
then such action may be taken on the next succeeding business day.

11.16 Independent Nature of Investors’ Obligations and Rights. The obligations
of each Investor under any of the Transaction Documents are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Investor shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such purpose.
The Company has elected to provide all Investors with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Investors.

[signature pages follow]

 

19

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IN WITNESS WHEREOF, the undersigned Investors and the Company have caused this
Agreement to be duly executed as of the date first above written.

 

COMPANY: FLOTEK INDUSTRIES, INC. By:  

/s/ John Chisholm

Name:   John Chisholm Title:   President

[Signatures continued on next page]

[Signature Page to Registration Rights Agreement - Notes]

--------------------------------------------------------------------------------

INVESTORS: WHITEBOX HEDGED HIGH YIELD PARTNERS, LP By:   Whitebox Hedged High
Yield Advisors, LLC Its:   General Partner By:   Whitebox Advisors LLC Its:  
Managing Member By:  

/s/ Mark Strefling

Name:   Mark Strefling Title:   Chief Legal Officer

IAM MINI-FUND 14 LIMITED

By:   Whitebox Advisors LLC Its:   Investment Manager By:  

/s/ Mark Strefling

Name:   Mark Strefling Title:   Chief Legal Officer

[Signature Page to Registration Rights Agreement]

--------------------------------------------------------------------------------

PANDORA SELECT PARTNERS, LP

By:   Pandora Select Advisors, LLC Its:   General Partner By:   Whitebox
Advisors LLC Its:   Managing Member By:  

/s/ Mark Strefling

Name:   Mark Strefling Title:   Chief Legal Officer WHITEBOX SPECIAL
OPPORTUNITIES FUND, LP – SERIES B By:   Whitebox Special Opportunities Advisors,
LLC Its:   General Partner By:   Whitebox Advisors LLC Its:   Managing Member
By:  

/s/ Mark Strefling

Name:   Mark Strefling Title:   Chief Legal Officer

WHITEBOX COMBINED PARTNERS, LP

By:   Whitebox Combined Advisors, LLC Its:   General Partner By:   Whitebox
Advisors LLC Its:   Managing Member By:  

/s/ Mark Strefling

Name:   Mark Strefling Title:   Chief Legal Officer

[Signature Page to Registration Rights Agreement - Notes]

--------------------------------------------------------------------------------

WHITEBOX CONVERTIBLE ARBITRAGE PARTNERS, LP

By:   Whitebox Convertible Arbitrage Advisors, LLC Its:   General Partner By:  
Whitebox Advisors LLC Its:   Managing Member By:  

/s/ Mark Strefling

Name:   Mark Strefling Title:   Chief Legal Officer

ADDRESS OF EACH INVESTOR:

c/o Whitebox Advisors LLC

3033 Excelsior Blvd., Suite 300

Minneapolis, MN 55416

Attention: Jake Mercer

Facsimile: 612-253-6100

(any notice hereunder to this Investor shall include a copy to):

Faegre & Benson LLP

2200 Wells Fargo Center

90 South Seventh Street

Minneapolis, Minnesota 55402

Attn: Michael K. Coddington

Facsimile: 612-766-1600

[Signature Page to Registration Rights Agreement - Notes]

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WHITEBOX INTERMARKET PARTNERS LP

By:   Whitebox Intermarket Advisors LLC Its:   General Partner By:   Whitebox
Advisors LLC Its:   Managing Member By:  

/s/ Mark Strefling

Name:   Mark Strefling Title:   Chief Legal Officer

ADDRESS OF EACH INVESTOR:

c/o Whitebox Advisors LLC

3033 Excelsior Blvd., Suite 300

Minneapolis, MN 55416

Attention: Jake Mercer

Facsimile: 612-253-6100

(any notice hereunder to this Investor shall include a copy to):

Faegre & Benson LLP

2200 Wells Fargo Center

90 South Seventh Street

Minneapolis, Minnesota 55402

Attn: Michael K. Coddington

Facsimile: 612-766-1600

[Signature Page to Registration Rights Agreement - Notes]

--------------------------------------------------------------------------------

ECF VALUE FUND, L.P.

By:   Gates Capital Partners, L.P. Its:   General Partner By:   Gates Capital
Management, Inc. Its:   General Partner By:  

/s/ Jeffrey L. Gates

Name:   Jeffrey L. Gates Title:   President

ECF VALUE FUND II, L.P.

By:   Gates Capital Partners, L.P. Its:   General Partner By:   Gates Capital
Management, Inc. Its:   General Partner By:  

/s/ Jeffrey L. Gates

Name:   Jeffrey L. Gates Title:   President

ECF VALUE FUND INTERNATIONAL LTD.

By:   Gates Capital Management, Inc. Its:   Investment Advisor By:  

/s/ Jeffrey L. Gates

Name:   Jeffrey L. Gates Title:   President

[Signature Page to Registration Rights Agreement - Notes]

--------------------------------------------------------------------------------

EXHIBIT A

FLOTEK INDUSTRIES, INC.

(the “Company”)

QUESTIONNAIRE TO THE SELLING SECURITYHOLDERS

This Questionnaire is to be completed, signed and faxed or emailed to
                     at                      or                     , by the
person or entity indicated on the cover of this Questionnaire (the “Selling
Securityholder”) whose securities of the Company are being registered pursuant
to a Registration Statement on Form S-3. Retain a duplicate copy for your files.
If you do not return the Questionnaire by the foregoing deadline, your shares
may not be included in the Registration Statement.

If you are uncertain about any of the following questions as they apply to your
situation, please supply all relevant facts. Include separate sheets with
details if necessary. If you have any questions, please call the Company’s
counsel, W. Mark Young, Esquire, at (713) 220-4323.

Please notify me immediately if any of the information disclosed in your answers
changes. Please answer all questions. Indicate “none” or “not applicable” when
appropriate. Information should be given as of the date of this Questionnaire,
even if previously reported to the Company.

IN ANSWERING THESE QUESTIONS, PLEASE REFER TO THE INSTRUCTIONS AT THE BEGINNING
OF THIS QUESTIONNAIRE.

Name of Selling Securityholder:                                          
                                       

 

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Instructions and Definitions

The following instructions and definitions are furnished to aid you in preparing
your answers to this Questionnaire.

 

  1. For purposes of this Questionnaire the term “Company” means Flotek
Industries, Inc.

 

  2. “Beneficial” ownership. Beneficial ownership shall have the meaning
ascribed to it in Section 13(d) of the Securities Exchange Act of 1934, as
amended. The SEC has taken the position that if you have sole or shared voting
power or dispositive power or the ability to acquire either sole or shared
voting or dispositive power of a security within 60 days, you are the beneficial
owner of that security, even though that security is not registered in your
name. Thus, for example, you could be the beneficial owner of securities in a
trust or estate of which you are a trustee or executor, or of which you are one
of the trustees or executors, or you could be the beneficial owner of securities
which you have a right to purchase.

 

  3. The term “affiliate” for purposes of this Questionnaire means any person
directly or indirectly through one or more intermediaries controlling,
controlled by, or under common control with the Selling Securityholder.

 

  4. The term “broker” for the purposes of this Questionnaire means any person
engaged in the business of effecting transactions in securities for the account
of others.

 

  5. The term “dealer” for the purposes of this Questionnaire means any person
engaged in the business of buying or selling securities for such person’s own
account through a broker or otherwise.

 

  6. The term “FINRA Member” for the purposes of this Questionnaire means any
individual, partnership, corporation or other legal entity that is a broker or
dealer admitted to membership in the Financial Industry Regulatory Authority,
Inc. (FINRA Manual, By-laws Article I, Definitions)

 

  7.

The term “control”(including the terms “controlling,” “controlled by” and “under
common control with”) for the purposes of this Questionnaire means the
possession, direct or indirect, of the power, either individually or with
others, to direct or cause the direction of the

 

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management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise. (Rule 405 under the Securities Act of
1933, as amended)

 

  8. The term “person associated with a member of FINRA” for the purposes of
this Questionnaire means every sole proprietor, partner, officer, director,
branch manager or executive representative of any FINRA Member, or any natural
person occupying a similar status or performing similar functions, or any
natural person engaged in the investment banking or securities business who is
directly or indirectly controlling or controlled by a FINRA Member, whether or
not such person is registered or exempt from registration with the Financial
Industry Regulatory Authority, Inc. pursuant to its bylaws. (FINRA Manual,
By-laws Article I, Definitions)

 

  9. The term “underwriter or a related person” for the purposes of this
Questionnaire means, with respect to a proposed offering, underwriters,
underwriters’ counsel, financial consultants and advisors, finders, members of
the selling or distribution group, and any and all other persons associated with
or related to any of such persons. (FINRA Interpretation)

 

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  1. Broker-Dealer Status.

(a) Are you, or are you an affiliate of, a broker or a dealer registered under
the Securities Exchange Act of 1934?

Yes                                                       No              

If “yes,” please give details below.

(b) Please confirm the following statement: The Company’s equity securities that
are being issued to you were acquired in the ordinary course of your business,
and at the time the securities were issued to you, you did not have any
agreement or understanding, directly or indirectly, with any person to
distribute the securities.

Confirmed                      Cannot Confirm              

If “cannot confirm,” please give details below.

 

  2. Relationships with the Company.

(a) Have you or your organization held any position or office with the Company,
its predecessors or affiliates within the last three years?

Yes                                                       No              

If “yes,” please give details below.

(b) Have you or your organization had any other material relationship with the
Company, its predecessors or affiliates within the last three years?

Yes                                                       No              

If “yes,” please give details below.

 

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  3. Equity Securities Beneficially Owned By You.

(a) Please state the number and type of equity securities of the Company
beneficially owned (please see instructions and definitions on page 2) by you as
of the date of this Questionnaire, including securities which are exercisable or
convertible into equity securities within 60 days of the date of this
Questionnaire.

 

Class of Security

  

Number of Shares Beneficially Owned

     

(b) If any natural person or entity other than you holds or shares voting power,
dispositive power and/or investment control with respect to the Company’s equity
securities listed in response to Question 3(a), please provide the names of the
natural persons (including titles) or entities that hold or share such voting
power or dispositive power and indicate the number of the Company’s equity
securities covered thereby.

(c) With respect to the Company’s equity securities listed in response to
Questions 3(a) and 3(b) for which an entity holds or shares voting power or
dispositive power, please provide the names of the natural persons (including
titles) or entities that control the entity or entities listed in response to
Questions 3(a) and 3(b).

(d) Please continue to list the natural persons or entities that control the
entities listed in response to Question 3(c) and the entities listed in response
to this Question 3(d) until you have listed only natural persons (including
titles) that control the applicable entity or entities. For example, if you are
a general partnership, please identify the general partners in the partnership.

 

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(e) If any person or entity disclaims beneficial ownership of any of the equity
securities you have listed in response to Question 3, please so indicate:

 

  4. FINRA Membership

(a) Are you (i) an FINRA Member (see definition above), (ii) a Controlling (see
definition) shareholder of an FINRA Member, (iii) a Person Associated with a
Member of FINRA(see definition), or (iv) an Underwriter or a Related Person (see
definition) with respect to the proposed offering; or (b) do you own any shares
or other securities of any FINRA Member not purchased in the open market; or
(c) have you made any outstanding subordinated loans to any FINRA Member?

Yes                                                       No              

If “yes,” please give details below.

 

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