FIRST SUPPLEMENTAL INDENTURE by and among

EX-4.2 3 dex42.htm FIRST SUPPLEMENTAL INDENTURE First Supplemental Indenture

Exhibit 4.2

FIRST SUPPLEMENTAL INDENTURE

by and among

FLOTEK INDUSTRIES, INC.

AS ISSUER,

THE GUARANTORS PARTY HERETO

AND

AMERICAN STOCK TRANSFER & TRUST COMPANY

AS TRUSTEE

5.25% Convertible Senior Notes due 2028

Dated as of February 14, 2008

Supplemental To Indenture For Senior Debt Securities

Dated as of February 14, 2008

TABLE OF CONTENTS


		PAGE

ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01.	Scope of First Supplemental Indenture	2
Section 1.02.	Definitions	2
Section 1.03.	Other Definitions	9
Section 1.04.	Rules of Construction	10

ARTICLE 2 THE SECURITIES

Section 2.01.	Title; Amount and Issue of Securities; Principal and Interest	10
Section 2.02.	Form of Securities	12
Section 2.03.	Legends	13
Section 2.04.	Registrar and Paying Agent	13
Section 2.05.	General Provisions Relating to Transfer and Exchange	14
Section 2.06.	Book-Entry Provisions for the Global Securities	14
Section 2.07.	Original Issue Discount	15

ARTICLE 3 COVENANTS

Section 3.01.	Payment of Securities	16
Section 3.02.	Further Instruments and Acts	16
Section 3.03.	Statement by Officer as to Default	16
Section 3.04.	Additional Interest and Contingent Interest	16
Section 3.05.	Calculation Of Original Issue Discount	17

ARTICLE 4 REDEMPTION OF SECURITIES

Section 4.01.	Optional Redemption	17
Section 4.02.	Selection by Trustee of Securities to Be Redeemed	17
Section 4.03.	Notice of Redemption	18

ARTICLE 5 DEFAULTS AND REMEDIES

Section 5.01.	Additional Events of Default	18
Section 5.02.	Sole Remedy for Failure to Report	20
Section 5.03.	Limitation on Suits	20


ARTICLE 6 DISCHARGE OF INDENTURE

Section 6.01.	Discharge of Liability on Securities	21
Section 6.02.	Reinstatement	22
Section 6.03.	Officer’s Certificate; Opinion of Counsel	22

ARTICLE 7 AMENDMENTS

Section 7.01.	With Consent of Holders	23

ARTICLE 8 PURCHASE AT THE OPTION OF HOLDERS UPON A FUNDAMENTAL CHANGE; PURCHASE AT THE OPTION OF HOLDERS

Section 8.01.	Purchase at the Option of the Holder Upon a Fundamental Change	23
Section 8.02.	Purchase of Securities at the Option of the Holder	26
Section 8.03.	Further Conditions and Procedures for Purchase at the Option of the Holder Upon a Fundamental Change and Purchase of Securities at the Option of the Holder	28

ARTICLE 9 CONVERSION

Section 9.01.	Conversion of Securities	31
Section 9.02.	Adjustments to Conversion Rate	38
Section 9.03.	Adjustment to Common Stock Delivered Upon Certain Fundamental Changes	45
Section 9.04.	Effect of Recapitalizations, Reclassifications, and Changes of Common Stock	46
Section 9.05.	Responsibility of Trustee	47
Section 9.06.	Stockholder Rights Plan	48
Section 9.07.	No Stockholder Rights	48
Section 9.08.	Withholding Taxes for Adjustments in Conversation Rate	48

ARTICLE 10 GUARANTEE OF SECURITIES

Section 10.01.	Securities Guarantee	49
Section 10.02.	Release of A Guarantor; Termination Of Securities Guarantee	49

iii


ARTICLE 11 MISCELLANEOUS

Section 11.01.	Compliance with Trust Indenture Act	49
Section 11.02.	No Defeasance	50
Section 11.03.	Communication by Holders with other Holders	50
Section 11.04.	Rules by Trustee, Paying Agent and Registrar	50
Section 11.05.	Governing Law	50
Section 11.06.	No Recourse Against Others	50
Section 11.07.	Successors	50
Section 11.08.	Multiple Originals	50
Section 11.09.	Table of Contents; Headings	50
Section 11.10.	Severability Clause	51
Section 11.11.	Calculations	51
Section 11.12.	Ratification and Incorporation of Original Indenture	51

EXHIBIT

A Form of the Security

FIRST SUPPLEMENTAL INDENTURE dated as of February 14, 2008, among Flotek Industries, Inc., a Delaware corporation (the “Company”), the guarantors listed on the signature page hereto (the “Initial Guarantors”) and American Stock Transfer & Trust Company, as Trustee (the “Trustee”).

Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company’s 5.25% Convertible Senior Notes due 2028 (the “Securities”) on the date hereof.

WITNESSETH:

WHEREAS, this First Supplemental Indenture is supplemental to the Original Indenture; and

WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issue of the Securities, initially in an aggregate principal amount not to exceed $115,000,000, and in order to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered, the Company has duly authorized the execution and delivery of this First Supplemental Indenture; and

WHEREAS, pursuant to Section 3.1 of the Original Indenture, the Company may establish one or more series of Securities from time to time as authorized by a supplemental indenture of which the Securities shall be one such series; and

WHEREAS, the Form of Security, the certificate of authentication to be borne by each Security, the Form of Conversion Notice, the Form of Fundamental Change Purchase Notice, the Form of Purchase Notice and the Assignment Form to be borne by the Securities are to be substantially in the forms hereinafter provided for; and

WHEREAS, all acts and things necessary to make the Securities, when executed by the Company and authenticated and delivered by the Trustee or a duly authorized authenticating agent, as in the Indenture provided, the valid, binding and legal obligations of the Company, and to constitute these presents a valid agreement according to its terms, have been done and performed, and the execution of this First Supplemental Indenture and the issue hereunder of the Securities have in all respects been duly authorized.

WHEREAS, the Guarantors party hereto have duly authorized the execution and delivery of this First Supplemental Indenture as guarantors of the Securities. All things necessary to make the Indenture a valid agreement of each Guarantor, in accordance with its terms, have been done, and each Guarantor has done all things necessary to make the Securities Guarantee, when the Securities

are executed by the Company and authenticated and delivered by the Trustee and duly issued by the Company, the valid obligations of such Guarantor as hereinafter provided.

NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:

That in order to declare the terms and conditions upon which the Securities are, and are to be, authenticated, issued and delivered, and in consideration of the premises and of the purchase and acceptance of the Securities by the holders thereof, the Company and the Guarantors covenant and agree with the Trustee for the equal and proportionate benefit of the respective holders from time to time of the Securities (except as otherwise provided below), as follows:

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01. Scope of First Supplemental Indenture. The changes, modifications and supplements to the Original Indenture affected by this First Supplemental Indenture shall be applicable only with respect to, and shall only govern the terms of, the Securities, which shall initially be limited to $115,000,000 aggregate principal amount Outstanding and which may be issued from time to time, and shall not apply to any other Securities that may be issued under the Original Indenture unless a supplemental indenture with respect to such other Securities specifically incorporates such changes, modifications and supplements. The provisions of the First Supplemental Indenture shall supersede any corresponding or inconsistent provisions in the Original Indenture.

Section 1.02. Definitions. The terms defined in this Section 1.02 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this First Supplemental Indenture and for purposes of the Original Indenture as it relates to the Securities shall have the respective meanings specified in this Section 1.02. Except as otherwise provided in this First Supplemental Indenture, all words, terms and phrases defined in the Original Indenture (but not otherwise defined herein) shall have the same meaning herein as in the Original Indenture. All other terms used in this First Supplemental Indenture that are defined in the Trust Indenture Act or that are by reference therein defined in the Securities Act (except as herein otherwise expressly provided or unless the context otherwise requires) shall have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as in force at the date of the execution of this First Supplemental Indenture. The words “herein,” “hereof,” “hereunder,” and words of similar import refer to this First Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision.

“Additional Interest” means all amounts, if any, payable pursuant to Section 5.02 hereof.

“Beneficial Owner” shall mean any Person who is considered a beneficial owner of a security in accordance with Rule 13d-3 promulgated by the SEC under the Exchange Act.

“Bid Solicitation Agent” means, initially, the Trustee. The Company may change the Bid Solicitation Agent, but the Bid Solicitation Agent shall not be the Company’s Affiliate. The Bid Solicitation Agent shall solicit bids from securities dealers in accordance with Section 9.01 that are believed by the Company to be willing to bid for the Securities.

“Capital Stock” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.

“Common Equity” of any Person means Capital Stock of such Person that is generally entitled to (1) vote in the election of directors of such Person or (2) if such Person is not a corporation, vote or otherwise participate in the selection of the governing body, partners, managers or others that will control the management or policies of such Person.

“Common Stock” means the Company’s common stock, par value $0.0001 per share at the date of this First Supplemental Indenture or, subject to Section 9.04, shares of any class or classes resulting from any reclassification or reclassifications thereof and that have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and that are not subject to redemption by the Company; provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications.

“Contingent Interest” has the meaning set forth in Exhibit A attached hereto.

“Conversion Agent” means the office or agency appointed by the Company where Securities may be presented for conversion. The Conversion Agent appointed by the Company shall initially be the Trustee.

“Conversion Period” means, with respect to any Securities:

(i) with respect to any Conversion Date that occurs on or after the 25^th Scheduled Trading Day prior to the Maturity Date, the 20 consecutive VWAP Trading Day period beginning on and including the 22^nd Scheduled Trading Day prior to the Maturity Date (whether or not the Maturity Date is a Scheduled Trading Day) (or if such day is not a VWAP Trading Day, the next succeeding VWAP Trading Day);

(ii) with respect to any Securities called for redemption, the 20 consecutive VWAP Trading Day Period beginning on and including the 22^nd Scheduled Trading Day prior to the Redemption Date (or if such day is not a VWAP Trading Day, the next succeeding VWAP Trading Day); and

(iii) in all other instances, the 20 consecutive VWAP Trading Day period beginning on and including the third VWAP Trading Day after the related Conversion Date in respect of such Securities.

“Conversion Price” at any time means a dollar amount (initially $22.75) equal to $1,000 divided by the Conversion Rate at such time.

“Daily Conversion Value” means, for each of the 20 consecutive VWAP Trading Days during the Conversion Period, one-twentieth (1/20) of the product of (a) the Conversion Rate on such day and (b) the Daily VWAP of the Common Stock (or the Reference Property pursuant to Section 9.04) on such VWAP Trading Day.

“Daily Settlement Amount” means, for each of the 20 VWAP Trading Days during the applicable Conversion Period:

(i) cash equal to the lesser of $50.00 and the Daily Conversion Value relating to such VWAP Trading Day; and

(ii) if such Daily Conversion Value exceeds $50.00, a number of shares of Common Stock equal to (A) the difference between such Daily Conversion Value and $50.00, divided by (B) the Daily VWAP of the Common Stock (or the consideration into which Common Stock has been exchanged in connection with certain corporate transactions) for such VWAP Trading Day, subject to adjustment pursuant to Section 9.02(l).

“Daily VWAP” means for each of the 20 consecutive VWAP Trading Days during the Conversion Period, the per share volume-weighted average price as displayed under the heading “Bloomberg VWAP” on Bloomberg page FTK.UQ <equity> AQR (or any equivalent successor page) in respect of the period from the scheduled open of trading on the principal trading market for the Common Stock to the scheduled close of trading on such market on such VWAP

Trading Day (or if such volume-weighted average price is unavailable, the market value of one share of Common Stock on such VWAP Trading Day, using a volume-weighted method if reasonably practical, as determined in good faith by the Company).

“DTC” means The Depository Trust Company, its nominees and their respective successors and assigns, or such other depository institution hereinafter appointed by the Company pursuant to the terms of this First Supplemental Indenture.

“Ex-Dividend Date” means, in respect of an issuance, a dividend or distribution to holders of Common Stock, the first date on which Common Stock trades on the applicable exchange or in the applicable market, regular way, without the right to receive the issuance, dividend or distribution in question.

“Fair Market Value” means the amount that a willing buyer would pay a willing seller in an arm’s length transaction.

A “Fundamental Change” shall be deemed to have occurred if any of the following occurs:

(1)

any “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than the Company, any Subsidiary of the Company or any employee benefit plan of the Company or any such Subsidiary, files a Schedule TO or any other schedule, form or report under the Exchange Act disclosing that such person or group has become the Beneficial Owner of Common Equity of the Company representing more than 50% of the ordinary voting power of the Company’s Common Equity;

(2)

consummation of any share exchange, consolidation or merger of the Company pursuant to which the Common Stock will be converted into cash, securities or other property or any sale, lease or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any Person other than one of the Company’s Subsidiaries; provided, however, that a transaction where the holders of more than 50% of all classes of the Company’s Common Equity immediately prior to such transaction own, directly or indirectly, more than 50% of all classes of Common Equity of the continuing or surviving entity or transferee or parent thereof immediately after such event shall not be a Fundamental Change; or

(3)

the Company’s Common Stock (or other Reference Property into which the Securities are then convertible) ceases to be listed on a U.S. national or regional securities exchange or quoted on an established automated over-the-counter trading market in the United States for a period of 30 consecutive Scheduled Trading Days,

provided, however, that a Fundamental Change described in clause (2) of the definition above shall not be deemed to have occurred if at least 90% of the consideration received or to be received by the holders of the Company’s Common Stock, excluding cash payments for fractional shares and cash payments in respect of statutory dissenters’ rights, in connection with the transaction or transactions constituting the Fundamental Change described in clause (2) consists of shares of common stock (or depositary receipts or shares evidencing common stock) traded on a U.S. national or regional securities exchange, or which shall be so traded when issued or exchanged in connection with such Fundamental Change as described in clause (2) of the definition above (such securities being referred to as “Publicly Traded Securities”) and as a result of such transaction or transactions the Securities become convertible into such consideration.

“Guarantors” means (i) initially, the Initial Guarantors and (ii) each of the Company’s other Subsidiaries that provides a Securities Guarantee of the Securities pursuant to the terms of the Indenture.

“Indenture” means the Original Indenture, as amended and supplemented by this First Supplemental Indenture and, if further amended or supplemented as herein provided, as so amended or supplemented.

“Interest Payment Date” has the meaning set forth in Exhibit A attached hereto.

“Issue Date” means February 14, 2008.

“Last Reported Sale Price” of the Common Stock (or any other security for which a Last Reported Sale Price must be obtained) means, on any date, the closing sale price per share of Common Stock or such security (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock or such other security is listed for trading. If the Common Stock or such security is not listed for trading on a U.S. national or regional securities exchange on the relevant date, the Last Reported Sale Price will be the mid-point of the last quoted bid and ask prices for the Common Stock or such security in the over-the-counter market on the relevant date as reported by the National Quotation Bureau or similar organization. If the

Common Stock or such security is not so quoted, the Last Reported Sale Price will be the average of the mid-point of the last bid and ask prices for the Common Stock or such security on the relevant date from each of at least three nationally recognized independent investment banking firms (which may include the Underwriter or its Affiliates) selected by the Company for this purpose. The Last Reported Sale Price shall be determined without reference to extended or after hours trading.

“Market Disruption Event” means, for the purpose of the definition of Trading Day, the occurrence or existence during the one half-hour period ending on the scheduled close of trading on the principal U.S. national or regional securities exchange on which the Common Stock is listed for trading of any material suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the stock exchange or otherwise) in the Common Stock or in any options contracts or future contracts relating to the Common Stock.

“Officer” means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer or any Vice President of such Person.

“Original Indenture” means the indenture for Senior Debt Securities dated as of February 14, 2008 by and among the Company, the guarantors party thereto and the Trustee.

“Original Issue Discount” means the amount of ordinary interest income on a Security that must be accrued as original issue discount for United States federal income tax purposes pursuant to Treasury Regulation Section 1.1275-4 or any successor provision.

“Preferred Stock”, as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.

“Prospectus Supplement” means the prospectus supplement, dated February 11, 2008, relating to the offering by the Company of the Securities.

“Regular Record Date” for the payment of interest on the Securities (including Contingent Interest and Additional Interest, if any), means the February 1 (whether or not a Business Day) immediately preceding an Interest Payment Date on February 15 and August 1 (whether or not a Business Day) immediately preceding an Interest Payment Date on August 15.

“Scheduled Trading Day” means a day that is scheduled to be a Trading Day on the primary United States national securities exchange or market on which the Common Stock is listed or admitted to trading.

“Securities” has the meaning ascribed to it in the second introductory paragraph of this First Supplemental Indenture.

“Securities Act” means the Securities Act of 1933 (15 U.S.C. §§ 77a – 77aa), as amended, and the rules and regulations of the SEC promulgated thereunder.

“Securities Custodian” means the custodian with respect to the Global Security (as appointed by DTC), or any successor Person thereto and shall initially be the Trustee.

“Stated Maturity” means February 15, 2028.

“Stock Price” means, in respect of a Fundamental Change, the price per share of Common Stock paid in connection with such Fundamental Change, which shall be equal to (i) if such Fundamental Change is a transaction set forth in clause (2) of the definition thereof, and holders of Common Stock receive only cash in such transaction, the cash amount paid per share of Common Stock and (ii) in all other cases, the average of the Last Reported Sale Prices of the Common Stock over the five Trading Day period ending on the Trading Day preceding the Effective Date of such Fundamental Change.

“Trading Day” means any day during which (i) trading in the Common Stock generally occurs on the primary United States national securities exchange or market on which the Common Stock (or other security in question) is listed or admitted for trading and (ii) there is no Market Disruption Event.

“Trading Price” of the Securities on any date of determination means the average of the secondary market bid quotations per $1,000 principal amount of the Securities obtained by the Bid Solicitation Agent for $5,000,000 principal amount of the Securities at approximately 3:30 p.m., New York City time, on such determination date from two independent nationally recognized securities dealers the Company will select, but if only one such bid can reasonably be obtained by the Bid Solicitation Agent, this one bid shall be used. If the Bid Solicitation Agent cannot reasonably obtain at least one bid for $5,000,000 principal amount of the Securities from a nationally-recognized securities dealer or if, in the Company’s reasonable judgment, the bid quotations are not indicative of the secondary market value of the Securities, then the Trading Price of the Securities will be determined by the Company’s Board of Directors based on a good faith estimate of the fair value of the Securities; provided however that, for purposes of determining the Trading Price pursuant to Section 9.01(a)(ii), if the

Bid Solicitation Agent cannot reasonably obtain on any Trading Day at least one bid for $5,000,000 principal amount of the Securities from a nationally recognized securities dealer, then the Trading Price per $1,000 principal amount of Securities for such Trading Day will be deemed to be less than 95% of the product of the Last Reported Sale Price of the Common Stock and the Conversion Rate on such Trading Day.

“UCC” means the Uniform Commercial Code as in effect in the State of New York.

“Underwriter” means Bear, Stearns & Co. Inc.

“Underwriting Agreement” means the Underwriting Agreement dated as of February 11, 2008 among the Company, the Guarantors and the Underwriter relating to the initial purchase and sale of the Securities.

“VWAP Market Disruption Event” means (i) a failure by the principal United States national or regional securities exchange or market on which the Common Stock is listed or admitted to trading to open for trading during its regular trading session or (ii) the occurrence or existence prior to 1:00 p.m. New York City time on any Scheduled Trading Day for the Common Stock for an aggregate one half-hour period of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the stock exchange or otherwise) in the Common Stock or in any options contracts or futures contracts relating to the Common Stock.

“VWAP Trading Day” means a day during which (i) trading in the Common Stock generally occurs on the principal United States national or regional securities exchange or market on which the Common Stock is listed or admitted for trading and (ii) there is no VWAP Market Disruption Event. If the Common Stock is not so listed or traded, then “VWAP Trading Day” shall mean “Business Day.”

Section 1.03. Other Definitions.


Term	Defined in Section
“Additional Shares”		9.03(a)
“Agent Members”		2.06(a)
“Company Notice”		8.03(a)
“Company Notice Date”		8.03(a)
“Contingent Payment Debt Regulations”		2.07
“Conversion Date”		9.01(c)
“Conversion Obligation”		9.01(d)(i)
“Conversion Rate”		9.01
“Effective Date”		9.03(b)


Term	Defined in Section
“Fundamental Change Purchase Date”		8.01
“Fundamental Change Purchase Notice”		8.01(b)
“Fundamental Change Purchase Price”		8.01
“Global Security Legend”		2.03(i)
“Measurement Period”		9.01(a)(ii)
“Net-Share Settlement”		9.01(d)
“Paying Agent”		2.04
“Purchase Date”		8.02(a)
“Purchase Notice”		8.02(a)
“Purchase Price”		8.02(a)
“Redemption Price”		4.01(b)
“Reference Property”		9.04
“Registrar”		2.04
“Reorganization Event”		9.04
“Spin-Off”		9.02(c)

Section 1.04. Rules of Construction. In addition to the rules of construction set forth in Section 1.1 of the Original Indenture, unless the context otherwise requires:

(a) “or” is not exclusive;

(b) the principal amount of any non-interest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP;

(c) the principal amount of any Preferred Stock shall be the greater of (i) the maximum liquidation value of such Preferred Stock and (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock; and

(d) references to the Company and its Subsidiaries on a consolidated basis shall be deemed to include any other Guarantor.

ARTICLE 2

THE SECURITIES

Section 2.01. Title; Amount and Issue of Securities; Principal and Interest. (a) The Securities shall be known and designated as the “5.25% Convertible Senior Notes due 2028” of the Company. The aggregate principal amount of Securities which may be authenticated and delivered under this First Supplemental Indenture is initially limited to $115,000,000, except for Securities

authenticated and delivered upon registration of, transfer of, or in exchange for, or in lieu of other Securities pursuant to Section 2.03, 2.05, 2.06, 8.03, 9.01 hereof, or Sections 3.4, 3.5, 3.6, 6.14 or 11.7 of the Original Indenture; provided that additional Securities may be issued in an unlimited aggregate principal amount from time to time thereafter as set forth pursuant to Section 3.3 of the Original Indenture, but only if such additional Securities to be issued are part of the same issue as the Securities initially issued and sold pursuant to the Prospectus Supplement for United States federal income tax purposes.

(b) The Securities shall mature on February 15, 2028 unless earlier converted, redeemed or repurchased in accordance with the provisions hereof.

(c) Interest on the Securities shall accrue from and including the date specified on the face of such Securities until the principal thereof is paid or made available for payment. Interest shall be payable semiannually in arrears on February 15 and August 15 in each year, commencing August 15, 2008. For purposes of this First Supplemental Indenture and the Securities, unless the context clearly requires otherwise, references to “interest” shall include Additional Interest and Contingent Interest.

(d) A Holder of any Security at 5:00 p.m., New York City time, on a Regular Record Date shall be entitled to receive interest (including Contingent Interest and Additional Interest, if any), on such Security on the corresponding Interest Payment Date, notwithstanding the conversion of such Securities at any time after the close of business on such Regular Record Date. Securities surrendered for conversion during the period from 5:00 p.m., New York City time, on any Regular Record Date to 9:00 a.m., New York City time, on the corresponding Interest Payment Date must be accompanied by payment of an amount equal to the interest (including Contingent Interest and Additional Interest, if any) payable on such Securities. Notwithstanding the foregoing, no such payment of interest (including Contingent Interest and Additional Interest) need be made by any converting Holder (i) if the Company has specified a Redemption Date that is after a Regular Record Date and on or prior to the corresponding Interest Payment Date, (ii) if the Company has specified a Fundamental Change Purchase Date that is after a Regular Record Date and on or prior to the corresponding Interest Payment Date, or (iii) to the extent of any overdue interest (including Contingent Interest and Additional Interest, if any) existing at the time of conversion of such Security. Except as described above, no interest, Contingent Interest or Additional Interest, if any, on converted Securities will be payable by the Company on any Interest Payment Date subsequent to the date of conversion, and delivery of shares of Common Stock or the combination of cash and shares of Common Stock, if applicable, pursuant to Article 9 hereunder, together with any cash payment for any fractional share, upon conversion will be deemed to satisfy in full the Company’s obligation to pay the principal amount of the Securities and accrued and unpaid interest and Contingent Interest and Additional Interest, if any, to, but not including, the related Conversion Date.

(e) Principal of, interest (including Contingent Interest and Additional Interest, if any) and premium, if any, on, Global Securities shall be payable to DTC in immediately available funds.

(f) Principal of, and any premium on, Definitive Securities shall be payable at the office or agency of the Company maintained for such purpose, which initially shall be the corporate trust office of the Trustee. Interest (including Contingent Interest and Additional Interest, if any), on Definitive Securities will be payable (i) to Holders having an aggregate principal amount of $5,000,000 or less, by check mailed to the Holders of these Securities and (ii) to Holders having an aggregate principal amount of more than $5,000,000, either by check mailed to each Holder or, upon application by a Holder to the Registrar not later than the relevant Regular Record Date, by wire transfer in immediately available funds to such Holder’s account within the United States, which application shall remain in effect until the Holder notifies, in writing, the Registrar to the contrary.

Section 2.02. Form of Securities.

(a) Except as otherwise provided pursuant to this Section 2.02, the Securities are issuable in fully registered form without coupons in substantially the form of Exhibit A hereto, with such applicable legends as are provided for in Section 2.03. The Securities are not issuable in bearer form. The terms and provisions contained in the form of Security shall constitute, and are hereby expressly made, a part of this First Supplemental Indenture and to the extent applicable, the Company, the Guarantors and the Trustee, by their execution and delivery of this First Supplemental Indenture, expressly agree to such terms and provisions and to be bound thereby.

(b) The Securities shall be issued initially in the form of one or more permanent Global Securities, with the applicable legends as provided in Section 2.03. Each Global Security shall be duly executed by the Company and the Guarantors and authenticated and delivered by the Trustee, and shall be registered in the name of DTC or its nominee and retained by the Trustee, as Securities Custodian, at its corporate trust office, for credit to the accounts of the Agent Members holding the Securities evidenced thereby. The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee, as Securities Custodian, and of DTC or its nominee, as hereinafter provided.

Section 2.03. Legends.

(i) Global Security Legend. Each Global Security shall bear the following legend (the “Global Security Legend”) on the face thereof:

“UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO IN THE TERMS OF SECURITIES ATTACHED HERETO.”

(ii) Legend for Definitive Securities. Definitive Securities will bear a legend substantially in the following form:

“THIS SECURITY WILL NOT BE ACCEPTED IN EXCHANGE FOR A BENEFICIAL INTEREST IN A GLOBAL SECURITY UNLESS THE HOLDER OF THIS SECURITY, SUBSEQUENT TO SUCH EXCHANGE, WILL HOLD NO SECURITIES.”

Section 2.04. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the “Registrar”), which Registrar shall constitute a Security Register (as such term is defined in the Original Indenture) and an office or agency where Securities may be presented for payment (the “Paying Agent”). The Company may have one or more co-registrars and one or more additional paying agents. The term “Paying Agent” includes any additional paying agent and the term “Registrar” includes any co-registrar.

The Company shall enter into an appropriate agency agreement with any Registrar or Paying Agent not a party to this First Supplemental Indenture, which shall incorporate the terms of the Trust Indenture Act. The agreement shall

implement the provisions of this First Supplemental Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of each such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 6.7 of the Original Indenture. The Company or any of its domestically organized, wholly owned Subsidiaries may act as Paying Agent, Registrar or transfer agent.

The Company initially appoints the Trustee as Registrar and Paying Agent for the Securities. The Company may remove any Registrar or Paying Agent upon written notice to such Registrar or Paying Agent and to the Trustee; provided, however, that no such removal shall become effective until (i) acceptance of any appointment by a successor as evidenced by an appropriate agreement entered into by the Company and such successor Registrar or successor Paying Agent, as the case may be, and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as Registrar or Paying Agent until the appointment of a successor in accordance with clause (i) above. The Registrar or Paying Agent may resign at any time upon written notice to the Company and the Trustee.

Section 2.05. General Provisions Relating to Transfer and Exchange. A Holder may transfer a Security only by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of the Indenture. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Holder only upon, final acceptance and registration of the transfer by the Registrar in the Securities Register.

In addition to the matters described in the 7^th paragraph of Section 3.5 of the Original Indenture, neither the Company nor the Registrar shall be required to exchange or register a transfer of any Securities surrendered for conversion or, if a portion of any Security is surrendered for conversion, the portion thereof surrendered for conversion.

Section 2.06. Book-Entry Provisions for the Global Securities. (a) The Global Securities initially shall:

(i) be registered in the name of DTC (or a nominee thereof);

(ii) be delivered to the Trustee as Securities Custodian; and

(iii) bear the Global Security Legend set forth in Section 2.03(i).

Members of, or participants in, DTC (“Agent Members”) shall have no rights under this First Supplemental Indenture with respect to any Global Security

held on their behalf by DTC, or the Trustee as its custodian, or under such Global Security, and DTC may be treated by the Company, the Trustee and any agent of the Company, or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing contained herein shall prevent the Company, the Trustee or any agent of the Company, or Trustee from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and the Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Security.

(b) The Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this First Supplemental Indenture or the Securities.

Section 2.07. Original Issue Discount. The Company agrees, and by acceptance of a Definitive Security or a beneficial ownership interest in a Global Security each Holder and each beneficial owner of the Securities shall be deemed to have agreed, for United States federal income tax purposes, (1) to treat the Securities as indebtedness that is subject to Treasury Regulations Section 1.1275-4 (the “Contingent Payment Debt Regulations”) and, for purposes of the Contingent Payment Debt Regulations, to treat (x) the cash and the fair market value of any stock beneficially received upon any conversion of the Securities as a contingent payment and (y) any Additional Interest or Contingent Interest received as contingent payments, (2) to accrue interest with respect to the Securities as original issue discount on a constant yield basis, according to the “noncontingent bond method” set forth in Treasury Regulations Section 1.1275-4(b), using the comparable yield of 9.25% per annum compounded semi-annually and (3) in the absence of an administrative determination or judicial ruling to the contrary, to be bound by the Company’s determination of the “comparable yield” and “projected payment schedule,” within the meaning of the Contingent Payment Debt Regulations, with respect to the Securities. A Holder may obtain the issue price, the amount of original issue discount, the issue date, the yield to maturity, the comparable yield and the projected payment schedule for the Securities by submitting a written request for such information to Flotek Industries, Inc., 2930 West Sam Houston Parkway North, Suite 300, Houston, TX 77043, Attention: Chief Financial Officer.

The Company acknowledges and agrees, and each Holder and any beneficial owner of a Security by its purchase thereof shall be deemed to acknowledge and agree, that (i) the comparable yield and the schedule of projected payments are not determined for any purpose other than for the determination of interest accruals and adjustments thereof in respect of the Securities for United States federal income tax purposes and (ii) the comparable yield and the schedule of projected payments do not constitute a projection or representation regarding the amounts payable on the Securities.

ARTICLE 3

COVENANTS

Section 3.01. Payment of Securities. The Company shall promptly pay the principal of, interest (including Contingent Interest and Additional Interest, if any) and premium, if any, on the Securities on the dates and in the manner provided in the Securities and in this First Supplemental Indenture. Principal, interest (including Contingent Interest and Additional Interest, if any) and premium, if any, shall be considered paid on the date due if by 11:00 a.m., New York City time, on such date the Trustee or the Paying Agent holds in accordance with this First Supplemental Indenture immediately available funds sufficient to pay all principal, interest (including Contingent Interest and Additional Interest, if any) and premium, if any, then due.

The Company shall pay interest on overdue principal or premium, if any, at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

Notwithstanding anything to the contrary contained in this First Supplemental Indenture, the Company may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States of America from principal, premium or interest (including Contingent Interest and Additional Interest, if any) payments hereunder.

Section 3.02. Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this First Supplemental Indenture.

Section 3.03. Statement by Officer as to Default. The Company shall deliver to the Trustee, within 30 days after the Company becomes aware of the occurrence of any Event of Default or Default, an Officer’s Certificate setting forth the details of such events which would constitute an Event of Default or Default, its status and the action which the Company proposes to take with respect thereto.

Section 3.04. Additional Interest and Contingent Interest. If Additional Interest is payable by the Company or the Guarantors pursuant to Section 5.02, or if Contingent Interest is payable by the Company or the Guarantors pursuant to the terms of the Securities, the Company or the Guarantors shall deliver to the Trustee an Officer’s Certificate to that effect stating (i) the amount of such

Additional Interest, or Contingent Interest that is payable and (ii) the date on which such Additional Interest, or Contingent Interest is payable. Unless and until a Responsible Officer of the Trustee receives such a certificate, the Trustee may assume without inquiry that no Additional Interest or Contingent Interest is payable. If the Company or the Guarantors have paid Additional Interest or Contingent Interest directly to the persons entitled to it, the Company or the Guarantors shall deliver to the Trustee an Officer’s Certificate setting forth the particulars of such payment.

Section 3.05. Calculation Of Original Issue Discount. The Company shall file with the Trustee promptly at the end of each calendar year (i) a written notice specifying the amount of Original Issue Discount (including daily rates and accrual periods) accrued on the Securities as of the end of such year and (ii) such other specific information relating to such Original Issue Discount as may then be reasonably requested by the Trustee and relevant under the Internal Revenue Code of 1986, as amended from time to time, or the Treasury regulations promulgated thereunder.

ARTICLE 4

REDEMPTION OF SECURITIES

Section 4.01. Optional Redemption.

(a) Prior to February 15, 2013, the Securities shall not be redeemable.

(b) On and after February 15, 2013, subject to the terms and conditions of this Article 4, the Company may, at its option, redeem for cash all or a portion of the Securities, at a price (the “Redemption Price”) equal to 100% of the principal amount of Securities to be redeemed, plus accrued and unpaid interest (including Contingent Interest and Additional Interest, if any) to but excluding the Redemption Date.

(c) In the event that the Redemption Date occurs after a Regular Record Date for the payment of interest and on or prior to the related Interest Payment Date, the Redemption Price for any such Securities to be redeemed shall be 100% of the principal amount of such Securities, and accrued and unpaid interest (including Contingent Interest and Additional Interest, if any) shall be paid to the Holder on such Regular Record Date.

(d) The Securities are not subject to redemption through the operation of any sinking fund.

Section 4.02. Selection by Trustee of Securities to Be Redeemed. If any Securities selected for partial redemption are thereafter surrendered for

conversion in part before termination of the conversion right with respect to the portion of the Securities so selected, the converted portion of such Securities shall be deemed (so far as may be), solely for purposes of determining the aggregate principal amount of Securities to be redeemed by the Company, to be the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection. Nothing in this Section 4.02 or Section 11.3 of the Original Indenture shall affect the right of any Holder to convert any Securities pursuant to Article 9 before the termination of the conversion right with respect thereto.

Section 4.03. Notice of Redemption. The Company shall notify each Holder of Securities to be redeemed in the manner provided in Section 11.4 of the Original Indenture. In addition to those matters set forth in Section 11.4 of the Original Indenture, a notice of redemption sent to the Holder shall state:

(a) the then current Conversion Rate and provide a statement that the Securities called for redemption may be converted at any time before the close of business on the third Scheduled Trading Day prior to the Redemption Date, and that Holders who wish to convert Securities must comply with the relevant procedures;

(b) in case any Security is to be redeemed in part only, the notice which relates to such Security shall state that on and after the Redemption Date, upon surrender of such Security, the Holder will receive, without charge, a new Security or Securities of authorized denominations for the principal amount thereof remaining unredeemed;

(d) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; and

(e) the CUSIP or ISIN number, and that no representation is made as to the accuracy or correctness of the CUSIP or ISIN number, if any, listed in such notice or printed on the Securities.

ARTICLE 5

DEFAULTS AND REMEDIES

Section 5.01. Additional Events of Default. In addition to those Events of Default set forth in Section 5.1 of the Original Indenture, the following events shall also be Events of Default with respect to the Securities:

(a) failure by the Company to comply with its obligation to convert the Securities in accordance with this First Supplemental Indenture, upon exercise of a Holder’s conversion right and such failure continues for a period of 10 days;

(b) failure by the Company to give a Company Notice of the occurrence of a Fundamental Change to Holders pursuant to Section 8.01 or notice of a specified corporate transaction (as described in Section 9.01(a)(iv)) to Holders, in each case when due;

(c) except as permitted by Section 10.02, any Securities Guarantee of any Significant Subsidiary shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect, or any Guarantor which is a Significant Subsidiary, or any person acting on its behalf, shall deny or disaffirm its obligation under the Securities Guarantee;

(d) failure by the Company for a period of 60 days after written notice from the Trustee or Holders of at least 25% in principal amount of Securities then outstanding has been received to comply with any obligation, covenant or agreement in the Indenture or under the Securities (or 180 days after such notice with respect to any failure to comply with Section 11.01 hereof) (other than those referred to in clauses (a), (b), (c), (e) and (f) of this Section 5.01);

(e) default by the Company or any Subsidiary in the payment of the principal or interest on any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed in excess of $15,000,000 in the aggregate of the Company and/or any such Subsidiary, whether such indebtedness now exists or shall hereafter be created, resulting in such indebtedness becoming or being declared due and payable, and such acceleration shall not have been rescinded or annulled within 30 days after written notice of such acceleration has been received by the Company or such Subsidiary from the Trustee (or to the Company and the Trustee from Holders of at least 25% in principal amount of outstanding Securities); and

(f) a final judgment or decree for the payment of $15,000,000 or more rendered against the Company or any Subsidiary, which judgment is not fully covered by insurance or not discharged or stayed within 60 days after (i) the date on which the right to appeal thereof has expired if no such appeal has commenced or (ii) the date on which all rights to appeal have been extinguished.

The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.

Notwithstanding the foregoing, a Default under clauses (d) or (e) of this Section 5.01 will not constitute an Event of Default until the Trustee notifies the Company (or the Holders of 25% or more in principal amount of the outstanding Securities notify the Company and the Trustee) of the Default in writing and the Company does not cure such Default within the time specified in clauses (d) or (e) of this Section 5.01 after receipt of such notice.

Section 5.02. Sole Remedy for Failure to Report. Notwithstanding any other provision of the Indenture, the sole remedy for an Event of Default relating to the failure to comply with the reporting obligations under Section 11.01 of this First Supplemental Indenture, and for any failure to comply with the requirements of Section 314(a)(1) of the Trust Indenture Act, will for the 365 days after the occurrence of such an Event of Default consist exclusively of the right to receive Additional Interest on the principal amount of the Securities at a rate equal to 0.25% per annum. This Additional Interest will be payable in the same manner and subject to the same terms as other interest payable under this First Supplemental Indenture. The Additional Interest will accrue on all outstanding Securities from and including the date on which an Event of Default relating to a failure to comply with Section 11.01 or Section 314(a)(1) of the Trust Indenture Act first occurs to but not excluding the 365^th day thereafter (or such earlier date on which the Event of Default relating to the reporting obligations under Section 11.01 or Section 314(a)(1) of the Trust Indenture Act shall have been cured or waived). On such 365^th day (or earlier, if the Event of Default relating to such reporting obligations is cured or waived prior to such 365^th day), such Additional Interest will cease to accrue and the Securities will be subject to acceleration and other remedies as provided in this Article 5 if the Event of Default is continuing. For the avoidance of doubt, the provisions of this Section 5.02 will not affect the rights of Holders of Securities in the event of the occurrence of any other Event of Default.

Section 5.03. Limitation on Suits. Subject to Section 5.8 of the Original Indenture, a Holder may not pursue any remedy with respect to this First Supplemental Indenture or the Securities unless:

(a) such Holder has previously given to the Trustee written notice stating that an Event of Default is continuing;

(b) Holders of at least 25% in principal amount of the outstanding Securities have requested that the Trustee pursue the remedy;

(c) such Holders have offered to the Trustee security or indemnity reasonably satisfactory to it against any loss, liability or expense to be incurred in compliance with such request;

(d) the Trustee has not complied with such request within 60 days after receipt of the request and the offer of security or indemnity; and

(e) the Holders of a majority in principal amount of the outstanding Securities have not given the Trustee a direction that, in the opinion of the Trustee, is inconsistent with such request within such 60-day period.

A Holder may not use this First Supplemental Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.

ARTICLE 6

DISCHARGE OF INDENTURE

Section 6.01. Discharge of Liability on Securities. Article 4 of the Original Indenture shall not apply to the Securities. When (1) the Company shall deliver to the Registrar for cancellation all Securities theretofore authenticated (other than any Securities which have been mutilated, destroyed, lost or wrongfully taken and in lieu of or in substitution for which other Securities shall have been authenticated and delivered) and not theretofore canceled, or (2) all the Securities not theretofore canceled or delivered to the Registrar for cancellation shall have (a) been deposited for conversion (after all related Conversion Periods have elapsed) and the Company or the Guarantors shall deliver to the Holders shares of Common Stock or a combination of cash and shares of Common Stock, as applicable, sufficient to pay all amounts owing in respect of all Securities (other than any Securities which shall have been mutilated, destroyed, lost or wrongfully taken and in lieu of or in substitution for which other Securities shall have been authenticated and delivered) not theretofore canceled or delivered to the Registrar for cancellation or (b) become due and payable on the Stated Maturity, Purchase Date, Fundamental Change Purchase Date or Redemption Date, as applicable, and the Company or the Guarantors shall deposit with the Trustee cash and shares of Common Stock, if any, as applicable, sufficient to pay all amounts owing in respect of all Securities (other than any Securities which shall have been mutilated, destroyed, lost or wrongfully taken and in lieu of or in substitution for which other Securities shall have been authenticated and delivered) not theretofore canceled or delivered to the Registrar for cancellation, including the principal amount, premium, if any, and interest (including Contingent Interest and Additional Interest, if any) accrued and unpaid to such Stated Maturity, Purchase Date, Fundamental Change Purchase Date or Redemption Date, as the case may be, and if in either case (1) or (2) the Company or the Guarantors shall also pay or cause to be paid all other sums payable hereunder by the Company, then this First Supplemental Indenture with respect to the Securities shall cease to be of further effect (except as to (i) remaining rights of registration of transfer, substitution and exchange and conversion of Securities; (ii) rights hereunder of Holders to receive from the Trustee payments of the

amounts then due, including interest (including Contingent Interest and Additional Interest, if any) or premium, if any, with respect to the Securities and the other rights, duties and obligations of Holders, as beneficiaries hereof solely with respect to the amounts, if any, so deposited with the Trustee; and (iii) the rights, obligations and immunities of the Trustee, Authenticating Agent, Paying Agent, Conversion Agent and Registrar under this First Supplemental Indenture with respect to the Securities), and the Trustee, on demand of the Company accompanied by an Officer’s Certificate and an Opinion of Counsel as required by Section 6.03 and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this First Supplemental Indenture with respect to the Securities; however, the Company hereby agrees to reimburse the Trustee, Authenticating Agent, Paying Agent, Conversion Agent and Registrar for any costs or expenses thereafter reasonably and properly incurred by the Trustee, Authenticating Agent, Paying Agent, Conversion Agent and Registrar and to compensate the Trustee, Authenticating Agent, Paying Agent, Conversion Agent and Registrar for any services thereafter reasonably and properly rendered by the Trustee, Authenticating Agent, Paying Agent, Conversion Agent and Registrar in connection with this First Supplemental Indenture with respect to the Securities.

Section 6.02. Reinstatement. If the Trustee or the Paying Agent is unable to apply any money to the Holders entitled thereto by reason of any order or judgment of any court of governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s and each Guarantor’s obligations under the Indenture with respect to the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 6.01 until such time as the Trustee or the Paying Agent is permitted to apply all such money in accordance with the Indenture and the Securities to the Holders entitled thereto; provided, however, that if the Company or the Guarantors make any payment of principal amount of, interest (including Contingent Interest and Additional Interest, if any) or premium, if any, on any Security following the reinstatement of its obligations, the Company and the Guarantors shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent.

Section 6.03. Officer’s Certificate; Opinion of Counsel. Upon any application or demand by the Company to the Trustee to take any action under Section 6.01, the Company shall furnish to the Trustee an Officer’s Certificate or Opinion of Counsel stating that all conditions precedent, if any, provided for in this First Supplemental Indenture relating to the proposed action have been complied with.

ARTICLE 7

AMENDMENTS

Section 7.01. With Consent of Holders. In addition to the matters described in Section 9.2 of the Original Indenture, the Company and the Trustee may not, without the consent of each Holder of Securities affected, amend or waive any portion of the Indenture or the Securities for one or more of the following purposes:

(a) extend the stated time for payment of interest, including Contingent Interest and Additional Interest, if any, or premium, on any Security;

(b) otherwise impair the right of any Holder to receive payment of principal of, interest (including Contingent Interest and Additional Interest, if any) or premium, if any, on such Holder’s Securities on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Securities;

(d) reduce the Redemption Price, the Fundamental Change Purchase Price or the Purchase Price payable upon the redemption or repurchase or conversion of any Security or amend or modify in any manner adverse to Holders of the Securities the Company’s obligation to make such payments; or

(e) make any changes to the amendment provisions which require each Holder’s consent or to the waiver provisions.

ARTICLE 8

PURCHASE AT THE OPTION OF HOLDERS UPON A FUNDAMENTAL

CHANGE; PURCHASE AT THE OPTION OF HOLDERS

Section 8.01. Purchase at the Option of the Holder Upon a Fundamental Change. If a Fundamental Change shall occur at any time, each Holder shall have the right, at such Holder’s option, to require the Company to purchase any or all of such Holder’s Securities on a date specified by the Company that is no later than the 35^th calendar day after the date of the Company Notice of the occurrence of such Fundamental Change (subject to extension to comply with applicable law, as provided in Section 8.03(d)) (the “Fundamental Change Purchase Date”). The Company shall purchase such Securities at a price (the “Fundamental Change Purchase Price”), which shall be paid in cash, equal to 100% of the principal amount of the Securities to be purchased plus accrued and unpaid interest, including any Contingent Interest and Additional Interest, to but

excluding the Fundamental Change Purchase Date, unless the Fundamental Change Purchase Date is between a Regular Record Date and the Interest Payment Date to which it relates, in which case the Fundamental Change Purchase Price shall equal 100% of the principal amount of Securities to be purchased, and accrued and unpaid interest, including Contingent Interest and Additional Interest, if any, shall be paid to the Holder of record on the Regular Record Date.

(a) Notice of Fundamental Change. The Company shall mail to all Holders and the Trustee a Company Notice of the occurrence of a Fundamental Change and of the purchase right arising as a result thereof, including the information required by Section 8.03(a) hereof, on or before the 20^th calendar day after the occurrence of such Fundamental Change. The Company shall promptly furnish to the Paying Agent a copy of such Company Notice.

(b) Exercise of Option. For a Security to be so purchased at the option of the Holder, such Holder must deliver to the Paying Agent such Security duly endorsed for transfer, together with a written notice of purchase (a “Fundamental Change Purchase Notice”) in the form entitled “Form of Fundamental Change Purchase Notice” attached to the Security duly completed, on or before the Business Day immediately preceding the Fundamental Change Purchase Date, subject to extension to comply with applicable law. The Fundamental Change Purchase Notice shall state:

(i) if certificated, the certificate numbers of the Securities which the Holder shall deliver to be purchased, or if not certificated, such notice must comply with appropriate DTC procedures;

(ii) the portion of the principal amount of the Securities which the Holder shall deliver to be purchased, which portion must be $1,000 in principal amount or a multiple thereof; and

(iii) that such Securities shall be purchased as of the Fundamental Change Purchase Date pursuant to the terms and conditions specified in paragraph 6 of the Securities and in this First Supplemental Indenture.

(c) Procedures. The Company shall purchase from a Holder, pursuant to this Section 8.01, Securities if the principal amount of such Securities is $1,000 or a multiple of $1,000 if so requested by such Holder.

Any purchase by the Company contemplated pursuant to the provisions of this Section 8.01 shall be consummated by the delivery of the Fundamental Change Purchase Price to be received by the Holder promptly following the later of the Fundamental Change Purchase Date or the time of book-entry transfer or delivery of the Securities.

Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Fundamental Change Purchase Notice contemplated by this Section 8.01 shall have the right at any time prior to the close of business on the Business Day prior to the Fundamental Change Purchase Date to withdraw such Fundamental Change Purchase Notice (in whole or in part) by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 8.03(b).

The Paying Agent shall promptly notify the Company of the receipt by it of any Fundamental Change Purchase Notice or written notice of withdrawal thereof.

At or before 11:00 a.m. (New York City time) on the Fundamental Change Purchase Date, the Company shall deposit with the Paying Agent (or if the Company or an Affiliate of the Company is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 10.3 of the Original Indenture) cash sufficient to pay the aggregate Fundamental Change Purchase Price of the Securities to be purchased pursuant to this Section 8.01. Payment by the Paying Agent of the Fundamental Change Purchase Price for such Securities shall be made promptly following the later of the Fundamental Change Purchase Date or the time of book-entry transfer or delivery of such Securities. If the Paying Agent holds, in accordance with the terms of this First Supplemental Indenture, cash sufficient to pay the Fundamental Change Purchase Price of such Securities on the Business Day following the Fundamental Change Purchase Date, then, on and after such date, such Securities shall cease to be outstanding and interest (including Contingent Interest and Additional Interest, if any), on such Securities shall cease to accrue, whether or not book-entry transfer of such Securities is made or such Securities are delivered to the Paying Agent, and all other rights of the Holder shall terminate (other than the right to receive the Fundamental Change Purchase Price and previously accrued and unpaid interest (including Contingent Interest and Additional Interest, if any), upon delivery or transfer of the Securities). Nothing herein shall preclude any withholding tax required by law.

The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all cash held by the Paying Agent for the payment of the Fundamental Change Purchase Price and shall notify the Trustee of any default by the Company in making any such payment. If the Company or an Affiliate of the Company acts as Paying Agent, it shall segregate the cash held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to deliver all cash held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon doing so, the Paying Agent shall have no further liability for the cash delivered to the Trustee.

Section 8.02. Purchase of Securities at the Option of the Holder.

(a) A Holder shall have the option to require the Company to purchase any outstanding Securities on each of February 15, 2013, February 15, 2018 and February 15, 2023 (each, a “Purchase Date”), at a price (the “Purchase Price”) which shall be paid in cash, equal to 100% of the principal amount of the Securities to be repurchased plus any accrued and unpaid interest, including any Contingent Interest and Additional Interest, if any, to but excluding the Purchase Date, upon:

(i) delivery to the Paying Agent by the Holder of a written notice of purchase (a “Purchase Notice”) at any time from the opening of business on the date that is 20 Business Days prior to the relevant Purchase Date until the close of business on the second Business Day prior to such Purchase Date, stating:

(A) if certificated, the certificate numbers of the Securities which the Holder will deliver to be purchased, or, if not certificated, the Purchase Notice must comply with appropriate DTC procedures;

(B) the portion of the principal amount of the Securities which the Holder will deliver to be purchased, which portion must be $1,000 in principal amount or a multiple thereof;

(C) that such Securities shall be purchased by the Company as of the Purchase Date pursuant to the terms and conditions specified in paragraph 6(a) of the Securities and in this First Supplemental Indenture; and

(ii) delivery or book-entry transfer of such Securities to the Paying Agent (together with all necessary endorsements) at the offices of the Paying Agent, such delivery or transfer being a condition to receipt by the Holder of the Purchase Price therefor; provided, however, that such Purchase Price shall be so paid pursuant to this Section 8.02 only if the Securities so delivered or transferred to the Paying Agent shall conform in all respects to the description thereof in the related Purchase Notice.

(b) The Company shall purchase from a Holder, pursuant to this Section 8.02, Securities if the principal amount of such Securities is $1,000 or a multiple of $1,000 if so requested by such Holder.

(c) Any purchase by the Company contemplated pursuant to the provisions of this Section 8.02 shall be consummated by the delivery of the Purchase Price to be received by the Holder promptly following the later of the Purchase Date or the time of book-entry transfer or delivery of the Securities.

(d) Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Purchase Notice contemplated by this Section 8.02 shall have the right at any time prior to the close of business on the Business Day prior to the Purchase Date to withdraw such Purchase Notice (in whole or in part) by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 8.03(b).

(e) The Paying Agent shall promptly notify the Company of the receipt by it of any Purchase Notice or written notice of withdrawal thereof.

(f) At or before 11:00 a.m. (New York City time) on the Purchase Date, the Company shall deposit with the Paying Agent (or if the Company or an Affiliate of the Company is acting as the Paying Agent, shall segregate and hold in trust) cash sufficient to pay the aggregate Purchase Price of the Securities to be purchased pursuant to this Section 8.02. Payment by the Paying Agent of the Purchase Price for such Securities shall be made promptly following the later of the Purchase Date or the time of book-entry transfer or delivery of such Securities. If the Paying Agent holds, in accordance with the terms of this First Supplemental Indenture, cash sufficient to pay the Purchase Price of such Securities on the Business Day following the Purchase Date, then, on and after such date, such Securities shall cease to be outstanding and interest (including Contingent Interest and Additional Interest, if any) on such Securities shall cease to accrue, whether or not book-entry transfer of such Securities is made or such Securities are delivered to the Paying Agent, and all other rights of the Holder shall terminate (other than the right to receive the Purchase Price and previously accrued interest (including Contingent Interest and Additional Interest, if any) upon delivery or transfer of the Securities). Nothing herein shall preclude any withholding tax required by law.

(g) The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all cash held by the Paying Agent for the payment of the Purchase Price and shall notify the Trustee of any default by the Company in making any such payment. If the Company or an Affiliate of the Company acts as Paying Agent, it shall segregate the cash held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to deliver all cash held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon doing so, the Paying Agent shall have no further liability for the cash delivered to the Trustee.

Section 8.03. Further Conditions and Procedures for Purchase at the Option of the Holder Upon a Fundamental Change and Purchase of Securities at the Option of the Holder.

(a) Notice of Purchase Date or Fundamental Change. The Company shall send notices (each, a “Company Notice”) to the Holders, beneficial owners of the Securities as required by applicable law, the Trustee and the Paying Agent, not less than 20 Business Days prior to each Purchase Date, or on or before the 20^th calendar day after the occurrence of the Fundamental Change, as the case may be (each such date of delivery, a “Company Notice Date”). Each Company Notice shall include a form of Purchase Notice or Fundamental Change Purchase Notice, as the case may be, to be completed by a Holder and shall state:

(i) the applicable Purchase Price or Fundamental Change Purchase Price, as the case may be;

(ii) if conversion is permitted under Section 9.01(a)(iv), the Conversion Rate at the time of such notice and any expected adjustments to the Conversion Rate;

(iii) the applicable Purchase Date or Fundamental Change Purchase Date, as the case may be, and the last date on which a Holder may exercise its repurchase rights under Section 8.01 or Section 8.02, as applicable;

(iv) the name and address of the Paying Agent and the Conversion Agent;

(v) that Securities must be surrendered to the Paying Agent to collect payment of the Purchase Price or the Fundamental Change Purchase Price, as the case may be;

(vi) that Securities as to which a Purchase Notice or a Fundamental Change Purchase Notice has been delivered may be surrendered for conversion only if the applicable Purchase Notice or Fundamental Change Purchase Notice, as the case may be, has been withdrawn in accordance with the terms of this First Supplemental Indenture;

(vii) that the Purchase Price or the Fundamental Change Purchase Price for any Securities as to which a Purchase Notice or a Fundamental Change Purchase Notice, as applicable, has been given and not withdrawn shall be paid by the Paying Agent promptly following the later of the Purchase Date or the Fundamental Change Purchase Date, as applicable, or the time of book-entry transfer or delivery of such Securities;

(viii) the procedures the Holder must follow under Sections 8.01 or 8.02, as applicable, and Section 8.03;

(ix) that, unless the Company defaults in making payment of such Purchase Price or Fundamental Change Purchase Price on Securities covered by any Purchase Notice or Fundamental Change Purchase Notice, as applicable, interest (including Contingent Interest and Additional Interest, if any) will cease to accrue on and after the Purchase Date or Fundamental Change Purchase Date, as applicable;

(x) the CUSIP or ISIN number of the Securities;

(xi) the procedures for withdrawing a Purchase Notice or a Fundamental Change Purchase Notice, as the case may be; and

(xii) in the case of a Company Notice pursuant to Section 8.01, the events causing a Fundamental Change and the effective date of the Fundamental Change.

Simultaneously with providing such Company Notice, the Company will publish a notice containing the information in such Company Notice in a newspaper of general circulation in The City of New York or publish such information on its then existing website or through such other public medium as it may use at the time.

At the Company’s request, made at least five Business Days prior to the date upon which such notice is to be mailed, and at the Company’s expense, the Paying Agent shall give the Company Notice in the Company’s name; provided, however, that, in all cases, the text of the Company Notice shall be prepared by the Company.

(b) Adequacy and Effect of Purchase Notice or Fundamental Change Purchase Notice; Withdrawal; Effect of Event of Default. The Company shall reasonably determine whether the Purchase Notice, Fundamental Change Purchase Notice or written notice of withdrawal delivered by the relevant Holders satisfies the conditions set out in Section 8.01(b), Section 8.02(a) and Section 8.03 for such notices. The Company’s determination under this Section 8.03(b) will be binding and conclusive, absent manifest error.

Upon receipt by the Company of the Purchase Notice or Fundamental Change Purchase Notice specified in Section 8.02(a) or Section 8.01(b), as applicable, the Holder of the Securities in respect of which such Purchase Notice

or Fundamental Change Purchase Notice, as the case may be, was given shall (unless such Purchase Notice or Fundamental Change Purchase Notice is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Purchase Price or Fundamental Change Purchase Price with respect to such Securities. Such Purchase Price or Fundamental Change Purchase Price shall be paid by the Paying Agent to such Holder promptly following the later of (x) the Purchase Date or the Fundamental Change Purchase Date, as the case may be, with respect to such Securities (provided the conditions in this Article 8 have been satisfied) and (y) the time of delivery or book-entry transfer of such Securities to the Paying Agent by the Holder thereof in the manner required by Section 8.02 or Section 8.01, as applicable. Securities in respect of which a Purchase Notice or Fundamental Change Purchase Notice, as the case may be, has been given by the Holder thereof may not be converted on or after the date of the delivery of such Purchase Notice or Fundamental Change Purchase Notice, as the case may be, unless such Purchase Notice or Fundamental Change Purchase Notice, as the case may be, has first been validly withdrawn as specified in the following two paragraphs.

A Purchase Notice or Fundamental Change Purchase Notice, as the case may be, may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent at any time prior to 5:00 p.m., New York City time, on the Business Day prior to the Purchase Date or the Fundamental Change Purchase Date, as the case may be, to which it relates, specifying:

(i) the principal amount of the Securities with respect to which such notice of withdrawal is being submitted;

(ii) if certificated, the certificate number of the Securities in respect of which such notice of withdrawal is being submitted, or, if not certificated, the written notice of withdrawal must comply with appropriate DTC procedures; and

(iii) the principal amount, if any, of such Securities which remains subject to the original Purchase Notice or Fundamental Change Purchase Notice, as the case may be, and which has been or shall be delivered for purchase by the Company.

There shall be no purchase of any Securities pursuant to Section 8.01 or Section 8.02 if an Event of Default has occurred and is continuing (other than a default that is cured by the payment of the Purchase Price or Fundamental Change Purchase Price, as the case may be). The Paying Agent shall promptly return to the respective Holders thereof any Securities (x) with respect to which a Purchase Notice or Fundamental Change Purchase Notice, as the case may be, has been withdrawn in compliance with this First Supplemental Indenture, or (y) held by it during the continuance of an Event of Default (other than a default that is cured

by the payment of the Purchase Price or Fundamental Change Purchase Price, as the case may be) in which case, upon such return, the Purchase Notice or Fundamental Change Purchase Notice with respect thereto shall be deemed to have been withdrawn.

(c) Securities Purchased in Part. Any Securities that are to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder’s attorney duly authorized in writing) and the Company shall execute, the Guarantors shall endorse and the Trustee or the Authenticating Agent shall authenticate and deliver to the Holder of such Securities, without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Securities so surrendered which is not purchased.

(d) Covenant to Comply with Securities Laws Upon Purchase of Securities. In connection with any offer to purchase Securities under Section 8.02 or Section 8.01, the Company shall, to the extent applicable, (a) comply with Rules 13e-4 and 14e-1 (and any successor provisions thereto) under the Exchange Act, if applicable; (b) file the related Schedule TO (or any successor schedule, form or report) under the Exchange Act, if applicable; and (c) otherwise comply with all applicable federal and state securities laws so as to permit the rights and obligations under Section 8.02 or Section 8.01 to be exercised in the time and in the manner specified in Section 8.02 or Section 8.01. To the extent any other provision of this First Supplemental Indenture conflicts with any of the foregoing, the foregoing shall govern.

(e) Officer’s Certificate. At least five Business Days before the Company Notice Date, the Company shall deliver an Officer’s Certificate to the Trustee specifying whether the Company desires the Trustee to give the Company Notice required by Section 8.03(a) herein.

ARTICLE 9

CONVERSION

Section 9.01. Conversion of Securities. (a) Right to Convert. Subject to the procedures for conversion set forth in this Article 9, a Holder may convert its Securities, in whole or in part (provided that the total principal amount of Securities converted are in integral multiples of $1,000), prior to January 15, 2028 at a rate (the “Conversion Rate”) of 43.9560 shares of Common Stock (subject to adjustment by the Company as set forth herein) per $1,000 principal amount of Securities when one or more of the conditions specified below are met and during

the related specified period, subject to the limitation in clause 9.01(a)(iii). On and after January 15, 2028, as set forth under clause (b) below, a Holder may convert its Securities until the close of business on the second Business Day immediately preceding Stated Maturity regardless of the conditions specified below.

(i) Conversion Upon Satisfaction of Sale Price Condition. A Holder may surrender all or a portion of its Securities for conversion during any fiscal quarter (and only during such fiscal quarter) commencing after June 30, 2008 if the Last Reported Sale Price for the Common Stock for at least 20 Trading Days during the period of 30 consecutive Trading Days ending on the last Trading Day of the immediately preceding fiscal quarter is greater than or equal to 120% of the Conversion Price in effect on such last Trading Day.

(ii) Conversion Upon Satisfaction of Trading Price Condition. A Holder may surrender its Securities for conversion during the five Business Day period after any 10 consecutive Trading Day period (the “Measurement Period”) in which the Trading Price per $1,000 principal amount of Securities, as determined following a request by a Holder in accordance with the procedures set forth in this Section 9.01(a)(ii), for each Trading Day of the Measurement Period was less than 95% of the product of the Last Reported Sale Price of the Common Stock and the Conversion Rate for such Trading Day. In connection with any conversion in accordance with this Section 9.01(a)(ii), the Bid Solicitation Agent shall have no obligation to determine the Trading Price of the Securities unless requested by the Company; and the Company shall have no obligation to make such request unless a Holder provides the Company with reasonable evidence that the Trading Price per $1,000 principal amount of Securities would be less than 95% of the product of the Last Reported Sale Price of the Common Stock and the Conversion Rate. Promptly after receiving such evidence, the Company shall instruct the Bid Solicitation Agent to determine the Trading Price of the Securities beginning on the next Trading Day and on each successive Trading Day until the Trading Price per $1,000 principal amount of Securities for any Trading Day is greater than or equal to 95% of the product of the Last Reported Sale Price of the Common Stock and the Conversion Rate.

(iii) Conversion Upon Notice of Redemption. If the Company calls any or all of the Securities for redemption, a Holder may surrender for conversion the Securities called for redemption at any time prior to the close of business on the third Scheduled Trading Day prior to the related Redemption Date, even if the Securities are not otherwise convertible at such time, after which time a Holder’s right to convert will expire unless the Company defaults in the payment of the Redemption Price.

(iv) Conversion Upon Specified Corporate Transactions.

(A) If the Company elects to (1) distribute to all holders of Common Stock any rights or warrants entitling them to purchase, for a period expiring within 45 days after the Ex-Dividend Date of the distribution, shares of Common Stock at a price per share less than the average of the Last Reported Sale Price of Common Stock for the 10 consecutive Trading Day period ending on the Trading Day immediately preceding the declaration date for such distribution, or (2) distribute to all holders of Common Stock assets, debt securities or rights to purchase securities of the Company, which distribution has a per share Fair Market Value, as determined by the Company’s Board of Directors, exceeding 15% of the Last Reported Sale Price on the Trading Day immediately preceding the declaration date for such distribution, then, in each case, the Company must notify the Holders of such distribution and of their rights under this clause (A), in the manner provided in Section 1.7 of the Original Indenture, at least 25 Scheduled Trading Days prior to the Ex-Dividend Date for such distribution. Once the Company has given such notice, Holders may surrender Securities for conversion at any time until the earlier of 5:00 p.m., New York City time, on the Business Day immediately prior to such Ex-Dividend Date or the Company’s announcement that such distribution will not take place even if the Securities are not otherwise convertible at such time.

(B) If the Company is party to a transaction described in clause (2) of the definition of Fundamental Change (without giving effect to the proviso set forth in the definition thereof relating to Publicly Traded Securities), the Company must notify Holders of such an event and of their rights under this clause (B), in the manner provided in Section 1.7 of the Original Indenture, at least 25 Scheduled Trading Days prior to the anticipated effective date for such transaction. Once the Company has given such notice, Holders may surrender Securities for conversion at any time until seven Scheduled Trading Days after the actual effective date of such transaction or, if later, the related Fundamental Change Purchase Date.

(C) A Holder may surrender all or a portion of such Holder’s Securities for conversion, if a Fundamental Change of the type described in clause (1) or (3) in the definition thereof occurs. In such event, Holders may surrender Securities for conversion at any time beginning on the actual Effective Date of

such Fundamental Change until and including the date which is seven Scheduled Trading Days after the actual effective date of such transaction or, if later, until the related Fundamental Change Purchase Date.

A Holder may convert a portion of the principal amount of Securities if the portion is $1,000 or a multiple of $1,000. The number of shares of Common Stock issuable or the combination of cash payable and the number of shares of Common Stock issuable, if any, upon conversion of a Security shall be determined as set forth in Section 9.01(d).

(b) Conversion During Specified Period Immediately Prior to Stated Maturity. Notwithstanding anything herein to the contrary, a Holder may surrender its Securities for conversion beginning on January 15, 2028, until the close of business on the second Business Day immediately preceding the Stated Maturity.

(i) In respect of a Definitive Security, a Holder must (A) complete and manually sign the conversion notice on the back of the Security, or a facsimile of such conversion notice; (B) deliver such conversion notice, which is irrevocable, and the Security to the Conversion Agent; (C) to the extent any shares of Common Stock issuable upon conversion are to be issued in a name other than the Holder’s, furnish appropriate endorsements and transfer documents as may be required by the Conversion Agent; (D) if required pursuant to Section 9.01(f) below, pay all transfer or similar taxes; and (E) if required pursuant to Section 2.01(d) above, pay funds equal to interest payable on the next Interest Payment Date to which such Holder is not entitled.

(ii) In respect of a beneficial interest in a Global Security, a Beneficial Owner must comply with DTC’s procedures for converting a beneficial interest in a Global Security and, if required pursuant to Section 2.01(d) above, pay funds equal to interest payable on the next Interest Payment Date to which such Beneficial Owner is not entitled, and if required, taxes or duties, if any.

The date a Holder satisfies the foregoing requirements is the “Conversion Date” hereunder.

If a Holder converts more than one Security at the same time, the number of shares of Common Stock issuable or the combination of the cash payable and number of shares of Common Stock issuable upon the conversion, if any, shall be based on the total principal amount of the Securities converted.

Upon surrender of a Security that is converted in part, the Company shall execute, the Guarantors shall endorse and the Trustee or the Authenticating Agent shall authenticate and deliver to the Holder, a new Security in an authorized denomination equal in principal amount to the unconverted portion of the Security surrendered.

Delivery of shares of Common Stock will be accomplished by delivery to the Conversion Agent of certificates for the relevant number of shares of Common Stock, other than in the case of Holders of Global Securities in book-entry form with DTC, in which case shares of Common Stock shall be delivered in accordance with DTC customary practices.

(d) Settlement Upon Conversion. In the event that the Company receives a Holder’s notice of conversion upon satisfaction of one or more of the conditions to conversion described in this Section 9.01, the Company will notify the relevant Holders within two Scheduled Trading Days following the Conversion Date whether the Company will satisfy its obligation to convert the Securities through delivery of (x) shares of Common Stock pursuant to clause (ii) below (plus cash in lieu of fractional shares) or (y) a combination of cash and shares of Common Stock, if any, (such method of settlement, a “Net-Share Settlement”) pursuant to clause (i) below; provided that the Company may not elect to satisfy such obligation pursuant to clause (ii) below if the Company has made the election to waive such right to do so as set forth in the immediately succeeding sentence or if the Conversion Period for the applicable Securities would not commence on or after the Scheduled Trading Day after the Company’s notice of settlement. At any time on or before the third Scheduled Trading Day prior to the applicable Conversion Period for a Net-Share Settlement, the Company may irrevocably waive, in its sole discretion without the consent of the Holders, by notice to the Trustee and to the Holders, its right to satisfy its Conversion Obligation in shares of its Common Stock pursuant to clause (ii) below (plus cash in lieu of any fractional shares). Notwithstanding the foregoing, if the Company elects to redeem the Securities, it will, in its notice of redemption, elect whether it will settle any conversions of Securities called for redemption pursuant to clause (i) or (ii) below (unless it has irrevocably elected to waive its right to satisfy its Conversion Obligation pursuant to clause (ii) below), which election shall apply to all Securities converted following the Company’s notice of redemption.

(i) If the Company chooses or has to satisfy its obligation to convert the Securities (the ‘‘Conversion Obligation’’) by Net-Share Settlement (or if the Company has irrevocably elected to waive its right to satisfy its Conversion Obligation pursuant to clause (ii) below), upon

conversion the Company will deliver to converting Holders cash and Common Stock, if any, in respect of each $1,000 principal amount of Securities being converted, equal to the aggregate Daily Settlement Amounts for each of the 20 VWAP Trading Days during the related Conversion Period; provided that the Company shall deliver cash in lieu of any fractional shares as described below in Section 9.01(e). The Daily Settlement Amounts shall be determined by the Company promptly following the last VWAP Trading Day of the Conversion Period.

The amount of cash and Common Stock, if any, delivered in respect of any Security converted pursuant to this clause (i) will be delivered to converting Holders as soon as practicable following the last VWAP Trading Day of the applicable Conversion Period.

(ii) If the Company elects to satisfy all of its Conversion Obligation with respect to Securities to be converted in shares of Common Stock, the Company will deliver to any converting Holder, for each $1,000 principal amount of the Securities, a number of shares of Common Stock equal to the Conversion Rate for such Securities, plus cash in lieu of any fractional shares determined as described below in Section 9.01(e).

The shares of Common Stock in respect of any Security converted (and cash in lieu of any fractional shares) pursuant to this clause (ii) will be delivered through the Conversion Agent or DTC as soon as practicable following the applicable Conversion Date for such Security.

(iii) With respect to a conversion of a Security pursuant to clause (ii) above, at and after the close of business on the Conversion Date, the Person in whose name any certificate representing any shares of Common Stock issuable upon such conversion is registered shall be treated as a stockholder of record of the Company to the extent permitted by law. With respect to a conversion of a Security pursuant to clause (i) above by Net Share Settlement, on each VWAP Trading Day during the related Conversion Period, the Person in whose name any certificate representing any shares of Common Stock constituting the Daily Settlement Amount for such VWAP Trading Day is registered shall be treated as a stockholder of record of the Company of such number of shares to the extent permitted by law on and after the close of business on such VWAP Trading Day. On and after the Conversion Date with respect to a conversion of a Security pursuant hereto, all rights of the Holder of such Security shall terminate, other than the right to receive the consideration deliverable upon conversion of such Security as provided herein. A Holder of a Security is not entitled, as such, to any rights of a holder of Common Stock until, if such Holder converts such Security and is entitled pursuant hereto to receive shares of Common Stock in respect

of such conversion, the close of business on the Conversion Date or respective VWAP Trading Days, as the case may be, with respect to such conversion.

(e) Cash Payments in Lieu of Fractional Shares. The Company shall not issue a fractional share of Common Stock upon conversion of Securities. Instead the Company shall deliver cash for the current market value of the fractional share. The current market value of a fractional share shall be determined to the nearest 1/10,000th of a share by multiplying the Last Reported Sale Price of the Common Stock on the Conversion Date (or, in the case of Net-Share Settlement, the Daily VWAP of the Common Stock on the last VWAP Trading Day of the relevant Conversion Period) by the fractional amount and rounding the product to the nearest whole cent.

(f) Taxes on Conversion. If a Holder converts Securities, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon the conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder’s name. The Conversion Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder’s name until the Conversion Agent receives a sum sufficient to pay any tax which shall be due because the shares are to be issued in a name other than the Holder’s name, but the Conversion Agent shall have no duty to determine if any such tax is due. Nothing herein shall preclude any withholding of tax required by law.

(g) Certain Covenants of the Company.

(i) The Company shall, prior to issuance of any Securities hereunder, and from time to time as may be necessary, reserve out of its authorized but unissued Common Stock or shares of Common Stock held in treasury, a sufficient number of shares of Common Stock, free of preemptive rights, to permit the conversion of the Securities.

(ii) All shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares or treasury shares, shall be duly and validly issued and fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim.

(iii) The Company shall endeavor promptly to comply with all federal and state securities laws regulating the issuance and delivery of shares of Common Stock upon the conversion of Securities, if any, and shall cause to have listed or quoted all such shares of Common Stock on each U.S. national securities exchange or over-the-counter or other domestic market on which the Common Stock is then listed or quoted.

(iv) Before taking any action which would cause an adjustment increasing the Conversion Rate to an amount that would cause the Conversion Price to be reduced below the then par value per share of the Common Stock, if any, of the shares of Common Stock issuable upon conversion of the Securities, the Company will take all corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue shares of such Common Stock at such adjusted Conversion Rate.

Section 9.02. Adjustments to Conversion Rate. The Conversion Rate shall be adjusted by the Company as follows:

(a) If the Company issues shares of Common Stock as a dividend or distribution on shares of the Common Stock, or effects a share split or share combination, the Conversion Rate will be adjusted based on the following formula:


where,

CR₀	=	the Conversion Rate in effect immediately prior to the Ex-Dividend Date for such dividend or distribution, or the effective date of such share split or share combination, as the case may be;

CR’	=	the new Conversion Rate in effect immediately after the Ex-Dividend Date for such dividend or distribution, or the effective date of such share split or share combination, as the case may be;

OS₀	=	the number of shares of Common Stock outstanding immediately prior to the Ex-Dividend Date for such dividend or distribution, or the effective date of such share split or share combination, as the case may be; and

OS’	=	the number of shares of Common Stock outstanding immediately after, and solely as a result of, such event.

Such adjustment shall become effective immediately after (i) the Ex-Dividend Date for such dividend or distribution or (ii) the date on which such split or combination becomes effective, as applicable. If any dividend or distribution of the type described in this clause Section 9.02(a) is declared but not so paid or made, the new Conversion Rate shall again be adjusted to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

(b) If the Company distributes to all holders of its Common Stock any rights or warrants entitling them to purchase, for a period of not more than 45 days after the Ex-Dividend Date for the distribution, shares of Common Stock at a price per share less than the average of the Last Reported Sale Prices of the Common Stock for the 10 consecutive Trading Day period ending on the Trading Day immediately preceding the declaration date for such distribution, the Conversion Rate will be adjusted based on the following formula:


where,

CR₀	=	the Conversion Rate in effect immediately prior to the Ex-Dividend Date for such distribution;

CR’	=	the new Conversion Rate in effect immediately after the Ex-Dividend Date for such distribution;

OS₀	=	the number of shares of Common Stock outstanding immediately prior to the Ex-Dividend Date for such distribution;

X	=	the total number of shares of Common Stock issuable pursuant to such rights or warrants; and

Y	=	the number of shares of Common Stock equal to the aggregate price payable to exercise such rights or warrants divided by the average of the Last Reported Sale Prices of the Common Stock over the 10 consecutive Trading Day period ending on the Trading Day immediately preceding the Ex-Dividend Date for such distribution.

For purposes of this clause Section 9.02(b), in determining whether any rights or warrants entitle the Holders to subscribe for or purchase shares of Common Stock at less than the average of the applicable Last Reported Sale Prices, and in determining the aggregate exercise or conversion price payable for such shares of Common Stock, there shall be taken into account any consideration received by the Company for such rights or warrants and any amount payable on exercise or conversion thereof, with the value of such consideration, if other than cash, to be determined by the Board of Directors. If any right or warrant described in this clause Section 9.02(b) is not exercised or converted prior to the expiration of the exercisability or convertibility thereof, the new Conversion Rate shall be readjusted to the Conversion Rate that would then be in effect if such right or warrant had not been so issued. Any adjustment made pursuant to this clause Section 9.02(b) shall become effective immediately after the Ex-Dividend Date for the applicable distribution.

(c) If the Company distributes shares of Capital Stock, evidences of its indebtedness or other assets or property of the Company to all holders of the Common Stock, excluding:

(i) dividends or distributions as to which an adjustment applies under clause (a) or (b) above;

(ii) dividends or distributions paid exclusively in cash; and

(iii) Spin-Offs to which the provisions set forth below in this clause (c) shall apply;

then the Conversion Rate will be adjusted based on the following formula:


where,

CR₀	=	the Conversion Rate in effect immediately prior to the Ex-Dividend Date for such distribution;

CR’	=	the new Conversion Rate in effect immediately after the Ex-Dividend Date for such distribution;

SP₀	=	the average of the Last Reported Sale Prices of the Common Stock over the 10 consecutive Trading Day period ending on the Trading Day immediately preceding the Ex-Dividend Date for such distribution; and

FMV	=	the Fair Market Value (as determined by the Board of Directors) of the shares of Capital Stock, evidences of indebtedness, assets or property distributed with respect to each outstanding share of Common Stock on the Ex-Dividend Date for such distribution.

Such adjustment shall become effective immediately after the Ex-Dividend Date for the applicable distribution.

With respect to an adjustment pursuant to this clause (c) where there has been a payment of a dividend or other distribution on the Common Stock of shares of Capital Stock of any class or series, or similar equity interest, of or relating to a Subsidiary or other business unit (a “Spin-Off”), the Conversion Rate in effect immediately before 5:00 p.m., New York City time, on the tenth Trading Day immediately following, and including, the effective date of the Spin-Off will be increased based on the following formula:


where,

CR₀	=	the Conversion Rate in effect immediately prior to the tenth Trading Day immediately following, and including, the effective date of the Spin-Off;

CR’	=	the new Conversion Rate in effect immediately after the tenth Trading Day immediately following, and including, the effective date of the Spin-Off;

FMV₀	=	the average of the Last Reported Sale Prices of the Capital Stock or similar equity interest distributed to holders of Common Stock applicable to one share of Common Stock over the first 10 consecutive Trading Day period immediately following, and including, the effective date of the Spin-Off; and

MP₀	=	the average of the Last Reported Sale Prices of Common Stock over the first 10 consecutive Trading Day period immediately following, and including, the effective date of the Spin-Off.

Such adjustment shall occur immediately after the tenth Trading Day immediately following, and including, the effective date of the Spin-Off; provided that in respect of any conversion during the ten Trading Days following the effective date of any Spin-Off, references within the portion of this clause (c) related to “Spin-Offs” to 10 Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed between the effective date of such Spin-Off and the relevant Conversion Date.

If any such dividend or distribution described in this clause (c) is declared but not paid or made, the new Conversion Rate shall be readjusted to be the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

(d) If any cash dividend or distribution is made to all holders of Common Stock, the Conversion Rate will be adjusted based on the following formula:


where,

CR₀	=	the Conversion Rate in effect immediately prior to the Ex-Dividend Date for such distribution;

CR’	=	the new Conversion Rate in effect immediately after the Ex-Dividend Date for such distribution;

SP₀	=	the Last Reported Sale Price of the Common Stock on the Trading Day immediately preceding the Ex-Dividend Date for such distribution; and

C	=	the amount in cash per share of Common Stock of the Company distributes to holders of Common Stock.

An adjustment to the Conversion Rate made pursuant to this clause (d) shall become effective immediately after the Ex-Dividend Date for the applicable dividend or distribution. If any dividend or distribution described in this clause (d) is declared but not so paid or made, the new Conversion Rate shall be readjusted to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

(e) If the Company or any of its Subsidiaries makes a payment in respect of a tender or exchange offer for Common Stock, to the extent that the cash and value of any other consideration included in the payment per share of Common Stock exceeds the Last Reported Sale Price of the Common Stock on the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer, the Conversion Rate will be increased based on the following formula:


where,

CR₀	=	the Conversion Rate in effect at the close of business on the last Trading Day of the 10 consecutive Trading Day period commencing on the Trading Day next succeeding the date such tender or exchange offer expires;

CR’	=	the new Conversion Rate in effect immediately following the last Trading Day of the 10 consecutive Trading Day period commencing on the Trading Day next succeeding the date such tender or exchange offer expires;


AC	=	the aggregate value of all cash and any other consideration (as determined by the Board of Directors) paid or payable for shares purchased in such tender or exchange offer;

OS₀	=	the number of shares of Common Stock outstanding immediately prior to the expiration of such tender or exchange offer;

OS’	=	the number of shares of Common Stock outstanding immediately after the expiration of such tender or exchange offer (after giving effect to the purchase or exchange of shares pursuant to such tender or exchange offer); and

SP’	=	the average of the Last Reported Sale Prices of Common Stock over the 10 consecutive Trading Day period commencing on the Trading Day next succeeding the date such tender or exchange offer expires.

The adjustment to the Conversion Rate under this clause (e) shall become effective immediately following the tenth Trading Day next succeeding the date such tender or exchange offer expires; provided that, in respect of any conversion during the ten Trading Days following the date that any tender or exchange offer expires, references within this clause (e) to 10 Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed between the date such tender or exchange offer expires and the relevant Conversion Date. If the Company or one of its Subsidiaries is obligated to purchase Common Stock pursuant to any such tender or exchange offer but are permanently prevented by applicable law from effecting any such purchase or all such purchases are rescinded, the new Conversion Rate shall be readjusted to be the Conversion Rate that would be in effect if such tender or exchange offer had not been made.

(f) Notwithstanding the foregoing provisions of this Section 9.02, no adjustment will be made thereunder, nor shall an adjustment be made to the ability of a Holder to convert, for any distribution described therein if the Holder will otherwise participate in the distribution on the same terms as holders of Common Stock as if such Holder held a number of shares of Common Stock equal to the applicable Conversion Rate, multiplied by the principal amount (expressed in thousands) of the Securities held by such holder, without having to convert its Securities. Further, if the application of the foregoing formulas in this Section 9.02 would result in a decrease in the Conversion Rate, no adjustment to the Conversion Rate will be made (except on account of share combinations).

(g) No adjustment to the Conversion Rate will be made unless as specifically set forth in this Section 9.02 and Section 9.03.

(h) Without limiting the foregoing, no adjustment to the Conversion Rate need be made:

(i) upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of additional optional amounts in shares of Common Stock under any plan;

(ii) upon the issuance of any shares of Common Stock or options or rights to purchase shares of Common Stock pursuant to any present or future employee, director or consultant benefit plan or program or employee stock purchase plan of or assumed by the Company or any of its Subsidiaries;

(iii) upon the issuance of any shares of Common Stock pursuant to any option, warrant, right, or exercisable, exchangeable or convertible security not described in clause (ii) above and outstanding as of the Issue Date;

(iv) for a change in the par value of the Common Stock; or

(v) for accrued and unpaid Interest (including Contingent Interest and Additional Interest, if any) on the Securities.

(i) No adjustment to the Conversion Rate will be required unless the adjustment would require an increase or decrease of at least 1% of the Conversion Rate. If the adjustment is not made because the adjustment does not change the Conversion Rate by at least 1%, then the adjustment that is not made will be carried forward and taken into account in any future adjustment. All required calculations will be made to the nearest cent or 1/1000th of a share, as the case may be. Notwithstanding the foregoing, if the Securities are called for redemption or, upon a Fundamental Change, all adjustments not previously made will be made for all the Securities to be converted after the Company’s notice of redemption to the applicable Redemption Date or after the Company’s notice of a Fundamental Change, as applicable.

(j) Whenever the Conversion Rate is adjusted as herein provided, the Company shall promptly file with the Trustee and any Conversion Agent other than the Trustee an Officer’s Certificate setting forth the Conversion Rate after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Unless and until a Responsible Officer of the Trustee shall have received such Officer’s Certificate, the Trustee shall not be deemed to have knowledge of any adjustment of the Conversion Rate and may assume that the last Conversion Rate of which it has knowledge is still in effect. Promptly after delivery of such certificate, the Company shall prepare a notice of such adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the date on which each adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Rate to the Holder of each Security at such

Holder’s last address appearing on the Securities Register provided for in Section 2.04 of this First Supplemental Indenture within 20 days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of any such adjustment.

(k) For purposes of this Section 9.02, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. If the Company pays any dividend or makes any distribution on, or issues any rights, options or warrants in respect of, shares of Common Stock held in treasury by the Company, the Company shall not issue, transfer or convey such shares of Common Stock in a manner that would have the effect of circumventing the provisions of this Section 9.02.

(l) If Net-Share Settlement applies and any provision of this Article 9 requires a calculation of an average of the Daily VWAP over a span of multiple days, the Company will make appropriate adjustments to the Daily Settlement Amount (determined in good faith by the Board of Directors) to account for any adjustment to the Conversion Rate that becomes effective, or any event requiring an adjustment to the Conversion Rate where the Ex-Dividend Date of the event occurs, at any time during the period from which such calculation is to be calculated; provided that such adjustments shall only be made to the Daily Settlement Amounts relating to days prior to the date that the adjustment to the Conversion Rate becomes effective.

Section 9.03. Adjustment to Common Stock Delivered Upon Certain Fundamental Changes. (a) If a Holder elects to convert Securities pursuant to Section 9.01(a)(iv) above in connection with a Fundamental Change on or following the effective date of the transaction and the transaction has an effective date occurring on or prior to February 15, 2013, subject to Section 9.04 below, the Conversion Rate for such converted Securities shall be increased by an additional number of shares of Common Stock (the “Additional Shares”) as described below. Any conversion will be deemed to have occurred in connection with such Fundamental Change if such Securities are surrendered for conversion on or following the effective date of a Fundamental Change and prior to the expiration of the time during which Securities may be converted in respect of such Fundamental Change as specified in Section 9.01(a)(iv) and notwithstanding the fact that a Security may then be convertible because another condition to conversion also has been satisfied.

(b) The number of Additional Shares will be determined by reference to the table attached as Schedule A hereto, based on the actual effective date on which the Fundamental Change occurs or becomes effective (the “Effective Date”) and the Stock Price paid per share of Common Stock with respect to such Fundamental Change; provided that if the Stock Price is between two Stock Price

amounts set forth in such table or the Effective Date is between two Effective Dates in the table, the number of Additional Shares will be determined by a straight-line interpolation between the number of Additional Shares set forth for the higher and lower Stock Price amounts and the two dates, as applicable, based on a 365-day year; provided further that if the Stock Price is greater than $100.00 per share (subject to adjustment as set forth in clause (c) below) or less than $17.50 per share (subject to adjustment as set forth in clause (c) below), then no Additional Shares will be added to the Conversion Rate. Notwithstanding the foregoing, the Conversion Rate shall not exceed 57.1429 per $1,000 principal amount of Securities on account of adjustments pursuant to this Section 9.03, subject to adjustments set out in Section 9.02(a) through (e).

(c) The Stock Prices set forth in the first row of the table in Schedule A hereto will be adjusted as of any date on which the Conversion Rate of the Securities is otherwise adjusted pursuant to Section 9.02. The adjusted Stock Prices will equal the Stock Prices applicable immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the Conversion Rate immediately prior to such adjustment and the denominator of which is the Conversion Rate as so adjusted. The number of Additional Shares set forth in such table will be adjusted in the same manner as the Conversion Rate as set forth in Section 9.02.

Section 9.04. Effect of Recapitalizations, Reclassifications, and Changes of Common Stock. (a) If any of the following events occur: (i) any recapitalization, reclassification or change of the outstanding shares of Common Stock (other than a subdivision or combination to which Section 9.02(a) applies), (ii) any consolidation, merger or combination of the Company with another Person, (iii) any sale or conveyance to another Person of all or substantially all of the property and assets of the Company and its Subsidiaries, or (iv) any statutory share exchange, in each case as a result of which Common Stock would be converted into, or exchanged for, stock, other securities, other property or assets (including cash or any combination thereof) (any such event or transaction, a “Reorganization Event”), then, following the effective time of the Reorganization Event, the right to receive shares of Common Stock upon conversion of Securities, if any, will be changed into a right to receive the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) (the “Reference Property”) that a Holder would have been entitled to receive upon such Reorganization Event in respect of Common Stock, as provided below. If the Reorganization Event causes Common Stock to be converted into the right to receive more than a single type of consideration (determined based in part upon any form of stockholder election), the Reference Property will be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make such an election. The Company will notify Holders of the weighted average as soon as practicable after such determination is made. Upon

such Reorganization Event, the Company or any Successor Company will enter into a supplemental indenture consistent with the foregoing. Such supplemental indenture shall provide for provisions and adjustments which shall be as nearly equivalent as may be practicable to the provisions and adjustments provided for in this Article 9, Article 7 and Article 8 of this First Supplemental Indenture, Article 9 of the Original Indenture and the definition of Fundamental Change, as appropriate, as determined in good faith by the Company (which determination shall be conclusive and binding), to make such provisions apply to such other Person if different from the original issuer of the Securities.

(b) Following the effective time of any such Reorganization Event, settlement of Securities converted shall be in units of Reference Property or cash and units of Reference Property, if applicable, determined in accordance with Section 9.01(d)(i) and Section 9.01(d)(ii) above. The Conversion Rate will relate to units of Reference Property (a “unit” of Reference Property being the kind and amount of reference property that a holder of one share of Common Stock would have received in such transaction); and the Daily VWAP will be determined based on the Daily VWAP of one unit of Reference Property.

(c) The Company shall cause notice of the execution of any supplemental indenture required by this Section 9.04 to be mailed to each Holder, at its address appearing on the Securities Register provided for in Section 2.04 of this First Supplemental Indenture, within 20 calendar days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture.

(d) The above provisions of this Section 9.04 shall similarly apply to successive Reorganization Events.

(e) If this Section 9.04 applies to any event or occurrence, Section 9.02 shall not apply in respect of such event or occurrence.

(f) The Company shall not become a party to any Reorganization Event unless its terms are consistent with the foregoing. None of the foregoing provisions shall affect the right of a Holder of Securities to convert the Securities as set forth in and subject to Section 9.01 prior to the effective time of such Reorganization Event.

Section 9.05. Responsibility of Trustee. The Trustee and any other Conversion Agent shall not at any time be under any duty or responsibility to the Company or any Holder of Securities to determine when the Securities become convertible, the Conversion Rate, or whether any facts exist which may require any adjustment of the Conversion Rate, or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed in making the same. The Trustee and any other Conversion Agent shall

not be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock, or of any securities or property, which may at any time be issued or delivered upon the conversion of any Security; and the Trustee and any other Conversion Agent make no representations with respect thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to issue, transfer or deliver any cash or shares of Common Stock or stock certificates or other securities or property upon the surrender of any Security for the purpose of conversion or to comply with any of the duties, responsibilities or covenants of the Company contained in this Article 9. Without limiting the generality of the foregoing, neither the Trustee nor any Conversion Agent shall be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture entered into pursuant to Section 9.04 relating either to the kind or amount of shares of stock or securities or property (including cash) receivable by Holders upon the conversion of their Securities after any Reorganization Event or to any adjustment to be made with respect thereto, but, subject to the provisions of Section 6.1 of the Original Indenture, may accept as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, an Officer’s Certificate with respect thereto.

Section 9.06. Stockholder Rights Plan. To the extent that the Company has a rights plan in effect upon conversion of the Securities into Common Stock, the Holder will receive upon conversion of the Securities in respect of which the Company has elected to deliver Common Stock, if applicable, the rights under the rights plan, unless prior to any conversion, the rights have separated from the Common Stock, in which case, and only in such case, the Conversion Rate will be adjusted at the time of separation as if the Company distributed to all holders of Common Stock shares of the Company’s Capital Stock, evidences of indebtedness or assets as described in Section 9.02(c) above, subject to readjustment in the event of the expiration, termination or redemption of such rights. In lieu of any such adjustment, the Company may amend such applicable stockholder rights agreement to provide that upon conversion of the Securities the Holders will receive, in addition to the Common Stock issuable upon such conversion, the rights which would have attached to such Common Stock if the rights had not become separated from the Common Stock under such applicable stockholder rights agreement.

Section 9.07. No Stockholder Rights. For the avoidance of doubt, Holders of Securities will not have any rights as holders of Common Stock (including voting rights and rights to receive any dividends or other distributions on the Common Stock) if and until the Securities are converted into shares of Common Stock.

Section 9.08. Withholding Taxes for Adjustments in Conversation Rate. If the Company pays withholding taxes on behalf of a Holder as a result of an

adjustment to the Conversion Rate, the Company may, at its option, set off such payments against payments of cash and shares of Common Stock on the Securities.

ARTICLE 10

GUARANTEE OF SECURITIES

Section 10.01. Securities Guarantee. The Securities shall be fully and unconditionally guaranteed by the Guarantors and the provisions of Article Fourteen of the Original Indenture shall apply to the Securities.

Section 10.02. Release of A Guarantor; Termination Of Securities Guarantee. All Subsidiaries that from time to time guarantee any of the Company’s indebtedness shall be Guarantors hereunder. A Guarantor shall be deemed released and relieved from all its obligations under its Securities Guarantee upon:

(a) a sale or other disposition (including by way of consolidation or merger) of such Guarantor or the sale or disposition of all or substantially all the assets of such Guarantor; or

(b) discharge of the Securities as provided in Article Four of the Original Indenture.

The Trustee shall deliver an appropriate instrument evidencing any such release upon receipt of a request by the Company accompanied by an Officer’s Certificate and Opinion of Counsel certifying as to the compliance with this Section 10.02.

Any Guarantor not released in accordance with this Section 10.02 remains liable for the full amount of principal of and interest on the Securities as provided in the Securities and Article 14 of the Original Indenture.

ARTICLE 11

MISCELLANEOUS

Section 11.01. Compliance with Trust Indenture Act. In addition to the Company’s reporting obligations set forth in Section 7.4 of the Original Indenture, the Company shall also comply with the provisions of Section 314(a) of the Trust Indenture Act.

Section 11.02. No Defeasance. The provisions of Article Thirteen of the Original Indenture shall not apply to any Securities issued under this First Supplemental Indenture.

Section 11.03. Communication by Holders with other Holders. Holders may communicate pursuant to Section 312(b) of the Trust Indenture Act with other Holders with respect to their rights under this First Supplemental Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of Section 312(c) of the Trust Indenture Act.

Section 11.04. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by, or a meeting of, Holders. The Registrar and the Paying Agent may make reasonable rules for their functions.

Section 11.05. Governing Law. THIS FIRST SUPPLEMENTAL INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

Section 11.06. No Recourse Against Others. An incorporator, director, officer, employee, partner or stockholder of the Company or any Guarantor, solely by reason of this status, shall not have any liability for any obligations of the Company or such Guarantor under the Securities, the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities.

Section 11.07. Successors. All agreements of the Company in this First Supplemental Indenture and the Securities shall bind its successors. All agreements of the Trustee in this First Supplemental Indenture shall bind its successors.

Section 11.08. Multiple Originals. The parties may sign any number of copies of this First Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this First Supplemental Indenture.

Section 11.09. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this First Supplemental Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

Section 11.10. Severability Clause. In case any provision in this First Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability.

Section 11.11. Calculations. Except as otherwise provided herein, the Company will be responsible for making all calculations called for under the Indenture and the Securities. The Company will make all such calculations in good faith and, absent manifest error, its calculations will be final and binding on Holders. The Company will provide a schedule of its calculations to each of the Trustee and the Conversion Agent, and each of the Trustee and Conversion Agent is entitled to rely conclusively upon the accuracy of the Company’s calculations without independent verification. The Trustee will deliver a copy of such schedule to any Holder upon the request of such Holder.

Section 11.12. Ratification and Incorporation of Original Indenture. As supplemented hereby, the Original Indenture is in all respects ratified and confirmed, and the Original Indenture and this First Supplemental Indenture shall be read, taken and construed as one and the same instrument.

[Remainder of the page intentionally left blank]

IN WITNESS WHEREOF, the parties have caused this First Supplemental Indenture to be duly executed as of the date first written above.


FLOTEK INDUSTRIES, INC.

By:		/s/ Jerry D. Dumas, Sr.
Name:		Jerry D. Dumas, Sr.
Title:		Chief Executive Officer, Chairman and President

AMERICAN STOCK TRANSFER & TRUST COMPANY, as Trustee

By:		/s/ Herbert J. Lemmer
Name:		Herbert J. Lemmer
Title:		Vice President

GUARANTORS:

CAVO DRILLING MOTORS, LTD. CO.

By:		/s/ Jerry D. Dumas, Sr.
Name:		Jerry D. Dumas, Sr.
Title:		Chief Executive Officer, Chairman and President

CESI CHEMICAL, INC.

By:		/s/ Jerry D. Dumas, Sr.
Name:		Jerry D. Dumas, Sr.
Title:		Chief Executive Officer and Chairman


FLOTEK PAYMASTER, INC.

By:		/s/ Jerry D. Dumas, Sr.
Name:		Jerry D. Dumas, Sr.
Title:		Chief Executive Officer, Chairman and President

MATERIAL TRANSLOGISTICS, INC.

By:		/s/ Jerry D. Dumas, Sr.
Name:		Jerry D. Dumas, Sr.
Title:		Chief Executive Officer, Chairman and President

PADKO INTERNATIONAL, INCORPORATED

By:		/s/ Jerry D. Dumas, Sr.
Name:		Jerry D. Dumas, Sr.
Title:		Chief Executive Officer, Chairman and President

PETROVALVE, INC.

By:		/s/ Jerry D. Dumas, Sr.
Name:		Jerry D. Dumas, Sr.
Title:		Chief Executive Officer, Chairman and President


SES HOLDINGS, INC.

By:		/s/ Jerry D. Dumas, Sr.
Name:		Jerry D. Dumas, Sr.
Title:		Chief Executive Officer, Chairman and President

SOONER ENERGY SERVICES, INC.

By:		/s/ Jerry D. Dumas, Sr.
Name:		Jerry D. Dumas, Sr.
Title:		Chief Executive Officer, Chairman and President

SPIDLE SALES & SERVICE, INC.

By:		/s/ Jerry D. Dumas, Sr.
Name:		Jerry D. Dumas, Sr.
Title:		Chief Executive Officer, Chairman and President

TELEDRIFT ACQUISITION, INC.

By:		/s/ Jerry D. Dumas, Sr.
Name:		Jerry D. Dumas, Sr.
Title:		Chief Executive Officer, Chairman and President


TRINITY TOOL, INC.

By:		/s/ Jerry D. Dumas, Sr.
Name:		Jerry D. Dumas, Sr.
Title:		Chief Executive Officer, Chairman and President

TURBECO, INC.

By:		/s/ Jerry D. Dumas, Sr.
Name:		Jerry D. Dumas, Sr.
Title:		Chief Executive Officer, Chairman and President

USA PETROVALVE, INC.

By:		/s/ Jerry D. Dumas, Sr.
Name:		Jerry D. Dumas, Sr.
Title:		Chief Executive Officer, Chairman and President

SCHEDULE A

The following table sets forth the number of Additional Shares to be added to the Conversion Rate per $1,000 principal amount of Securities pursuant to Section 9.03 of this First Supplemental Indenture:


	Stock Price
Effective Date	$17.50	$20.00	$22.75	$25.00	$30.00	$40.00	$50.00	$60.00	$75.00	$100.00
February 14, 2008	13.1869	10.5698	8.5977	7.4269	5.6569	3.7521	2.7296	2.0810	1.4519	0.8458
February 15, 2009	13.1869	9.6771	7.6896	6.5471	4.8875	3.2019	2.3312	1.7839	1.2521	0.7350
February 15, 2010	13.1869	8.6840	6.6375	5.5145	3.9799	2.5589	1.8665	1.4355	1.0153	0.6021
February 15, 2011	13.1869	7.6841	5.4597	4.3227	2.9220	1.8251	1.3383	1.0369	0.7407	0.4462
February 15, 2012	13.1869	6.6284	3.9676	2.7740	1.6009	0.9714	0.7235	0.5653	0.4078	0.2503
February 15, 2013	13.1869	6.0440	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000

Schedule A

EXHIBIT A

[FORM OF FACE OF SECURITY]

FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT AND THE ISSUE DATE OF THIS SECURITY IS FEBRUARY [ ], 2008. IN ADDITION, THIS SECURITY IS SUBJECT TO UNITED STATES FEDERAL INCOME TAX REGULATIONS GOVERNING CONTINGENT PAYMENT DEBT INSTRUMENTS. FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THE COMPARABLE YIELD OF THIS SECURITY IS 9.25%, COMPOUNDED SEMI-ANNUALLY (WHICH WILL BE TREATED AS THE YIELD TO MATURITY FOR UNITED STATES FEDERAL INCOME TAX PURPOSES).

THE COMPANY AGREES, AND BY ACCEPTANCE OF A CERTIFICATED SECURITY OR A BENEFICIAL OWNERSHIP INTEREST IN A GLOBAL SECURITY EACH HOLDER AND EACH BENEFICIAL OWNER OF THE SECURITIES SHALL BE DEEMED TO HAVE AGREED, FOR UNITED STATES FEDERAL INCOME TAX PURPOSES, (1) TO TREAT THE SECURITIES AS INDEBTEDNESS THAT IS SUBJECT TO TREASURY REGULATIONS SECTION 1.1275-4 (THE “CONTINGENT PAYMENT DEBT REGULATIONS”) AND, FOR PURPOSES OF THE CONTINGENT PAYMENT DEBT REGULATIONS, TO TREAT (X) THE CASH AND THE FAIR MARKET VALUE OF ANY STOCK BENEFICIALLY RECEIVED UPON ANY CONVERSION OF THE SECURITIES AS A CONTINGENT PAYMENT AND (Y) ANY ADDITIONAL INTEREST OR CONTINGENT INTEREST RECEIVED AS CONTINGENT PAYMENTS, (2) TO ACCRUE INTEREST WITH RESPECT TO THE SECURITIES AS ORIGINAL ISSUE DISCOUNT ON A CONSTANT YIELD BASIS, ACCORDING TO THE “NONCONTINGENT BOND METHOD” SET FORTH IN TREASURY REGULATIONS SECTION 1.1275-4(B), USING THE COMPARABLE YIELD OF 9.25% PER ANNUM COMPOUNDED SEMI-ANNUALLY AND (3) IN THE ABSENCE OF AN ADMINISTRATIVE DETERMINATION OR JUDICIAL RULING TO THE CONTRARY, TO BE BOUND BY THE COMPANY’S DETERMINATION OF THE “COMPARABLE YIELD” AND “PROJECTED PAYMENT SCHEDULE,” WITHIN THE MEANING OF THE CONTINGENT PAYMENT DEBT REGULATIONS, WITH RESPECT TO THE SECURITIES. A HOLDER MAY OBTAIN THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, THE YIELD TO MATURITY, THE COMPARABLE YIELD AND THE PROJECTED PAYMENT SCHEDULE FOR THE SECURITIES BY SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO FLOTEK INDUSTRIES, INC., 2930 WEST SAM HOUSTON PARKWAY NORTH, SUITE 300, HOUSTON, TX 77043, ATTENTION: CHIEF FINANCIAL OFFICER.

[Global Security Legend, if applicable]

A-1

No. [ ]

Principal Amount $[ ], as

revised by the Schedule of Increases

and Decreases in Global Security

attached hereto.

CUSIP NO.: 343389 AA0

ISIN: US343389AA03

5.25% Convertible Senior Notes due 2028

Flotek Industries, Inc., a Delaware corporation, promises to pay to [ ], or registered assigns, the principal sum of [ ] Dollars, as revised by the Schedule of Increases and Decreases in Global Security attached hereto, on February 15, 2028.

Interest Payment Dates: February 15 and August 15

Regular Record Dates: February 1 and August 1

Additional provisions of this Security are set forth on the attached “Terms of Securities.”

Dated: [ ]

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.


FLOTEK INDUSTRIES, INC.

By:
Name:
Title:

Each of the Guarantors (which term includes any successor Person in such capacity under the Indenture), has fully, unconditionally and absolutely guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture, the due and punctual payment of the principal of, and premium, if any, and interest on the Securities and all other amounts due and payable under the Indenture and the Securities by the Company.

The obligations of the Guarantors to the Holders of Securities and to the Trustee pursuant to the Securities Guarantee and the Indenture are expressly set forth in Article 10 of the First Supplemental Indenture and Article Fourteen of the Original Indenture and reference is hereby made to the Indenture for the precise terms of the Securities Guarantee.

A-2


CAVO DRILLING MOTORS, LTD. CO.

By:
Name:
Title:

CESI CHEMICAL, INC.

By:
Name:
Title:

FLOTEK PAYMASTER, INC.

By:
Name:
Title:

MATERIAL TRANSLOGISTICS, INC.

By:
Name:
Title:

A-3


PADKO INTERNATIONAL, INCORPORATED

By:
Name:
Title:

PETROVALVE, INC.

By:
Name:
Title:

SES HOLDINGS, INC.

By:
Name:
Title:

SOONER ENERGY SERVICES, INC.

By:
Name:
Title:

SPIDLE SALES & SERVICE, INC.

By:
Name:
Title:

A-4


TELEDRIFT ACQUISITION, INC.

By:
Name:
Title:

TRINITY TOOL, INC.

By:
Name:
Title:

TURBECO, INC.

By:
Name:
Title:

USA PETROVALVE, INC.

By:
Name:
Title:


TRUSTEE’S CERTIFICATE OF AUTHENTICATION

AMERICAN STOCK TRANSFER & TRUST COMPANY as Trustee, certifies that this is one of the Securities referred to in the Indenture.

By:
		Authorized Signatory

A-5

TERMS OF SECURITIES

5.25% Convertible Senior Notes due 2028

The Company issued this Security under an Indenture dated as of February 14, 2008 (the “Original Indenture”), among the Company, the guarantors party thereto and the Trustee, as supplemented by the First Supplemental Indenture dated as of February 14, 2008 (the “First Supplemental Indenture”), among the Company, the guarantors party thereto and the Trustee, (the Original Indenture, as supplemented by the First Supplemental Indenture, the “Indenture”), to which reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders. Additional Securities may be issued under the Indenture in an unlimited aggregate principal amount subject to certain conditions specified in the Indenture.

Interest

Flotek Industries, Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the “Company”), promises to pay interest on the principal amount of this Security at the rate of 5.25% per annum until (but excluding) February 15, 2028.

The Company will pay interest semiannually in arrears on February 15 and August 15 of each year (each, an “Interest Payment Date”), commencing August 15, 2008, to Holders of record on the immediately preceding February 1 and August 1. Interest on the Securities will accrue from the most recent date to which interest has been paid on the Securities or, if no interest has been paid, from February 14, 2008. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

Contingent Interest

Subject to the accrual and record date provisions described above, the Company will pay Contingent Interest to the Holders of the Securities during any six-month period from an Interest Payment Date to, but excluding, the following Interest Payment Date, commencing with the six-month period beginning on February 15, 2013, if the Trading Price of the Securities for each of the five Trading Days ending on the third Trading Day immediately preceding the first day of the relevant six-month period equals 120% or more of the principal amount of the Securities.

The amount of Contingent Interest payable per each $1,000 principal amount of Securities with respect to any six-month period will equal 0.50% per annum of the average Trading Price of the Securities for the five Trading Days referred to above.

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Upon determination that Holders of the Securities will be entitled to receive Contingent Interest that will become payable during a relevant six-month period, on or prior to the start of such six-month period, the Company will provide notice to the Trustee setting forth the amount of contingent interest per $1,000 principal amount of the Securities and disseminate a press release through a public medium that is customary for such press releases.

The Company may cause to be withheld from any payment hereunder any tax withholding required by law or regulations, including, in the case of any withholding obligation arising from income that does not give rise to any cash or property from which any applicable withholding tax could be satisfied, set off against any subsequent payment of cash or property hereunder.

The Company may unilaterally increase the amount of Contingent Interest it may pay or pay interest or other amounts it is obligated to pay, but the Company will have no obligation to do so.

Method of Payment

By no later than 11:00 a.m. (New York City time) on the date on which any principal of, interest (including Contingent Interest and Additional Interest, if any) or premium, if any, on any Security is due and payable, the Company shall deposit with the Paying Agent money sufficient to pay such amount. The Company will pay principal, premium and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of Securities represented by a Global Security (including principal, interest (including Contingent Interest and Additional Interest, if any) and premium, if any) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will pay principal of Definitive Securities at the office or agency designated by the Company for such purpose. Interest (including Contingent Interest and Additional Interest, if any), on Definitive Securities will be payable (i) to Holders having an aggregate principal amount of $5,000,000 or less, by check mailed to the Holders of these Securities and (ii) to Holders having an aggregate principal amount of more than $5,000,000, either by check mailed to each Holder or, upon application by a Holder to the Registrar not later than the relevant record date, by wire transfer in immediately available funds to that Holder’s account within the United States, which application shall remain in effect until the Holder notifies, in writing, the Registrar to the contrary.

Redemption

Subject to certain conditions specified in the Indenture, the Securities will be redeemable, at the option of the Company, in whole at any time or in part from time to time, at any time on or after February 15, 2013 and at a price equal to 100% of the principal amount of Securities to be redeemed, plus accrued and unpaid interest

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(including Contingent Interest and Additional Interest, if any) to but excluding the Redemption Date (unless the Redemption Date is between a Regular Record Date and the Interest Payment Date to which it relates, in which case the Company will pay accrued and unpaid interest to the Holder of record on such Regular Record Date).

Sinking Fund

The Securities are not subject to any sinking fund.

Purchase by the Company at the Option of the Holder; Purchase at the Option of the Holder Upon a Fundamental Change

(a) Subject to the terms and conditions of the Indenture, a Holder shall have the option to require the Company to purchase all or a portion of its Securities held by such Holder on each of February 15, 2013, February 15, 2018 and February 15, 2023 at a Purchase Price specified in the Indenture.

(b) If a Fundamental Change shall occur at any time, each Holder shall have the right, at such Holder’s option and subject to the terms and conditions of the Indenture, to require the Company to purchase all or a portion of its Securities at a Fundamental Change Purchase Price specified in the Indenture.

Conversion

Subject to the procedures for conversion set forth in the Indenture, a Holder may convert its Securities on or prior to January 15, 2028 only when one or more of the conditions specified in the Indenture are met and during the related specified period. On or after January 15, 2028, a Holder may convert its Securities until the close of business on the second Business Day immediately preceding Stated Maturity regardless of such conditions specified in the Indenture.

The initial Conversion Rate is 43.9560 shares of Common Stock per $1,000 principal amount of Securities, subject to adjustment in certain events described in the Indenture. Upon conversion, the Company will either (i) deliver shares of Common Stock based on the Conversion Rate or (ii) pay cash and shares of Common Stock, if any, as set forth in the Indenture. The Company shall deliver cash in lieu of any fractional share of Common Stock.

A Holder may convert a portion of the Securities only if the principal amount of such portion is $1,000 or a multiple of $1,000. No payment or adjustment shall be made for dividends on the Common Stock except as provided in the Indenture.

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Denominations; Transfer; Exchange

The Securities are in registered form without coupons in denominations of principal amount of $1,000 and multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange of Securities (i) so selected for redemption or, if a portion of any Security is selected for redemption, the portion thereof selected for redemption; (ii) surrendered for conversion or, if a portion of any Security is surrendered for conversion, the portion thereof surrendered for conversion; or (iii) in certificated form for a period of 15 days prior to mailing a notice of redemption under Article 4 of the First Supplemental Indenture and Article 11 of the Original Indenture.

Persons Deemed Owners

The registered Holder of this Security may be treated as the owner of it for all purposes.

10.

Unclaimed Money

If money for the payment of principal, premium, if any, or interest (including Contingent Interest and Additional Interest, if any) remains unclaimed for one year, the Trustee or Paying Agent shall pay the money back to the Company, subject to applicable abandoned property laws. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.

11.

Amendment, Waiver

Subject to certain exceptions, the Indenture contains provisions permitting an amendment of the Indenture or the Securities with the written consent of the Holders of at least a majority in principal amount of the then outstanding Securities and the waiver of any Event of Default (other than with respect to nonpayment or in respect of a provision that cannot be amended without the written consent of each Holder affected) or noncompliance with any provision with the written consent of the Holders of a majority in principal amount of the then outstanding Securities.

In addition, the Indenture permits an amendment of the Indenture or the Securities without the consent of any Holder under certain circumstances specified in the Indenture.

12.

Defaults and Remedies

Subject to the following paragraph, if an Event of Default specified in the Indenture occurs and is continuing, the Trustee or the Holders of at least 25% in

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principal amount of the Securities may declare all the Securities by notice to the Company to be due and payable immediately. In addition, certain specified Events of Default will cause the Securities to become immediately due and payable without further action by the Holders.

The sole remedy for an Event of Default relating to the Company’s failure to comply with the reporting obligations under Section 11.01 of the First Supplemental Indenture and Section 7.4 of the Original Indenture, and for any failure to comply with the requirements of Section 314(a)(1) of the Trust Indenture Act, will for the 365 days after the occurrence of such an Event of Default consist exclusively of the right to receive Additional Interest on the principal amount of the Securities at a rate equal to 0.25% per annum.

Holders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or Event of Default in payment of principal, interest (including Contingent Interest and Additional Interest, if any) or premium, if any) if it determines that withholding notice is in their interest.

13.

Trustee Dealings with the Company

Subject to certain limitations set forth in the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

14.

No Recourse Against Others

An incorporator, director, officer, employee, partner, sponsor or stockholder of the Company or any Guarantor, solely by reason of this status, shall not have any liability for any obligations of the Company or such Guarantor under the Securities, the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities.

15.

Authentication

This Security shall not be valid until an authorized signatory of the Trustee manually authenticates this Security.

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16.

Abbreviations

Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).

17.

CUSIP Numbers

Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption, and reliance may be placed only on the other identification numbers placed thereon.

18.

Governing Law

This Security and the Indenture shall be governed by, and construed in accordance with, the laws of the State of New York.

The Company will furnish to any Holder upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Security. Requests may be made to:

Flotek Industries, Inc.

2930 West Sam Houston Parkway North, Suite 300

Houston, TX 77043

Attention: Chief Financial Officer

Facsimile: (713) ###-###-####

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ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.


Date:				Your Signature:


Signature Guarantee:
		(Signature must be guaranteed)

Sign exactly as your name appears on the other side of this Security.

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program, pursuant to S.E.C. Rule 17Ad-15.

Signature:

Signature Guarantee:



(Signature must be guaranteed)				Signature:

[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

The following increases or decreases in this Global Security have been made:

Date

Amount of decrease
in Principal Amount

of this Global

Security

Amount of increase
in Principal Amount

of this Global

Security

Principal Amount of

this Global Security

following such

decrease or increase

Signature of
authorized signatory

of Trustee or
Securities Custodian

FORM OF CONVERSION NOTICE

To:	Flotek Industries, Inc.

The undersigned registered Holder of this Security hereby exercises the option to convert this Security, or portion hereof (which is $1,000 principal amount or a multiple thereof) designated below in accordance with the terms of the Indenture referred to in this Security, and directs that cash, and the shares of Common Stock of Flotek Industries, Inc., if any, issuable and deliverable upon such conversion, and any Securities representing any unconverted principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. If cash, shares or any portion of this Security not converted are to be issued in the name of a Person other than the undersigned, the undersigned shall pay all transfer taxes payable with respect thereto.

This notice shall be deemed to be an irrevocable exercise of the option to convert this Security.


Dated:

				Signature(s)

				The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program, pursuant to S.E.C. Rule 17Ad-15.


				Signature Guarantee
Fill in for registration of shares if to be delivered, and Securities if to be issued other than to and in the name of registered holder:


(Name)				Principal amount to be converted (if less than all): $ ,000

(Street Address)


(City state and zip code)				Social Security or Other Taxpayer Number
Please print name and address

FORM OF FUNDAMENTAL CHANGE PURCHASE NOTICE

To:	Flotek Industries, Inc.

The undersigned registered Holder of this Security hereby acknowledges receipt of a notice from Flotek Industries, Inc. (the “Company”) as to the occurrence of a Fundamental Change with respect to the Company and requests and instructs the Company to repurchase this Security, or the portion hereof (which is $1,000 principal amount or a multiple thereof) designated below, in accordance with the terms of the Indenture referred to in this Security and directs that the check in payment for this Security or the portion thereof and any Securities representing any unrepurchased principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. If any portion of this Security not repurchased is to be issued in the name of a Person other than the undersigned, the undersigned shall pay all transfer taxes payable with respect thereto.


Dated:

				Signature(s)

				The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program, pursuant to S.E.C. Rule 17Ad-15.


				Signature Guarantee

Fill in if a check is to be issued, or Securities are to be issued, other than to and in the name of registered Holder:


(Name)				Principal amount to be purchased (if less than all): $ ,000

(Street Address)


(City state and zip code)				Social Security or Other Taxpayer Number
Please print name and address

FORM OF PURCHASE NOTICE

To:	Flotek Industries, Inc.

The undersigned registered Holder of this Security hereby acknowledges receipt of a notice from Flotek Industries, Inc. (the “Company”) as to the Holder’s option to require the Company to repurchase this Security and requests and instructs the Company to repurchase this Security, or the portion hereof (which is $1,000 principal amount or a multiple thereof) designated below, in accordance with the terms of the Indenture referred to in this Security and directs that the check in payment for this Security or the portion thereof and any Securities representing any unrepurchased principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. If any portion of this Security not repurchased is to be issued in the name of a Person other than the undersigned, the undersigned shall pay all transfer taxes payable with respect thereto.


Dated:

				Signature(s)

				The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program, pursuant to S.E.C. Rule 17Ad-15.


				Signature Guarantee

Fill in if a check is to be issued, or Securities are to be issued, other than to and in the name of registered Holder:


(Name)				Principal amount to be purchased (if less than all): $ ,000


(Street Address)


(City state and zip code)				Social Security or Other Taxpayer Number
Please print name and address