As filed with the Securities and Exchange Commission on November 14, 2001.
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
October 23, 2001
FLOTEK INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
Delaware 1-132170 77-0709256
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
7030 Empire Central Drive, Houston, Texas 77040
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (713) 849-9911
Not Applicable
(Former name or former address, if changed since last report)
FLOTEK INDUSTRIES, INC.
TABLE OF CONTENTS
FOR
CURRENT REPORT ON FORM 8-K
Item 2. Acquisition and Disposition of Assets..............3
Item 5. Other Events.......................................3
Item 7. Financial Statements and Exhibits..................4
Signature.....................................................5
Item 2. Acquisition or Disposition of Assets.
On October 31, 2001, Flotek Industries, Inc. completed the closing of its
previously announced merger with Chemical & Equipment Specialties, Inc.
("CESI"). In connection with the merger, the Company issued 2,994,478 shares of
common stock and assumed employee stock options and contingent share issuance
obligations totaling 117,524 shares. All such share amounts reflect the 120 to 1
reverse stock split described below.
Simultaneously with the closing of the merger, all preferred shares of
Flotek Industries, Inc. have been converted to common stock at the rate of $3.24
per share (post-split). Subsequent to August 15, 2001 and prior to the closing
of the merger, warrants to purchase 536,141 shares of common stock at $3.60 per
share (post-split) were exercised, resulting in cash proceeds to the Company of
$1,930,106. Accordingly, the total outstanding common shares of the Company,
after giving effect to the shares issued in the CESI merger and the reverse
stock split (excluding adjustments for fractional shares to be paid in cash) is
4,850,696 shares.
CESI, headquartered in Duncan, Oklahoma, operates in two primary segments
of the oilfield service industry; specialty chemicals and equipment
manufacturing. The specialty chemical segment develops, manufactures and
packages innovative cementing and stimulation chemicals, including the
development of environmentally neutral chemicals. The equipment manufacturing
segment manufactures, to exacting specifications and ISO 9001 standards,
specialized cementing equipment (pumping and bulk material transport) and
stimulation equipment (nitrogen, blending and pumping), as well as proprietary
automated monitoring and control systems. CESI also designs and constructs
automated bulk material handling and loading facilities for major oilfield
service companies.
For accounting purposes, the merger will be treated under the purchase
method of accounting as an acquisition of Flotek Industries, Inc. by CESI.
Accordingly, the combined company financial statements will reflect the
historical results of CESI and will incorporate the results of the current
Flotek Industries Inc. only for periods subsequent to the merger. The combined
financial statements will also revalue the assets and liabilities of the current
Flotek Industries, Inc. in accordance with purchase accounting rules. The
Company will report its future results on a calendar year basis, effective with
the current year ending December 31, 2001.
Item 5. Other Events.
Flotek Industries Inc. held a special shareholders' meeting on October 23,
2001 to consider and vote upon a change in the Company's jurisdiction of
incorporation from Alberta, Canada to Delaware. With 76.7% of the Company's
voting shares represented at the meeting, the resolution was approved by 99.96%
of the shares voted. The resolution was subsequently submitted to the Court of
Queen's Bench of Alberta for final approval of the Court, which was received on
October 30, 2001. In connection with this change, one share of common stock of
the new Flotek Industries, Inc. (Delaware), was issued for each 120 outstanding
common shares of the old Flotek Industries Inc. (Alberta), accomplishing a
reverse stock split of 120 to 1. The Company will redeem fractional shares for
cash. The reverse stock split was given effect at the opening of trading on
November 5, 2001. Also on that date, the Company began trading with a new stock
ticker symbol, "FLTK", to reflect its change in status from a foreign-domiciled
corporation to a Delaware corporation.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
On or prior to January 14, 2002, the Company will be filing an amended
Current Report on Form 8-K which will include the financial statements of CESI
required by SEC Regulations.
(b) Pro forma Financial Information.
On or prior to January 14, 2002, the Company will be filing an amended
Current Report on Form 8-K which will include pro forma financial statements
reflecting the combined operations of Flotek Industries, Inc. and CESI as if the
companies had been consolidated for historical reporting periods, as required by
SEC Regulations.
(c) Exhibits.
The following exhibits are filed herewith or incorporated by reference.
Exhibit
Number Description of Exhibit
------- ---------------------------
2.1 Agreement and Plan of Reorganization by and between Flotek
Industries Inc. and Chemical & Equipment Specialties, Inc. (a)
99.1 Acquiror Shareholders Agreement
99.2 Acquiror Shareholder Lock-up Agreement
(a) Incorporated by reference to the Company's Form 8-K filed with the
Commission on October 12, 2001
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FLOTEK INDUSTRIES INC.
Registrant
Date: November 14, 2001 By: /s/ Jerry D. Dumas, Sr.
----------------------------
Jerry D. Dumas, Sr.
Chairman and Chief Executive Officer
EXHIBIT INDEX
Exhibit Page
Number Description Number
------- ----------- ------
2.1 Agreement and Plan of Reorganization by
and between Flotek Industries Inc. and
Chemical & Equipment Specialties, Inc. (a)
99.1 Acquiror Shareholders Agreement 7
99.2 Acquiror Shareholder Lock-up Agreement 15
(a) Incorporated by reference to the Company's Form 8-K filed with the
Commission on October 12, 2001
EXHIBIT 99.1
------------
ACQUIROR SHAREHOLDERS AGREEMENT
THIS ACQUIROR SHAREHOLDERS AGREEMENT ("Agreement") is made effective as of
the 15th day of August, 2001 by and among Flotek Industries, Inc., an Alberta,
Canada corporation ("Acquiror"), Chemical and Equipment Specialties, Inc.
("Target"), an Oklahoma corporation, and each of the undersigned shareholders
(the "Shareholders") of Acquiror, 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; 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 Target 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 Target Securities. Such Shareholder is the
lawful record and beneficial owner of the number of shares of common stock of
Acquiror ("Acquiror Common Stock"), Series A Convertible Preferred Stock of
Acquiror ("Acquiror Preferred Stock"), and warrants to acquire Acquiror Common
Stock expiring April 30, 2010 ("Acquiror Warrants") 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 in Exhibit A). Except for the Acquiror
Warrants and 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 Acquiror or any Subsidiary of Acquiror
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.
-----------------------
(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 Acquiror Preferred Stock, the Acquiror Common Stock to be acquired
upon conversion of the Acquiror Preferred Stock or exercise of the
Acquiror Warrants 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 and Acquiror Warrants, 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
and the Form 10-Q for the three months ended May 31, 2001 as filed with
the Securities and Exchange Commission (the "Commission");
(c) Such Shareholder (i) has received copies of the financial
statements of Target for the six months ended June 30, 2001; and (ii) 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
issuable upon conversion of the Acquiror Preferred Stock and exercise of
the Acquiror Warrants have 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 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
issuable to such Shareholder 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 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 has voted, agrees to vote or shall have
voted all Acquiror Preferred Stock owned by such Shareholder in favor of the
approval of (i) the Reorganization Agreement and the transactions contemplated
thereby and (ii) the change in the jurisdiction of the domicile of Acquiror from
Alberta to Delaware (the "Change in Domicile") and, accordingly, shall not seek
nor be entitled to any dissenter's or appraisal rights with respect to their
Preferred Stock in connection with the Reorganization Agreement and the
transaction contemplated thereby or the Change in Domicile. Each of the
Shareholders who is a director or officer of Acquiror (or who is controlled by
such persons) also agrees to vote all Acquiror Common Stock owned by him (or by
persons controlled by him) including any shares acquired on exercise of Acquiror
Warrants or options or on conversion of Acquiror Preferred Stock in favor of the
approval of (i) the Reorganization Agreement and the transactions contemplated
thereby and (ii) the change in the jurisdiction of the domicile of Acquiror from
Alberta to Delaware (the "Change in Domicile") and, accordingly, shall not seek
nor be entitled to any dissenter's or appraisal rights with respect to their
shares of Common Stock in connection with the Reorganization Agreement and the
transactions contemplated thereby or the Change in Domicile.
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 Acquiror, the acquisition
of a majority of the equity securities of Acquiror, or the acquisition of all or
a substantial portion of the assets of Acquiror, excluding the transactions
contemplated by the Reorganization Agreement.
2.4 Conversion of Acquiror Preferred Stock and Exercise of Acquiror
Warrants. Such Shareholder acknowledges that the Reorganization Agreement (i)
permits him to convert his Acquiror Preferred Stock into Acquiror Common Stock
at a "Conversion Price" as defined in the terms of the Target Preferred Stock of
US $0.027 rather than US $0.03 as provided in the Acquiror Preferred Stock if
converted before the Merger Closing Date; and (ii) requires that the
Shareholders convert at least 90% of the Acquiror Preferred Stock outstanding on
or before the Merger Closing and exercise or amend at least 90% of the Acquiror
Warrants outstanding on or before the Warrant Exercise Date with at least 85% of
the Acquiror Warrants being exercised for cash and that if such conditions are
not satisfied, the transactions contemplated by the Reorganization Agreement may
not occur. By so indicating on the signature page, such Shareholder hereby
elects to convert his Acquiror Preferred Stock on the Merger Closing Date and
exercise his Acquiror Warrants for cash on the Warrant Exercise Date. Such
Shareholder acknowledges and agrees that the issuance of the Acquiror Common
Stock upon conversion of the Acquiror Preferred Stock will not result in any
adjustment to the exercise price of the Acquiror Warrants.
2.5 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 or Target 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. RECEIPT OF MERGER CONSIDERATION.
-------------------------------
3.1 Receipt of Acquiror Common Stock. Each of the Shareholders hereby
appoints Jerry Dumas and Gary Pittman, or either of them, as such Shareholder's
agent to receive on such Shareholder's behalf from Acquiror at the Warrant
Exercise Date and the Merger Closing Date the Acquiror Common Stock to which
such Shareholder is entitled pursuant to Section 2.4. The Acquiror Common Stock
shall be disbursed by such agent after the occurrence of the Warrant Exercise
Date and the Merger Closing Date to the Shareholders.
3.2 Acceptance of Appointment. Jerry Dumas and Gary Pittman hereby
accept the appointments described above.
4. TERMINATION. This Agreement shall automatically terminate upon any
termination of the Reorganization Agreement.
5. MISCELLANEOUS.
-------------
5.1 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
7030 Empire Central Drive
Houston, TX 77040
Facsimile: 713-466-8386
Attn: Jerry Dumas
If to Target:
Chemical & Equipment Specialties, Inc.
P. O. Box 1006
Duncan, OK 73533
Facsimile: 580-255-2673
Attn: Glenn Penny
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.
5.2 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.
5.3 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.
5.4 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.
5.5 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.
5.6 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.
5.7 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.
5.8 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.
5.9 Section Headings. The headings of sections in this Agreement
are provided for convenience only and will not affect its construction
or interpretation.
5.10 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 10.12 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 6.11 below.
5.11 Jurisdiction and Venue. Subject to Section 6.10 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 Harris 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.
5.12 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.
5.13 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.
5.14 Defined Terms. Capitalized terms not otherwise defined herein have
the meanings set forth in the Reorganization Agreement.
[END OF PAGE - SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
FLOTEK INDUSTRIES, INC.
By: /s/ Jerry D. Dumas, Sr.
------------------------------
Jerry D. Dumas, Sr.,
President and CEO
CHEMICAL & EQUIPMENT SPECIALTIES, INC.
By: /s/ Glenn S. Penny
-------------------------------
Glenn Penny, President
"SHAREHOLDERS"
--------------------------------------------------------------------------------
EXHIBIT 99.2
------------
October 31, 2001
Lock-up Acquiror Shareholder:
----------------------------
TOSI, L.P.
William R. Ziegler
Hinckley Brook, Inc.
Saxton River Corporation
Jerry D. Dumas, Sr.
Gary M. Pittman
Acquiror Shareholder Lock-Up Agreement
Chemical and Equipment Specialties, Inc.
P. O. Box 1006
Duncan, OK 73533
and
Flotek Industries, Inc.
7030 Empire Central Drive
Houston, TX 77040
Re: Lock-Up Agreement - Sale of Flotek Common Stock
-----------------------------------------------
Ladies and Gentlemen:
In order to induce you to consummate that certain Agreement and Plan
of Reorganization by and between Flotek Industries, Inc. ("Flotek") and Chemical
and Equipment Specialties, Inc. ("CESI") dated as of August 15, 2001
("Reorganization Agreement"), the undersigned shareholder of Flotek hereby
agrees that, without the prior written consent of CESI and Flotek, the
undersigned will not, during the period beginning on the date hereof and ending
one year after the Merger Closing Date (as defined in the Reorganization
Agreement):
(1) offer, pledge, announce the intention to sell, sell,
contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or
indirectly, any shares of common stock or Flotek
("Common Stock"), or any securities of Flotek
which are substantially similar to the Common
Stock, or any securities convertible into or
exercisable or exchangeable for Common Stock
(including, but not limited to, Common Stock which
may be deemed to be beneficially owned by the
undersigned in accordance with the rules and
regulations of the Securities and Exchange
Commission and securities which may be issued upon
exercise of any stock options or warrants);
(2) enter into any swap, option, future, forward or other
agreement that transfers, in whole or in part, any
of the economic consequences of ownership of the
Common Stock or any securities of the Company
which are substantially similar to the Common
Stock, including, but not limited to, any security
convertible into or exercisable or exchangeable
for Common Stock, whether any such transaction
described in clause (1) or (2) above is to be
settled by delivery of Common Stock or such other
securities, in cash or otherwise; or
(3) make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any substantially
similar securities of the Company, including but not limited to,
any security convertible into or exercisable or exchangeable for
Common Stock.
Notwithstanding the foregoing, the undersigned may (i) make transfers
of the Common Stock in private transactions not involving a broker or dealer
provided the transferee agrees to abide by this Agreement and (ii) publicly sell
shares of Common Stock to the extent permitted by Rule 144 provided he complies
with the volume limitations based on average trading volume as provided in Rule
144(e)(1)(ii) rather than one percent of the shares outstanding as provided in
Rule 144(e)(1)(i).
The undersigned hereby represents and warrants that the undersigned
has full power and authority to enter into this lock-up agreement and that it is
not a party to any agreement or understanding that would cause a breach of this
lock-up agreement if it were entered into during the period in which the
restrictions set forth herein are effective.
In furtherance of the foregoing, Flotek and any duly appointed
transfer agent for the registration or transfer of the securities described
herein are hereby authorized to decline to make any transfer of securities if
such transfer would constitute a violation or breach of this lock-up agreement.
All authority herein conferred or agreed to be conferred and any
obligations of the undersigned shall be binding upon the successors, assigns,
heirs or personal representatives of the undersigned.
This agreement shall automatically terminate if the Reorganization
Agreement is terminated for any reason.
Very truly yours,
Jerry D. Dumas, Sr.
President, Chairman and CEO
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
31st day of October, 2001
TOSI, L.P.
By: Pittman Property Corp., a Texas
Corporation, General Partner
/s/ J. W. Beavers, Jr.
---------------------------------------
By: J. W. Beavers, Jr., President
/s/ William R. Ziegler
---------------------------------------
William R. Ziegler, an individual
Hinckley Brook, Inc.
/s/ Jerry D. Dumas, Sr.
---------------------------------------
By: Jerry D. Dumas, Sr., President
Saxton River Corporation
/s/ Jerry D. Dumas, Sr.
---------------------------------------
By: Jerry D. Dumas, Sr., President
/s/ Jerry D. Dumas, Sr.
---------------------------------------
Jerry D. Dumas, Sr., individual
/s/ Gary M. Pittman
---------------------------------------
Gary M. Pittman, an individual