Exhibit 7.2
TARGET SHAREHOLDERS AGREEMENT
THIS TARGET SHAREHOLDERS AGREEMENT ("Agreement") is made effective as of
the 26th day of October, 2001 by and among Flotek Industries, Inc., an Alberta,
Canada corporation ("Acquiror"), and each of the undersigned shareholders (the
"Shareholders") of Chemical & Equipment Specialties, Inc., an Oklahoma
corporation ("Target"), with reference to the following circumstances:
RECITALS
A. Target and Acquiror have entered into an Agreement and Plan of
Reorganization of even date herewith (the "Reorganization Agreement"), providing
for the merger of a subsidiary of Acquiror with and into Target (the "Merger");
and
B. As a condition to Acquiror's execution of the Reorganization Agreement,
the Shareholders have agreed to make certain representations, warranties and
covenants set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, and other good and valuable consideration, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDERS. As a material
inducement to Acquiror to enter into the Reorganization Agreement and to
consummate the transactions contemplated thereby, each of the Shareholders,
severally and not jointly, represents and warrants to Acquiror and Target, as of
the date of this Agreement and as of the Merger Closing under the Reorganization
Agreement, as follows:
1.1 Authority; Power; Binding Effect on Shareholder. Such Shareholder has
the requisite right, power, authority and capacity to execute and deliver this
Agreement and to make the representations and warranties of such Shareholder
herein and to perform such Shareholder's obligations hereunder. The execution,
delivery and performance of this Agreement by such Shareholder has been
authorized by all necessary action on the part of such Shareholder and no other
proceedings (corporate or other) on the part of such Shareholder are necessary
to authorize the execution, delivery and performance of this Agreement. This
Agreement has been duly executed and delivered by such Shareholder and, assuming
the due execution and delivery of this Agreement by Acquiror, constitutes the
legal, valid and binding obligation of such Shareholder enforceable against such
Shareholder in accordance with its terms and conditions.
1.2 Ownership by Shareholder of Acquiror Common Stock. Such Shareholder is
the lawful record and beneficial owner of the number of shares of common stock,
par value $0.01 per share, of Target ("Target Common Stock") set forth opposite
such Shareholder's name on Exhibit "A" attached hereto, free and clear of any
lien, claim or encumbrance (except as set forth hereto). Except as indicated on
Exhibit "A" attached hereto, such Shareholder holds no options, warrants, calls,
conversion or other rights, or any agreements or commitments of any nature which
obligate Target or any subsidiary of Target to issue any additional shares of
capital stock or any securities convertible into or exchangeable for any such
shares of capital stock.
1.3 Securities Laws Matters.
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(a) Such Shareholder is either an accredited investor and/or has such
knowledge and experience in financial and business matters that such
Shareholder is capable of evaluating the merits and risks of an investment
in the common stock of Acquiror ("Acquiror Common Stock") and has had the
opportunity to obtain advice from professional advisors, including
attorneys and accountants, with respect to all aspects of the transactions
contemplated herein and the ownership of Acquiror Common Stock, including
the impact of all relevant securities and tax laws thereon;
(b) Such Shareholder has been furnished by Acquiror with a copy of
Acquiror's Annual Report on Form 10-K for the year ended February 28, 2001
as filed with the Securities and Exchange Commission (the "Commission");
(c) Such Shareholder: (i) is either an officer or director of Target
or is familiar with the financial condition and business prospects of
Target; (ii) has received copies of the financial statements of Target for
the six months ended June 30, 2001; and (iii) has had access to such other
information concerning Target and Acquiror as such Shareholder has
reasonably requested;
(d) Such Shareholder acknowledges that the Acquiror Common Stock to
be acquired by him in connection with the Reorganization Agreement as a
result of the Merger has not been registered under the Securities Act of
1993, as amended (the "Securities Act"), or the securities laws of any
state, that the Acquiror Common Stock is being acquired for investment
purposes and not with a view to distribution or resale, nor with the
intention of selling, transferring or otherwise disposing of all or any
part of such Acquiror Common Stock for any particular price, or at any
particular time, or upon the happening of any particular event or
circumstance, except selling, transferring, or disposing of said Acquiror
Common Stock in full compliance with all applicable provisions of the
Securities Act, the rules and regulations promulgated thereunder, and
applicable state securities laws; and that, in addition to certain
restrictions set forth in Section 2 hereof, such shares must be held
indefinitely unless they are subsequently registered under the Securities
Act and applicable state securities laws or an exemption from such
registration is available;
(e) Such Shareholder has had the opportunity to ask questions of, and
receive answers from, Target and Acquiror concerning the terms and
conditions of the Reorganization Agreement transactions contemplated
thereby and to obtain any additional information reasonably necessary to
verify the accuracy of the information referred to in subsections (b) and
(c) above. Each question which such Shareholder has asked has been
answered, each document concerning Acquiror and Target which such
Shareholder has reasonably requested has been furnished and there is no
further information concerning Acquiror or Target that such Shareholder
desires to obtain; and
(f) Such Shareholder understands that the Acquiror Common Stock to be
received by such Shareholder in connection with the Reorganization
Agreement shall bear a legend in substantially the following form:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "SECURITIES ACT"). SUCH SHARES MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR SUCH OFFER, SALE,
TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE SECURITIES ACT AND SUCH LAWS.
2. COVENANTS AND AGREEMENTS OF THE SHAREHOLDERS. Each of the
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Shareholders, severally and not jointly, covenants and agrees as
follows:
2.1 No Inconsistent Action; Voting Agreement. Each Shareholder shall not
take any action that is inconsistent with such Shareholder's obligations under
this Agreement, and such Shareholder agrees to vote or shall have voted all
Target Common Stock owned by such Shareholder in favor of the approval of the
Reorganization Agreement and the transactions contemplated thereby and,
accordingly, shall not seek nor be entitled to any dissenter's or appraisal
rights in connection with the Reorganization Agreement and the transactions
contemplated thereby.
2.2 Confidentiality. Each Shareholder agrees to keep confidential all
information obtained by such Shareholder with respect to Target and Acquiror in
connection with this Agreement and the Reorganization Agreement (including the
existence and terms of the transactions contemplated by the Reorganization
Agreement) and shall use such information solely in connection with the
transactions contemplated hereby. Notwithstanding the foregoing, such
Shareholder shall not be required to keep confidential information that (a) is
known or available through other lawful sources not bound by a confidentiality
agreement with the disclosing party, (b) is or becomes publicly known through no
fault of the receiving party or its agents, (c) is required to be disclosed
pursuant to an order or request of a judicial authority or governmental entity
(provided the disclosing party is given reasonable prior notice) or (d) is
developed by the receiving party independently of the disclosure by the
disclosing party.
2.3 Acquisition Proposals. Unless and until the Reorganization Agreement
shall be terminated in accordance with its terms, each Shareholder shall not,
nor shall such Shareholder authorize or permit any representative or agent to,
directly or indirectly, solicit, initiate or encourage submission of (including
by way of furnishing information) any proposal or offer from any person which
constitutes, or may reasonable be expected to lead to, any Acquisition Proposal
(as defined herein), entertain any discussions or negotiations with respect to
an Acquisition Proposal, or enter into any agreement or commitment providing for
or relating to an Acquisition Proposal. With respect to Acquisition Proposals
received by a Shareholder after the date of this Agreement, such Shareholder
shall promptly notify Target and Acquiror upon receipt of any Acquisition
Proposal or any request for information relating to Acquiror in connection with
an Acquisition Proposal or for access to the directors, personnel, assets, books
or records of Acquiror. For purposes of this Agreement, "Acquisition Proposal"
means any offer or proposal for, or any indication of interest in, a merger,
consolidation or other business combination involving Target, the acquisition of
a majority of the equity securities of Target, or the acquisition of all or a
substantial portion of the assets of Target, excluding the transactions
contemplated by the Reorganization Agreement.
2.4 Indemnification by Shareholders. Each Shareholder individually agrees
to indemnify and hold Acquiror and Target harmless from and against any and all
liabilities, damages, losses, claims, demands, costs or expenses (including
interest, penalties, reasonable attorneys' and accountants' fees and expenses)
which Acquiror shall suffer or incur resulting from, relating to or arising out
of (i) any inaccuracy in any representation or warranty by such Shareholder
under this Agreement or (ii) the failure of such Shareholder to perform such
Shareholder's obligations under this Agreement.
3. TERMINATION. This Agreement shall automatically terminate
upon any termination of the Reorganization Agreement.
4. MISCELLANEOUS.
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4.1 Notices. All notices and other communications required or permitted
hereunder must be in writing and shall be deemed to have been duly given when
(a) delivered by hand (with written confirmation of receipt), (b) when received
by the addressee, if mailed by first class mail, postage prepaid, registered or
certified with return receipt requested, or (c) when received by the addressee,
if sent by a nationally recognized overnight delivery service, in each case to
the appropriate party at the addresses set forth below:
If to Acquiror:
Flotek Industries
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
If to Target:
Chemical & Equipment Specialties, Inc.
P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
If to any Shareholder, at the address of such Shareholder set forth in
Exhibit "A" attached hereto.
or to such other address or addresses as any party may from time to time
designate by notice to the other parties.
4.2 Successors and Assigns. Except as otherwise expressly provided in this
Agreement, the provisions of this Agreement shall inure to the benefit of, and
be binding upon, the successors, assigns, heirs, transferees, executors and
administrators of the parties hereto. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
4.3 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement of the parties with respect to the matters
contemplated hereby and supersedes any other agreement, whether written or oral,
that may have been made or entered into by any party relating to the matters
contemplated hereby.
4.4 Amendment. This Agreement, or any provision hereof, may be amended only
in writing signed by Acquiror and by any Shareholder that is bound or affected
by such Amendment.
4.5 Waiver. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement will operate as a waiver of
such right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other parties; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.
4.6 Governing Law. This Agreement, including without limitation, the
interpretation, construction and validity hereof, shall be governed by the laws
of the State of Oklahoma without regard to its conflict of laws principles.
4.7 Severability. The parties agree that if one or more provisions
contained in this Agreement shall be deemed or held to be invalid, illegal or
unenforceable in any respect under any applicable law, this Agreement shall be
construed with the invalid, illegal or unenforceable provision deleted, and the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected or impaired thereby.
4.8. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original copy of this
Agreement and all of which together will be deemed to constitute one and the
same document effective as to Acquiror and each Shareholder that has signed any
such counterpart.
4.9 Section Headings. The headings of sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation.
4.10 Dispute Resolution. The parties intend that any disputes between
Acquiror and the Shareholders concerning this Agreement shall be resolved by
arbitration as provided in the Reorganization Agreement, and the provisions of
Section 13.14 of the Reorganization Agreement shall be controlling with regard
to any such dispute in connection with this Agreement. However, to the extent
arbitration shall be held by a court of competent jurisdiction to be
unenforceable, the parties agree as set forth in Section 4.11 below.
4.11 Jurisdiction and Venue. Subject to Section 4.10 above, each of the
parties hereby consents to the bringing of any suit, action or proceeding with
respect to this Agreement in (i) the Oklahoma state courts of competent
jurisdiction in Oklahoma County, Oklahoma or in the United States District Court
in which the City of Oklahoma City is located or (ii) the Texas state courts of
competent jurisdiction in ▇▇▇▇▇▇ County, Texas or in the United States District
Court in which the City of Houston is located. ALL PARTIES HEREBY IRREVOCABLY
WAIVE ANY OBJECTIONS WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE PERSONAL
JURISDICTION OR VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT BROUGHT IN ANY SUCH COURT AND HEREBY FURTHER
IRREVOCABLY WAIVE ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
4.12 Legal Fees and Expenses. If a court of competent jurisdiction or
arbitrator appointed pursuant to the provisions of this Agreement makes a
finding or judgment that a party has breached this Agreement, then such
breaching party agrees to pay the costs and expenses (including reasonable
attorneys fees and expenses) incurred by any other party in successfully (i)
enforcing any of the terms of the Agreement against such breaching party or (ii)
proving that such breaching party breached any of the terms of this Agreement.
4.13 Rights Under Reorganization Agreement. Target acknowledges and agrees
that the Shareholders are third-party beneficiaries of the representations,
warranties, covenants and agreements of Target under the Reorganization
Agreement and any and all rights of Acquiror under the Reorganization Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CHEMICAL & EQUIPMENT SPECIALTIES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: President and CEO
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FLOTEK INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: Chairman, President and CEO
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