STOCK PURCHASE AGREEMENT
EXHIBIT
2.1
THIS
STOCK PURCHASE AGREEMENT, dated as of December 20th, 2004 (the “Agreement”), is by
and among Flotek Industries, Inc., a Delaware corporation (“Flotek”), Xxxx
Xxxxxx, Xxxxx Xxxxxx, and Xxxx Xxxxxxxxx (collectively, the “Stockholders”).
W I T N E S S E T H:
WHEREAS,
the Stockholders own the number of shares of the common stock of Xxxxxx Sales
& Services, Inc., a Utah corporation (the “Company”)
indicated on Schedule A (the “Xxxxxx
Shares”);
WHEREAS,
Flotek desires to acquire the Xxxxxx Shares from the Stockholders, and the
Stockholders desire to sell the Xxxxxx Shares to Flotek, upon the terms and
subject to the conditions set forth herein;
NOW,
THEREFORE, in consideration of the premises and the representations, warranties,
covenants and agreements contained herein, the parties hereto, intending to be
legally bound, agree as follows:
ARTICLE
I
THE
PURCHASE
Section
1.1. Sale
and Purchase. At the
Closing (as hereinafter defined) and in accordance with the provisions of this
Agreement, Flotek shall purchase from the Stockholders, and the Stockholders
shall sell to Flotek, the Xxxxxx Shares in exchange for the consideration
described in Section 1.2. At the Closing, the Stockholders shall transfer to
Flotek good and marketable title to the Xxxxxx Shares that is free and clear of
all pledges, liens, claims, charges, options, calls, encumbrances, restrictions,
and assessments whatsoever.
Section
1.2. Purchase
Consideration. Subject
to Section 1.4, the consideration (the “Consideration”) for
the delivery and transfer to Flotek of the Xxxxxx Shares shall be as
follows:
(a) The
payment at the Closing of an aggregate of $6,100,000 in cash or in immediately
available funds, allocated among the Stockholders as indicated on Schedule
A;
(b) The
delivery at the Closing of Promissory Notes payable to the order of each of the
Stockholders in the aggregate principal amount of $1,275,000. Each Promissory
Note shall be substantially identical in form to Exhibit 1.2 and shall be in the
original principal amount indicated on Schedule A; and
(c) The
number of shares (the “Flotek
Shares”) of the
common stock of Flotek, .0001 par value per share (the “Flotek
Common Stock”)
determined by dividing $700,000 by the Share Value. The Flotek Shares shall be
allocated among the Stockholders as indicated on Schedule A. For purposes
herein, the term “Share
Value” shall
mean the value of the Flotek Shares based on the average for the ten business
days that precede the Closing Date of daily closing trading prices of the Flotek
Common Stock on the over-the-counter market, as reported by the National
Quotation Bureau, Inc., or if such information is not available, as furnished by
any member of the National Securities Dealers, Inc., selected by
Flotek.
Notwithstanding
anything to the contrary set forth herein, no part of the Consideration shall be
escrowed or held back in any respect at Closing to secure the obligations of the
Stockholders pursuant to this Agreement or the accuracy of the representations
and warranties of the Stockholders.
Section
1.3. Other
Agreements. At the
Closing, (a) each Stockholder and Xxxxx XxXxxxxx shall execute and deliver
Agreements Not To Compete substantially identical in form to Exhibit 1.3(a), and
(b) Xxxx Xxxxxx, Xxxx Xxxxxxxxx and Xxxxx XxXxxxxx shall execute and deliver
Employment Agreements substantially identical in form to Exhibit
1.3(b).
Section
1.4. Employee
Bonus Pool. At the
Closing, $800,000 of the Consideration shall not be paid to Xxxx Xxxxxx but
shall instead be placed in a separate Flotek bank account (or with respect to
non-cash Consideration, in such form as Xxxxxx shall direct), the disbursement
of which shall be governed by a Bonus Pool Agreement substantially identical in
form to Exhibit 1.4. Flotek and Xxxx Xxxxxx shall enter into such Bonus Pool
Agreement at the Closing, and shall mutually agree regarding the form of the
Consideration subject to the Bonus Pool Agreement.
Section
1.5. Closing. The
closing (the “Closing”) of the
transactions contemplated by this Agreement (the “Transaction”) shall
take place at the offices of Flotek on January 3rd, 2005 or the first subsequent
date on which the last of the conditions set forth in Article V is fulfilled or
waived, or at such other time and place as Flotek and the Stockholders shall
agree. The date on which the Closing occurs is referred to in this Agreement as
the “Closing
Date.” At the
Closing, each of the parties shall take such actions as shall be required
pursuant to the terms hereof to be taken at the Closing, or which are otherwise
reasonably required to cause the Transaction to be consummated.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF FLOTEK
Flotek
represents and warrants to the Stockholders as follows:
Section
2.1. Organization
and Qualification. Flotek is
a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted.
Section
2.2. Reports.
Flotek
has previously made available or delivered to the Company and the Stockholders
copies of the Form 10-K filed by it with the Securities and Exchange Commission
(the “SEC”) and
its quarterly reports filed with the SEC on Form 10-Q for the periods ending
March 31, 2004, June 30, 2004, and September 30, 2004 (“Flotek
SEC Reports”). As of
their respective dates, the Flotek SEC Reports did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Flotek has not made
any other representation to the Stockholders regarding the Flotek Shares. The
Flotek Shares will be restricted stock which will not be tradable on the open
market under the applicable securities laws.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
OF
THE STOCKHOLDERS
The
Stockholders jointly and severally represent and warrant to Flotek
that:
Section
3.1. Capitalization.
The
Xxxxxx Shares are the only issued and outstanding shares of the capital stock of
the Company. The Xxxxxx Shares are validly issued and are fully paid,
nonassessable and free of preemptive rights. There are no outstanding
subscriptions, options, calls, contracts, rights or warrants, including any
right of conversion or exchange obligating the Company or the Stockholders to
issue, deliver or sell, additional shares of the capital stock of the Company.
There are no voting trusts, proxies or other agreements or understandings to
which the Company or the Stockholders is a party or is bound with respect to the
voting of or restricting the sale of any shares of capital stock of the Company.
Each Stockholder has good, valid and marketable title to the Xxxxxx Shares
indicated as being owned by that Stockholder in Schedule A, free and clear of
all pledges, liens, claims, charges, options, calls, encumbrances, restrictions,
and assessments whatsoever.
Section
3.2. Non-Contravention. The
execution and delivery of this Agreement by the Company and the Stockholders and
the consummation by the Company and the Stockholders of the Transaction do not
and will not violate or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or result in a
right of termination or acceleration under, under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, or any agreement to which the Company is now a
party or by which the Company or any of its respective properties or assets may
be bound or affected.
Section
3.3. Financial
Statements. Company
has furnished Flotek with an unaudited balance sheet, income statement and
statement of cash flow for Company as of September 30, 2004 (collectively, the
"Financial
Statements"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles, consistently applied (“GAAP”), and
are accurate and complete (except, in the unaudited statements, for the absence
of footnote disclosures and for the absence of normal year-end audit adjustments
which are not material in the aggregate) and fairly present the financial
condition and result of operations of the Company.
Section
3.4. Absence
of Undisclosed Liabilities. Except
as indicated in the attached Disclosure Schedule, the Company has not incurred
any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature, except liabilities or obligations (a) which are
provided for in the Financial Statements or reflected in the notes thereto, (b)
which were incurred after September 30, 2004, and were incurred in the ordinary
course of business and consistent with past practices (“Ordinary
Course Liabilities”), or (c)
pursuant to this Agreement.
Section
3.5. Absence
of Certain Changes or Events. Since
September 30, 2004 the business of the Company has been conducted in the
ordinary course of business consistent with past practices, and there has not
been any event, occurrence, development or state of circumstances or facts which
has had, or could reasonably be anticipated to have, individually or in the
aggregate, a material adverse effect with respect to the Company.
Section
3.6. Title
to Assets. The
Company has good and indefeasible title to all of the assets which are indicated
as being owned by the Company on the Financial Statements, free and clear of all
mortgages, liens, pledges, charges, or encumbrance of any nature
whatsoever.
Section
3.7. Litigation. There
are no claims, suits, actions, or proceedings pending or, to the knowledge of
all of the Stockholders, threatened against or relating to the Company, before
any court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator. The Company is not subject to any judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or authority, or any
arbitrator.
Section
3.8. No
Violation of Law. The
Company is not in violation of or has been given notice or been charged with any
violation of, any law, statute, order, rule, regulation, ordinance or judgment
(including, without limitation, any applicable environmental law) of any
governmental or regulatory body or authority. No investigation or review by any
governmental or regulatory body or authority is pending or threatened, nor has
any governmental or regulatory body or authority indicated an intention to
conduct the same. The attached Disclosure Schedule contains an accurate and
complete description of the facts known to the Stockholders relating to the
environmental issue described therein. The Stockholders have provided to Flotek
copies of all written information in the possession of the Company which relates
to such environmental matter.
Section
3.9. Labor
Matters. There are
no material controversies pending or, to the Knowledge of all of the
Stockholders, threatened between the Company on the one hand and any of its
employees on the other.
Section
3.10. Agency
Agreements. Each
agreement pursuant to which the Company is a party pursuant to which the Company
is appointed to act as a sales representative or distributor is a valid, binding
and enforceable agreement of the Company and, to the knowledge of all of the
Stockholders, the other parties thereto. The Stockholders have provided Flotek
with copies of all such agreements. Except as indicated in the attached
Disclosure Schedule, there has not occurred any breach or default under any such
agreement on the part of the Company or, to the knowledge of all of the
Stockholders, any other parties thereto. Except as indicated in the attached
Disclosure Schedule, no event has occurred which with the giving of notice or
the lapse of time, or both, would constitute a default under any such agreement
on the part of the Company, or, to the knowledge of all of the Stockholders, any
of the other parties thereto. There is no dispute between the parties to any
such agreement as to the interpretation thereof or as to whether any party is in
breach or default thereunder, and no party to any such agreement has indicated
its intention to, or suggested it may evaluate whether to, terminate any such
agreement.
Section
3.11. Disclosure. No
representation or warranty of the Company or Stockholders set forth hereunder
contains any untrue statement of the material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading.
ARTICLE
IV
CONDUCT
OF BUSINESS PENDING THE CLOSING
Prior to
the Closing, the Stockholders will cause the Company to operate its respective
business in, and only in, the usual, regular and ordinary course of business in
substantially the same manner as operated on the date of this Agreement. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Closing, the Company will not make or declare a dividend
or other distribution to any of the Stockholders, or redeem any of its stock, or
increase the compensation of any of its officers or other employees. The
Stockholders will have complied with and will continue to comply with Section 8
of that certain letter of intent dated September 23, 2004.
ARTICLE
V
CONDITIONS
TO CLOSING
The
respective obligations of each party to effect the Transaction shall be subject
to the fulfillment or waiver, if permissible, on or prior to the Closing Date of
the following conditions:
(a) Each
party hereto shall have performed its agreements contained in this Agreement
required to be performed on or prior to the Closing Date and the representations
and warranties of each party contained in this Agreement shall be true and
correct in all material respects (or in all respects in the case of any
representation or warranty containing any materiality qualification) on and as
of the date made and on and as of the Closing Date as if made at and as of such
date, and the parties shall have executed and delivered executed and delivered
at Closing a certificate to that effect;
(b) Since
September 30, 2004, there shall have been no changes that constitute, and no
event or events shall have occurred which have resulted in or constitute, a
material adverse effect with respect to the Company; and
(c) Flotek
shall have obtained a loan from a bank in an amount sufficient to fund the
payment of the Consideration to the Stockholders.
ARTICLE
VI
INDEMNIFICATION
Section
6.1. Indemnification
of Flotek. The
Stockholders each agree to jointly and severally indemnify Flotek and the
Company (including their respective officers, directors, employees and agents)
against, and hold each of them harmless from and against, any and all claims,
actions, causes of action, arbitrations, proceedings, losses, damages,
liabilities, judgments and expenses (including, without limitation, reasonable
attorneys' fees) ("Indemnified
Amounts")
incurred by the indemnified party as a result of (a) any error, inaccuracy,
breach or misrepresentation in any of the representations and warranties made by
or on behalf of the Stockholders in this Agreement, (b) any violation or breach
by any of the Stockholders of or default by any of the Stockholders under the
terms of this Agreement, (c) any liability or other claims concerning the
operations of the Company on or prior to the Closing Date which are not
reflected in the Financial Statements or Ordinary Course Liabilities, whether or
not such liability or claim is required to be accrued under GAAP, or (d) any
taxes relating to the Company for periods on or before the Closing Date in
excess of the amount reserved for accrued taxes in the Financial Statements.
Notwithstanding anything to the contrary set forth herein, none of the
Stockholders shall be required to indemnify Flotek or the Company with respect
to any matters described on the attached Disclosure Schedule provided that such
description is accurate and complete. The indemnified party shall be entitled to
recover its reasonable and necessary attorneys' fees and litigation expenses
incurred in connection with the successful enforcement of its rights under this
Section.
The indemnification obligations under this Section 6.1 shall apply regardless of
whether any suit or action results solely or in part from the active, passive or
concurrent negligence of the indemnified party
Section
6.2. Survival;
Threshold and Limits of Liability. No
Stockholder shall be liable under this Agreement for the breach of any
representation or warranty unless the aggregate amount of such liability (for
all such claims against all indemnifying parties pursuant to Section 6.1 or 6.2,
as the case may be) exceeds $50,000, in which event the Stockholder shall be
fully liable without regard to such threshold. The maximum liability of the
Stockholders with respect to all Indemnified Amounts under Section 6.1 shall be
limited to their share of $8,075,000, based on relative ownership of the Xxxxxx
Shares immediately prior to the Closing. The liability of the Stockholders with
respect to their representations and warranties shall expire one (1) year after
the Closing Date, except with respect to claims with respect to any such breach
asserted against any of them pursuant to Section 6.1 prior to the expiration of
such period.
Nothing
herein shall be construed to authorize the withholding of any payment obligation
referenced in Section 1.2 of this agreement.
ARTICLE
VII
MISCELLANEOUS
Section
7.1. Termination. This
Agreement may be terminated at any time prior to the Closing by either the
Stockholders or Flotek if:
(a) the
representations and warranties of the other party shall fail to be true and
correct in all material respects (or in all respects in the case of any
representation or warranty containing any materiality qualification) on and as
of the date made or, except in the case of any such representations and
warranties made as of a specified date, on and as of any subsequent date as if
made at and as of the subsequent date and such failure shall not have been cured
in all material respects (or in all respects in the case of any representation
or warranty containing any materiality qualification) within 30 days after
written notice of such failure;
(b) the
Transaction is not completed by February 28, 2005 (provided that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to a
party if the failure of that party to fulfill any obligation under or in
connection with this Agreement has been the cause of or resulted in the failure
of the Transaction to occur on or before such date).
Section
7.2.
Effect of Termination. In the
event of termination of this Agreement by either Flotek or the Stockholders
pursuant to the provisions of Section 7.1, this Agreement shall forthwith become
void and there shall be no further obligations on the part of the Stockholders
or Flotek or their respective officers or directors, or the Stockholders.
Nothing in this Section 7.2 shall relieve any party from liability for any
breach of this Agreement, however.
Section
7.3. Remedies. If any
legal action or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or proceeding
in addition to any other relief to which it or he may be entitled at law or
equity.
Section
7.4. Notices. All
notices, consents, demands or other communications required or permitted to be
given pursuant to this Agreement shall be deemed sufficiently given: (i) when
delivered personally during a business day to the appropriate location described
below or telefaxed to the telefax number indicated below, or (ii) five (5)
business days after the posting thereof by United States first class, registered
or certified mail, return receipt requested, with postage fee prepaid and
addressed:
| If to Flotek: | Flotek Industries, Inc. | ||
| 0000 Xxxxxx Xxxxxxx Xxxxx | |||
| Xxxxxxx, Xxxxx 00000 | |||
| Telefax No. (000) 000-0000 | |||
| With a copy to: | Xxxxx X. Xxxxxxx | ||
| Xxxxxxx & Xxxxxxx LLP | |||
| 0000 Xx. Xxxxx Xxxxx, Xxxxx 000 | |||
| Xxxxxxx, Xxxxx 00000 | |||
| Telefax No. (000) 000-0000 | |||
| If to Xxxx Xxxxxx or Xxxxx Xxxxxx: | X.X. Xxx 000 | ||
| 000 Xxxxxxxx Xxxxx Xxxxx | |||
|
Xxxxxxxxx,
Xxxxx 00000 | |||
| Telefax No. (000)000-0000 | |||
| With a copy to: | Xxxx Xxxxx | ||
| Xxxxx & Xxxxx | |||
| 0 Xxxx Xxxx Xxxxxx | |||
| Xxxxxxxxx, Xxxxx 00000 | |||
| Telefax No. (000)000-0000 | |||
| If to Xxxx Xxxxxxxxx: | 000 Xxxxx 000 Xxxx | ||
| Xxxxxx, Xxxx 00000 |
Section
7.5. Successors. This
Agreement shall be binding upon each of the parties upon their execution, and
inure to the benefit of the parties hereto and their successors and assigns.
Section
7.6. Severability. In the
event that any one or more of the provisions contained in this Agreement or in
any other instrument referred to herein, shall, for any reason, be held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision of this Agreement or
any such other instrument.
Section
7.7. Section
Headings. The
section headings used herein are descriptive only and shall have no legal force
or effect whatsoever. Except to the extent the context specifically indicates
otherwise, all references to articles and sections refer to articles and
sections of this Agreement, and all references to the exhibits and schedules
refer to exhibits and schedules attached hereto, each of which is made a part
hereof for all purposes.
Section
7.8. Gender.
Whenever the context so requires, the masculine shall include the feminine and
neuter, and the singular shall include the plural and conversely.
Section
7.9. Governing
Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas, U.S.A., applicable to agreements and contracts executed and to
be wholly performed there, without giving effect to the conflicts of law
principles thereof.
Section
7.10. Multiple
Counterparts. This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original.
Section
7.11. Waiver. Any
waiver by either party to be enforceable must be in writing and no waiver by
either party shall constitute a continuing waiver.
Section
7.12. Entire
Agreement. This
Agreement and the other agreements referred to herein set forth the entire
understanding of the parties hereto relating to the subject matter hereof and
thereof and supersede all prior agreements and understandings among or between
any of the parties relating to the subject matter hereof and
thereof.
Section
7.13. Cross
References.
References in this Agreement to Articles, Sections, Exhibits, or Schedules shall
be deemed to be references to Articles, Sections, Exhibits, and Schedules of
this Agreement unless the context specifically and expressly requires
otherwise.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first set forth above.
| COMPANY: | |||
| FLOTEK: | |||
| FLOTEK INDUSTRIES, INC., a Delaware corporation | |||
| By: /s/ Xxxxx X. Xxxxx, Xx. | |||
| Name: Xxxxx X. Xxxxx, Xx. | |||
| Title: Chairman & Chief Executive Officer | |||
| STOCKHOLDERS: | |||
|
/s/
Xxxx Xxxxxx
|
|||
| Xxxx Xxxxxx | |||
| /s/ Xxxxx Xxxxxx | |||
| Xxxxx Xxxxxx | |||
| /s/ Xxxx Xxxxxxxxx | |||
| Xxxx Xxxxxxxxx | |||
