UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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): February 13, 2017

 

 

Flotek Industries, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-13270   90-0023731

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

   
10603 W. Sam Houston Pkwy N., Suite 300  
Houston, Texas   77064
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (713) 849-9911

Not applicable

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Departure of Robert M. Schmitz

As previously reported, on November 2, 2016, Robert M. Schmitz notified Flotek Industries, Inc. (the “Company”) of his decision to retire as the Company’s Executive Vice President and Chief Financial Officer effective in the first quarter of 2017. Mr. Schmitz’s decision to retire was not due to any disagreement with the Company, including with respect to any matter relating to the Company’s operations, policies or practices. Mr. Schmitz’s retirement is effective February 13, 2017 (the “Schmitz Retirement Date”). In connection with his retirement, the Company and Mr. Schmitz entered into a Retirement Agreement (the “Schmitz Retirement Agreement”). Pursuant to the Schmitz Retirement Agreement, on the Effective Date (as such term is defined in the Schmitz Retirement Agreement), Mr. Schmitz shall receive a one-time payment of $100,000.00 and, at the end of each of the next nine full calendar months following the Effective Date, shall receive a payment of $39,930.56. Following the Schmitz Retirement Date, Mr. Schmitz shall receive coverage at Company expense under the employee health insurance plan of the Company until August 31, 2018. The description of the Schmitz Retirement Agreement is qualified in its entirety by reference to the copy thereof filed as Exhibit 10.1 to this Form 8-K, which is incorporated by reference.

Appointment of Richard Walton as Chief Financial Officer

Also on February 13, 2017, H. Richard Walton was appointed as Executive Vice President and Chief Financial Officer of Flotek. Mr. Walton has served as Chief Financial Officer Emeritus since May 2015. Previously, Mr. Walton served as Executive Vice President and Chief Financial Officer from March 2013 through May 2015 and Interim Chief Financial Officer from January 2013 through March 2013. Prior to joining Flotek, Mr. Walton spent his entire 30 year career in public accounting, including 20 years as an audit partner at KPMG. His experience includes financial statement audits and registration of securities with the SEC. Following his retirement from KPMG, LLP in 2003, Mr. Walton served as a consultant to public companies, including Flotek since 2010. Mr. Walton is a certified public accountant and has served as an officer in the United States Army. He holds a Bachelor’s degree from Westminster College in Economics and Business Administration.

Departure of Steve Reeves

On February 16, 2017, Steve Reeves, Executive Vice President, Operations of the Company, indicated his desire to retire from his position with the Company and the Company’s subsidiaries, effective June 30, 2017 (the “Reeves Retirement Date”). Mr. Reeves’ decision to retire is not due to any disagreement with the Company, including with respect to any matter relating to the Company’s operations, policies or practices. In connection with his retirement, the Company and Mr. Reeves entered into a Retirement Agreement (the “Reeves Retirement Agreement”). Pursuant to the Reeves Retirement Agreement, starting on the Effective Date (as such term is defined in the Reeves Retirement Agreement), Mr. Reeves shall receive a bi-weekly salary of $16,730.77 until the Reeves Retirement Date. Following the Reeves Retirement Date, Mr. Reeves shall receive coverage at Company expense under the employee health insurance plan of the Company until December 31, 2018. Furthermore, on the Effective Date, the Company shall issue to Mr. Reeves, 68,333 shares of common stock pursuant to a Restricted Stock Agreement between Mr. Reeves and the Company. Such stock shall vest as of the Reeves Retirement Date along with the 25,014 unvested shares of common stock which were issued to Mr. Reeves pursuant to the terms of the Restricted Stock Agreement between the Company and Mr. Reeves, dated January 26, 2015. The description of the Reeves Retirement Agreement is qualified in its entirety by reference to the copy thereof filed as Exhibit 10.2 to this Form 8-K, which is incorporated by reference.

Compensatory Arrangements of Certain Officers

On February 13, 2017, the Compensation Committee (the “Compensation Committee”) of the board of directors of the Company (the “Board”) approved base salaries for certain of the executive officers of the Company effective as of January 1, 2017 and, in order to provide appropriate incentives to work towards the continued growth


and success of the Company, adopted a Management Incentive Plan (the “2017 MIP”) and Performance Unit Plan (“2017 PUP”) with respect to certain of its senior executive officers. The table below sets forth the 2017 annual base salary for the Company’s executive officers, including the principal executive officer, the principal financial officer and the other executive officers of the Company.

The 2017 MIP provides for the payment of cash bonuses to management personnel selected by the Compensation Committee, including all of the named executive officers. These bonuses are expressed as a percentage of each participant’s 2017 annual base salary (the “Target Bonus Percentage”). The Target Bonus Percentage for the President, Chief Executive Officer and Chairman is 110% of base salary. The range for other participants is 75% to 85% of base salary. The table below sets forth the 2017 Target Bonus Percentage for purposes of the 2017 MIP for the Company’s executive officers, including the principal executive officer, the principal financial officer and the other executive officers of the Company.

Bonuses under the 2017 MIP are made up of three separate parts: a bonus based on Earnings Before Interest, Taxes, Depreciation and Amortization (the “EBITDA Bonus”), a bonus based on revenues (the “Revenue Bonus”) and a bonus based on the achievement of certain goals set by the Compensation Committee for each participant (the “Goal Bonus”).

The EBITDA Bonus accounts for 60% of the total bonus potentially payable under the MIP. The EBITDA Bonus is based on the Company’s 2017 Adjusted EBITDA. “Adjusted EBITDA” means the consolidated EBITDA of the Company, excluding the results from any operations considered discontinued operations for GAAP purposes, plus any amounts deducted in computing EBITDA with respect to incentive compensation (including stock compensation), the MIP, financing transaction costs (whether paid in cash or not), and other noncash and/or nonrecurring charges not directly related to the ongoing operations of the Company, equitably adjusted by the Compensation Committee (in its discretion) to reflect the effect of any acquisition or disposition of any assets and/or lines of business or the impact of any extraordinary or nonrecurring items. Depending on the performance of the Company’s 2017 Adjusted EBITDA, a percentage (ranging from 0-200%) will be applied to each participant’s Target Bonus Percentage (the “EBITDA Bonus Percentage”). The EBITDA Bonus of a participant shall equal 60% of the EBITDA Bonus Percentage of the participant, multiplied by the annual salary as of the date that the MIP becomes applicable to the participant.

The Revenue Bonus accounts for 20% of the total bonus potentially payable under the MIP. The Revenue Bonus is based on the performance of the Company’s “Adjusted Revenue.” Adjusted Revenue is consolidated revenue, as determined pursuant to GAAP, excluding the results from any operations considered discontinued operations for GAAP purposes, equitably adjusted by the Compensation Committee (in its discretion) to reflect the effect of any acquisition or disposition of any assets and/or lines of business and other extraordinary, nonrecurring items. Similar to the EBITDA Bonus, depending on the performance of the Company’s Adjusted Revenues, a percentage (ranging from 0-200%) will be applied to each participant’s Target Bonus Percentage relating to the Revenue Bonus (the “Revenue Bonus Percentage”). The Revenue Bonus of a participant shall equal 20% of the Revenue Bonus Percentage of the participant, multiplied by the annual salary as of the date that the MIP becomes applicable to the participant.

The Goal Bonus accounts for 20% of the total bonus potentially payable under the MIP. The Compensation Committee shall, on or before March 15, 2017, inform the participant in writing of the goals which the Compensation Committee has established as being the criteria to be met by the participant in order to receive his/her Goal Bonus. The Compensation Committee may establish more than one goal for the participant and may allocate the Goal Bonus of that participant among the goals. The Goal Bonus (or a part thereof) shall be payable to the participant if the Compensation Committee determines, in its discretion, that the goal(s) that the Compensation Committee has determined to be applicable to that participant for that Goal Bonus has been achieved by the participant. The Goal Bonus shall equal 20% of the Target Bonus Percentage of that participant, multiplied by the annual base salary of the participant as of the date that the MIP becomes applicable to the participant.

The 2017 PUP permits the Company to grant Performance Units to certain of the officers, employees and other service providers of the Company. The 2017 PUP provides for an amount of Target Units to be granted to each participant. Such Target Units are calculated by multiplying the annual salary of the participant by the Award Value Multiple listed below and dividing such product by the greater of $13.00 or the closing price on the New York Stock Exchange of the Common Stock of the Company as of the date of the award, February 13, 2017. Each participant shall be issued the number of shares of Restricted Stock equal to the number of Target Units held multiplied by the Performance Percentage. The Performance Percentage will be either 0%, 50%, 100% or 200% depending on the performance of the Company’s stock relative to members of a peer group listed in the 2017 PUP.


Executive Officer

   2017 Base Annual Salary      2017 Target Bonus
Percentage of Salary For
Purpose of Cash
Bonuses under the 2017
MIP
    2017 Award Value
Multiple of Salary for
Purposes of the 2017 PUP
 

John Chisholm*

Chairman, President and Chief Executive Officer

     860,000         110     3.75   

Joshua A. Snively, Sr.

Executive Vice President, Research and Development

     446,670         85     2.00   

Robert C. Bodnar,

Executive Vice President and Transformation Officer

     425,900         75     2.00   

H. Richard Walton,

Executive Vice President and Chief Financial Officer

     375,000         75     2.00   

A portion of Mr. Chisholm’s compensation is payable to companies controlled by Mr. Chisholm pursuant to the Fifth Amended and Restated Service Agreement, as amended, by and between the Company and such companies controlled by Mr. Chisholm. On February 13, 2017, the Board authorized the Company to enter into a letter agreement with Protechnics II, Inc. and Chisholm Management, Inc. to amend that certain Fifth Amended and Restated Service Agreement with such parties pursuant to which the compensation payable to such parties, which relates to the services provided by John Chisholm as Chairman, President and Chief Executive Officer of the Company, is increased to $810,000 effective as of January 1, 2017. This compensation amount is included in the base annual salary amount indicated above for Mr. Chisholm. The description of the letter agreement is qualified in its entirety by reference to the copy thereof filed as Exhibit 10.3 to this Form 8-K, which is incorporated by reference.

 

Item 9.01. Financial Statements and Exhibits.

 

  (d) Exhibits.

 

Exhibit Number

  

Description

10.1    Retirement Agreement dated February 14, 2017 between Robert M. Schmitz and the Company.
10.2    Retirement Agreement dated February 16, 2017 between Steve Reeves and the Company.
10.3    Letter Agreement dated February 13, 2017 among the Company, Protechnics II, Inc. and Chisholm Management, Inc. amending that certain Fifth Amended and Restated Service Agreement among such parties.


SIGNATURES

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.

Date: February 16, 2017

     

/s/ H. Richard Walton

      H. Richard Walton
      Executive Vice President and Chief Financial Officer


EXHIBIT INDEX

 

Exhibit Number

  

Description

10.1    Retirement Agreement dated February 14, 2017 between Robert Schmitz and the Company.
10.2    Retirement Agreement dated February 16, 2017 between Steve Reeves and the Company.
10.3    Letter Agreement dated February 13, 2017 among the Company, Protechnics II, Inc. and Chisholm Management, Inc. amending that certain Fifth Amended and Restated Service Agreement among such parties.

Exhibit 10.1

RETIREMENT AGREEMENT

This Retirement Agreement (“Agreement”) is entered into as of the Effective Date (as hereinafter defined) by and between Robert M. Schmitz (“Schmitz”), an individual, and Flotek Industries, Inc., a Delaware corporation (the “Company”).

WHEREAS, pursuant to the terms of that certain Employment Agreement entered into between the Company and Schmitz on May 29, 2015 to be effective as of May 1, 2015 (the “Employment Agreement”), Schmitz is serving as the Chief Financial Officer and Executive Vice President of the Company and in various positions with the Company’s subsidiaries; and

WHEREAS, Schmitz is retiring from his position of Chief Financial Officer and Executive Vice President of the Company and his positions with the Company’s subsidiaries on February 13, 2017;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby expressly acknowledged, the undersigned parties agree as follows:

1. Date of Retirement .

(a) Effective as of February 13, 2017 (the “Retirement Date”), Schmitz shall retire and be separated from his employment by the Company and from the position of Chief Financial Officer and Executive Vice President of the Company and all of the positions held by Schmitz with respect to the Company’s subsidiaries. This Agreement shall become effective, however, on the “Effective Date,” as defined in subsection (b) below.

(b) Schmitz understands that he has 21 days from February 14, 2017 (the “Submittal Date”), which is the date a draft of this Agreement was delivered to him, for the purpose of reviewing and considering this Agreement and making his decision whether to agree to and execute this document. Schmitz understands that, while it is his right to decide to enter into and execute this Agreement before the end of this 21-day period that he is under no obligation to do so. If Schmitz signs and returns this Agreement before the end of this 21-day period, it is because Schmitz freely chose to do so after carefully considering its terms. Schmitz is entitled to revoke his execution of this Agreement within 7 days of signing it, and this Agreement does not become effective or enforceable until the day after this 7-day revocation period has expired (the “Effective Date”). If the revocation period expires of a weekday or holiday, Schmitz will have until the end of the next business day to revoke. Notwithstanding anything to the contrary set forth herein, neither Schmitz nor the Company shall have any obligation hereunder until such 7-day revocation period has expired with such revocation right unexercised.


2. Severance Payment and Benefits .

(a) In exchange for the promises of Schmitz contained in this Agreement and the release of claims as set forth in Section 4 of this Agreement, the Company will pay to Schmitz a total of $459,375.04 as follows: (i) $100,000.00 on the Effective Date and (ii) $39,930.56 at the end of each of the next nine full calendar months following the Effective Date. Schmitz agrees that the consideration the Company will provide includes amounts in addition to anything of value to which Schmitz is already entitled.

(b) Schmitz shall receive coverage at Company expense under the employee health insurance plan of the Company for the period following the Retirement Date until August 31, 2018.

(c) All payments to Schmitz shall be subject to withholding of employment, FICA, and other taxes as required by law.

3. Other Benefits . Schmitz shall not be entitled to coverage under any employee benefit plan of the Company subsequent to the Retirement Date except as set forth in Section 2(b). The terms of this Agreement shall not affect in any respect the rights of Schmitz with respect to contributions previously made by or with respect to Schmitz pursuant to the Section 401(k) Plan of the Company or any other vested rights under ERISA-covered employee benefit plans, which shall be governed by the terms of such plan(s), as applicable on the date Schmitz signs this Agreement.

4. Release . In consideration for the Company’s promises in this Agreement, including the promise to pay compensation to Schmitz pursuant to Section 2(a) hereof, Schmitz, on behalf of himself and his heirs, executors, administrators, successors, assigns, and any other person claiming by, through, or under Schmitz, voluntarily and knowingly waives, releases and discharges the Company, its subsidiaries and their direct and indirect affiliates, and their respective successors, assigns, divisions, representatives, agents, officers, directors, stockholders, and employees (the “Released Parties”), from any claims, demands and/or causes of action whatsoever, presently known or unknown, that are based upon facts occurring on or prior to the Effective Date, including but not limited to, the following: (a) any statutory claims under the Age Discrimination in Employment Act of 1967, the Older Workers Benefits Protection Act of 1990, the Americans with Disabilities Act of 1990, the Civil Rights Acts of 1964 and 1991, the National Labor Relations Act, or other U.S. (federal, state or local) or international laws (all as amended), (b) any tort or contract claims, (c) any claims for options or rights to acquire stock or the issuance of or right to retain restricted stock, (d) any claims or rights with respect to severance compensation or any other consideration under the Employment Agreement, and/or (e) any claims, matters or actions related to Schmitz’s employment and/or affiliation with, or

 

Page 2 of 7


separation from, the Company, and any facts or circumstances relating to the negotiation of this Agreement. Such release does not, however, reach the Company’s obligations under this Agreement or any obligations under the Bylaws of the Company to Schmitz with regard to indemnification and advancement of expenses to or for the benefit of Schmitz. Nothing in this Agreement is intended to waive claims (i) for unemployment or workers’ compensation benefits, (ii) that may arise after Schmitz signs this Agreement, or (iii) which cannot be released by private agreement. In addition, nothing in this Agreement including but not limited to the release of claims, proprietary information, confidentiality, cooperation, and non-disparagement provisions, prevent Schmitz from filing a charge or complaint with or from participating in an investigation or proceeding conducted by the EEOC, NLRB, or any other any federal, state or local agency charged with the enforcement of any laws, or from exercising rights under Section 7 of the NLRA to engage in joint activity with other employees, although by signing this release Schmitz is waiving rights to individual relief based on claims asserted in such a charge or complaint, or asserted by any third-party on Schmitz’s behalf, except where such a waiver of individual relief is prohibited.

5. No Assignment of Claims . The Company and Schmitz each represents and warrants to the other that it or he has not made any assignment and will make no assignment of any of the claims which are purported to be released and discharged by this Agreement.

6. Return of Company Property . On the Retirement Date, Schmitz agrees to return to the Company all of the Company’s property in his possession, including but not limited to all of the tangible and intangible property belonging to the Company and relating to his employment with the Company. Schmitz further represents and warrants that Schmitz will not retain any copies, electronic or otherwise, of such property.

7. Additional Covenants .

(a) Schmitz acknowledges (i) receipt of all compensation and benefits due through the Retirement Date as a result of services performed for the Company with the receipt of a final paycheck except as provided in this Agreement; (ii) Schmitz has reported to the Company any and all work-related injuries incurred during employment; (iii) the Company properly provided any leave of absence because of Schmitz’s or a family member’s health condition and Schmitz has not been subjected to any improper treatment, conduct or actions due to a request for or taking such leave; (iv) Schmitz has provided the Company with written notice of any and all concerns regarding suspected ethical and compliance issues or violations on the part of the Company, and (v) Schmitz has not filed any complaints, claims, or actions against the Company or any Released Party.

 

Page 3 of 7


(b) Schmitz agrees to cooperate fully with the Company in its prosecution, defense of or other participation in any administrative, judicial or other proceeding arising from any charge, complaint or other action which has been or may be filed by or against the Company that relate to matters within the knowledge or responsibility of Schmitz.

(c) Schmitz will not solicit, or assist or facilitate another in soliciting, for employment any natural person who as of the Effective Date is employed by the Company or any of its subsidiaries in any capacity, or personally solicit, or assist or facilitate another in soliciting, any such employees to terminate their employment with the Company or personally facilitate or assist in the hiring of any such employee by any other person for a period of one year following the Retirement Date.

8. Confidentiality .

(a) Schmitz and the Company acknowledge that by virtue of his prior relationship with the Company, Schmitz has previously had access to certain Confidential Information and been involved in the creation of certain Confidential Information. Schmitz acknowledges and agrees that all such Confidential Information constitutes valuable, special and unique property belonging exclusively to the Company. Schmitz agrees that he will not, for any reason or purpose whatsoever, disclose any Confidential Information to any party without express written authorization of the Company.

(b) “Confidential Information” means any confidential or proprietary information of the Company, including, without limitation, all documents or information, in whatever form or medium, concerning or evidencing operations, activities, strategies, long range plans, financial and tax information, personnel information, plans, opportunities, and customer information, but excluding any such information that is or becomes generally available to the public other than as a result of any breach of this Agreement or other unauthorized disclosure.

(c) This Agreement and all terms of this Agreement are hereby designated as confidential information. Neither Schmitz nor the Company, nor their agents and representatives, are permitted to discuss the nature and terms of this agreement with any third party, except that both parties are permitted to discuss the nature and terms of this Agreement with appropriate tax, accounting or legal professionals, as necessary in any legal proceedings directly related to the provisions and terms of this Agreement, or as otherwise required by law or compelled by a court of competent jurisdiction after reasonable notice to the Company.

 

Page 4 of 7


9. Non-Disparagement . Schmitz agrees not to disparage the Company, its directors, officers or employees, and the Company agrees that its senior managers will not disparage Schmitz or his tenure or efforts at the Company.

10. Governing Law . The execution, validity, interpretation and performance of this Agreement shall be determined and governed exclusively by the laws of the State of Texas, without reference to the principles of conflict of laws.

11. Entire Agreement . This Agreement represents the complete agreement among Schmitz and the Company concerning the subject matter hereof and supersedes all prior agreements and understandings, written or oral, between Schmitz and any member of the Company concerning the subject matter of this Agreement except those provisions of the Employment Agreement which survive the “Termination Date” as set forth in the Employment Agreement. No attempted modification or waiver of any of the provisions of this Agreement shall be binding on any party hereto unless in writing and signed by Schmitz and the Company. This Agreement is binding upon and inures to the benefit of the parties’ heirs, successors and permitted assigns.

12. Acknowledgements . This Agreement has been entered into voluntarily and not as a result of coercion, duress or undue influence. Schmitz acknowledges that he has read and fully understands the terms of this Agreement. The company hereby advises Schmitz that he should consult with an attorney before executing this Agreement. Schmitz understands and agrees that any modification or alteration of any terms of this Agreement by Schmitz voids this Agreement in its entirety. Schmitz agrees with the Company that changes, whether material or immaterial, do not restart the running of the 21-day consideration period provided in Paragraph 1.

13. Dispute Resolution . Any and all disputes between the parties to this Agreement arising out of or in connection with the negotiation, execution, interpretation, performance or non-performance of this Agreement and the covenants and obligations contemplated herein, including but not limited to any claims against Schmitz, the Company, its respective officers, directors, employees or agents, shall be solely and finally settled by arbitration before three arbitrators conducted in Houston, Texas pursuant to the Commercial Rules of the American Arbitration Association, as now in effect or hereafter amended. Judgment on the award of the arbitrator may be entered in any court having jurisdiction over the party against whom enforcement of the award is being sought, and the parties hereby irrevocably consent to the jurisdiction of any such court for the purpose of enforcing any such award. The parties agree and acknowledge that any arbitration proceedings between them, and the outcome of such proceedings, shall be kept strictly confidential. In the event of any such dispute concerning the subject matter of this Agreement, the prevailing party shall be entitled to recover reasonable attorney’s fees incurred for the arbitration.

 

Page 5 of 7


14. Notices . All notices, consents, waivers and other communications required or permitted by this Agreement shall be in writing and shall be deemed given to a party when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to the following addresses, facsimile numbers or e-mail addresses and marked to the attention of the person (by name or title) designated below (or to such other address, facsimile number, e-mail address or person as a party may designate by notice to the other parties):

Company:

Flotek Industries, Inc.

Attention: President

10603 W. Sam Houston Pkwy. N., Suite 300

Houston, Texas 77064

with a mandatory copy to:

Casey W. Doherty

Doherty & Doherty LLP

1717 St. James Place, Ste. 520

Houston, Texas 77056

Fax no.: 713-572-1001

E-mail address: casey@doherty-law.com

Schmitz:

 

 

   

 

   

 

   

15. Execution . This Agreement may be executed in counterparts, each of which will be deemed an original and shall be deemed duly executed upon the signing of the counterparts by the parties.

[Signature Page Follows]

 

Page 6 of 7


The parties to this Agreement have executed this Agreement on the dates set forth below.

 

/s/ Robert M. Schmitz

Robert M. Schmitz

February 14, 2017

Date

FLOTEK INDUSTRIES, INC.

By:

 

/s/ John Chisholm

Name: John Chisholm

Title: President and CEO

February 14, 2017

Date

 

Page 7 of 7

Exhibit 10.2

RETIREMENT AGREEMENT

This Retirement Agreement (“Agreement”) is entered into as of the Effective Date (as hereinafter defined) by and between Steve Reeves (“Reeves”), an individual, and Flotek Industries, Inc., a Delaware corporation (the “Company”).

WHEREAS, Reeves is serving as the Executive Vice President, Operations, of the Company and in various positions with the Company’s subsidiaries; and

WHEREAS, Reeves is retiring from his positions with the Company and the Company’s subsidiaries on June 30, 2017;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby expressly acknowledged, the undersigned parties agree as follows:

1. Date of Retirement .

(a) Effective as of June 30, 2017 (the “Retirement Date”), Reeves shall retire and be separated from his employment by the Company and from the position of Executive Vice President, Operations of the Company and all of the positions held by Reeves with respect to the Company and its subsidiaries. This Agreement shall become effective, however, on the “Effective Date,” as defined in subsection (b) below.

(b) Reeves understands that he has 21 days from February 14, 2017 (the “Submittal Date”), which is the date a draft of this Agreement was delivered to him, for the purpose of reviewing and considering this Agreement and making his decision whether to agree to and execute this document. Reeves understands that, while it is his right to decide to enter into and execute this Agreement before the end of this 21-day period that he is under no obligation to do so. If Reeves signs and returns this Agreement before the end of this 21-day period, it is because Reeves freely chose to do so after carefully considering its terms. Reeves is entitled to revoke his execution of this Agreement within 7 days of signing it, and this Agreement does not become effective or enforceable until the day after this 7-day revocation period has expired (the “Effective Date”). If the revocation period expires of a weekday or holiday, Reeves will have until the end of the next business day to revoke. Notwithstanding anything to the contrary set forth herein, neither Reeves nor the Company shall have any obligation hereunder until such 7-day revocation period has expired with such revocation right unexercised.

2. Compensation through Retirement Date, Severance and Benefits .


(a) Reeves shall receive a bi-weekly salary of $16,730.77 during the period from January 1, 2017 through the Retirement Date in accordance with the payroll policies and practices of the Company.

(b) Reeves shall receive coverage at Company expense under the employee health insurance plan of the Company for the period following the Retirement Date until December 31, 2018.

(c) In exchange for the promises of Reeves contained in this Agreement and the release of claims as set forth in Section 4 of this Agreement, the Company shall issue to Reeves on the Effective Date 68,333 shares of common stock of the Company pursuant to a Restricted Stock Agreement between the Company and Reeves in the form attached hereto as Exhibit A and vest as of the Retirement Date the shares of the common stock of the Company issued to Reeves pursuant to Restricted Stock Agreements between the Company and Reeves as set forth in Section 3(a). Reeves agrees that the consideration the Company will provide includes amounts in addition to anything of value to which Reeves is already entitled.

(d) All payments to Reeves shall be subject to withholding of employment, FICA, and other taxes as required by law.

3. Equity Awards; Other Benefits .

(a) The following shares, which have not become vested shall be considered vested as of the Retirement Date: (i) 68,333 shares of the common stock of the Company issued pursuant to the terms of the Restricted Stock Agreement between the Company and Reeves attached hereto as Exhibit A and (ii) 25,014 shares of the common stock of the Company issued pursuant to the terms of the Restricted Stock Agreement between the Company and Reeves dated January 26, 2015.

(b) Reeves shall not be entitled to coverage under any employee benefit plan of the Company subsequent to the Retirement Date except as set forth in Section 2(b). The terms of this Agreement shall not affect in any respect the rights of Reeves with respect to contributions previously made by or with respect to Reeves pursuant to the Section 401(k) Plan of the Company or any other vested rights under ERISA-covered employee benefit plans, which shall be governed by the terms of such plan(s), as applicable on the date Reeves signs this Agreement.

 

Page 2 of 14


4. Release . In consideration for the Company’s promises in this Agreement, including the promises in Sections 2(c) and 3(a) hereof to issue on the Effective Date 68,333 shares of common stock of the Company to Reeves and to vest as of the Retirement Date the shares of the common stock of the Company issued to Reeves pursuant to Restricted Stock Agreements between the Company and Reeves, Reeves, on behalf of himself and his heirs, executors, administrators, successors, assigns, and any other person claiming by, through, or under Reeves, voluntarily and knowingly waives, releases and discharges the Company, its subsidiaries and their direct and indirect affiliates, and their respective successors, assigns, divisions, representatives, agents, officers, directors, stockholders, and employees (the “Released Parties”), from any claims, demands and/or causes of action whatsoever, presently known or unknown, that are based upon facts occurring on or prior to the Effective Date, including but not limited to, the following: (a) any statutory claims under the Age Discrimination in Employment Act of 1967, the Older Workers Benefits Protection Act of 1990, the Americans with Disabilities Act of 1990, the Civil Rights Acts of 1964 and 1991, the National Labor Relations Act, or other U.S. (federal, state or local) or international laws (all as amended), (b) any tort or contract claims, (c) any claims for options or rights to acquire stock or the issuance of or right to retain restricted stock, except as set forth in this Agreement and/or (d) any claims, matters or actions related to Reeves’s employment and/or affiliation with, or separation from, the Company, and any facts or circumstances relating to the negotiation of this Agreement. Such release does not, however, reach the Company’s obligations under this Agreement or any obligations under the Bylaws of the Company to Reeves with regard to indemnification and advancement of expenses to or for the benefit of Reeves. Nothing in this Agreement is intended to waive claims (i) for unemployment or workers’ compensation benefits, (ii) that may arise after Reeves signs this Agreement, or (iii) which cannot be released by private agreement. In addition, nothing in this Agreement including but not limited to the release of claims, proprietary information, confidentiality, cooperation, and non-disparagement provisions, prevent Reeves from filing a charge or complaint with or from participating in an investigation or proceeding conducted by the EEOC, NLRB, or any other any federal, state or local agency charged with the enforcement of any laws, or from exercising rights under Section 7 of the NLRA to engage in joint activity with other employees, although by signing this release Reeves is waiving rights to individual relief based on claims asserted in such a charge or complaint, or asserted by any third-party on Reeves’s behalf, except where such a waiver of individual relief is prohibited.

5. No Assignment of Claims . The Company and Reeves each represents and warrants to the other that it or he has not made any assignment and will make no assignment of any of the claims which are purported to be released and discharged by this Agreement.

6. Return of Company Property . On the Retirement Date, Reeves agrees to return to the Company all of the Company’s property in his possession, including but not limited to all of the tangible and intangible property belonging to the Company and relating to his employment with the Company. Reeves further represents and warrants that Reeves will not retain any copies, electronic or otherwise, of such property.

 

Page 3 of 14


7. Additional Covenants .

(a) Reeves acknowledges (i) receipt of all compensation and benefits due through the Retirement Date as a result of services performed for the Company with the receipt of a final paycheck except as provided in this Agreement; (ii) Reeves has reported to the Company any and all work-related injuries incurred during employment; (iii) the Company properly provided any leave of absence because of Reeves’s or a family member’s health condition and Reeves has not been subjected to any improper treatment, conduct or actions due to a request for or taking such leave; (iv) Reeves has provided the Company with written notice of any and all concerns regarding suspected ethical and compliance issues or violations on the part of the Company, and (v) Reeves has not filed any complaints, claims, or actions against the Company or any Released Party.

(b) Reeves agrees to cooperate fully with the Company in its prosecution, defense of or other participation in any administrative, judicial or other proceeding arising from any charge, complaint or other action which has been or may be filed by or against the Company that relate to matters within the knowledge or responsibility of Reeves.

(c) Reeves will not solicit, or assist or facilitate another in soliciting, for employment any natural person who as of the Retirement Date is employed by the Company or any of its subsidiaries in any capacity, or personally solicit, or assist or facilitate another in soliciting, any such employees to terminate their employment with the Company or personally facilitate or assist in the hiring of any such employee by any other person for a period of one year following the Retirement Date.

8. Confidentiality .

(a) Reeves and the Company acknowledge that by virtue of his prior relationship with the Company, Reeves has previously had access to certain Confidential Information and been involved in the creation of certain Confidential Information. Reeves acknowledges and agrees that all such Confidential Information constitutes valuable, special and unique property belonging exclusively to the Company. Reeves agrees that he will not, for any reason or purpose whatsoever, disclose any Confidential Information to any party without express written authorization of the Company.

 

Page 4 of 14


(b) “Confidential Information” means any confidential or proprietary information of the Company, including, without limitation, all documents or information, in whatever form or medium, concerning or evidencing operations, activities, strategies, long range plans, financial and tax information, personnel information, plans, opportunities, and customer information, but excluding any such information that is or becomes generally available to the public other than as a result of any breach of this Agreement or other unauthorized disclosure.

(c) This Agreement and all terms of this Agreement are hereby designated as confidential information. Neither Reeves nor the Company, nor their agents and representatives, are permitted to discuss the nature and terms of this agreement with any third party, except that both parties are permitted to discuss the nature and terms of this Agreement with appropriate tax, accounting or legal professionals, as necessary in any legal proceedings directly related to the provisions and terms of this Agreement, or as otherwise required by law or compelled by a court of competent jurisdiction after reasonable notice to the Company.

9. Non-Disparagement . Reeves agrees not to disparage the Company, its directors, officers or employees, and the Company agrees that its senior managers will not disparage Reeves or his tenure or efforts at the Company.

10. Governing Law . The execution, validity, interpretation and performance of this Agreement shall be determined and governed exclusively by the laws of the State of Texas, without reference to the principles of conflict of laws.

11. Entire Agreement . This Agreement represents the complete agreement among Reeves and the Company concerning the subject matter hereof and supersedes all prior agreements and understandings, written or oral, between Reeves and any member of the Company concerning the subject matter of this Agreement except those provisions of the Employment Agreement between Reeves and the Company dated effective as of December 31, 2014 which survive the “Termination Date” as set forth in such Employment Agreement. No attempted modification or waiver of any of the provisions of this Agreement shall be binding on any party hereto unless in writing and signed by Reeves and the Company. This Agreement is binding upon and inures to the benefit of the parties’ heirs, successors and permitted assigns. For purposes of clarity, it is the intent of Reeves and the Company that any successor entity or assignee of the Company remain bound by the terms of this Agreement, and that all obligations of the Company to Reeves remain in full force and effect in the event of any sale, transfer, assignment or reorganization of the Company.

12. Acknowledgements . This Agreement has been entered into voluntarily and not as a result of coercion, duress or undue influence. Reeves acknowledges that he has read and fully understands the terms of this Agreement. The company hereby advises Reeves that he should consult with an attorney before executing this Agreement. Reeves understands and agrees that any modification or alteration of any terms of this Agreement by Reeves voids this Agreement in its entirety. Reeves agrees with the Company that changes, whether material or immaterial, do not restart the running of the 21-day consideration period provided in Paragraph 1.

 

Page 5 of 14


13. Dispute Resolution . Any and all disputes between the parties to this Agreement arising out of or in connection with the negotiation, execution, interpretation, performance or non-performance of this Agreement and the covenants and obligations contemplated herein, including but not limited to any claims against Reeves, the Company, its respective officers, directors, employees or agents, shall be solely and finally settled by arbitration before three arbitrators conducted in Houston, Texas pursuant to the Commercial Rules of the American Arbitration Association, as now in effect or hereafter amended. Judgment on the award of the arbitrator may be entered in any court having jurisdiction over the party against whom enforcement of the award is being sought, and the parties hereby irrevocably consent to the jurisdiction of any such court for the purpose of enforcing any such award. The parties agree and acknowledge that any arbitration proceedings between them, and the outcome of such proceedings, shall be kept strictly confidential. In the event of any such dispute concerning the subject matter of this Agreement, the prevailing party shall be entitled to recover reasonable attorney’s fees incurred for the arbitration.

14. Notices . All notices, consents, waivers and other communications required or permitted by this Agreement shall be in writing and shall be deemed given to a party when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to the following addresses, facsimile numbers or e-mail addresses and marked to the attention of the person (by name or title) designated below (or to such other address, facsimile number, e-mail address or person as a party may designate by notice to the other parties):

Company:

Flotek Industries, Inc.

Attention: President

10603 W. Sam Houston Pkwy. N., Suite 300

Houston, Texas 77064

with a mandatory copy to:

Casey W. Doherty

Doherty & Doherty LLP

1717 St. James Place, Ste. 520

Houston, Texas 77056

 

Page 6 of 14


Fax no.: 713-572-1001

E-mail address: casey@doherty-law.com

Reeves:

 

 

   

 

   

 

   

15. Execution . This Agreement may be executed in counterparts, each of which will be deemed an original and shall be deemed duly executed upon the signing of the counterparts by the parties.

[Signature Page Follows]

 

Page 7 of 14


The parties to this Agreement have executed this Agreement on the dates set forth below.

 

/s/ Steve Reeves

Steve Reeves

February 16, 2017

Date

FLOTEK INDUSTRIES, INC.
By:  

/s/ John Chisholm

Name:  

John Chisholm

Title:  

President and CEO

February 16, 2017

Date

 

Page 8 of 14


EXHIBIT A

FLOTEK INDUSTRIES, INC.

RESTRICTED STOCK AGREEMENT

1. Grant of Restricted Stock. Subject to the conditions described in this agreement (the “Award Agreement”) and in the Flotek Industries Inc. 2014 Long-Term Incentive Plan, as amended from time to time (the “Plan”), Flotek Industries, Inc., a Delaware corporation (the “Company”), hereby agrees to grant Steve Reeves (“Participant”) shares of “Restricted Stock” of the Company.

2. Number of Shares of Restricted Stock Granted . 68,333 shares of Restricted Stock (Common Stock of the Company, $0.0001 par value per share).

3. Grant Date .             , 2017.

4. Vesting. The Restricted Stock granted hereunder shall be considered Vested on June 30, 2017.

5. Issuance and Transferability .

(a) Registration and Restricting Legend . Upon grant, the Restricted Stock granted hereunder shall be registered in the name of Participant and, unless and until such Restricted Stock vests, shall be left on deposit with the Company, or in trust or escrow pursuant to an agreement satisfactory to the Company, until such time as the restrictions on transfer have lapsed. If the shares of Restricted Stock are represented by certificates, such certificates shall be marked with the following legend:

“The shares represented by this certificate have been issued pursuant to the terms of the Flotek Industries, Inc. 2014 Long-Term Incentive Plan and may not be sold, pledged, transferred, assigned or otherwise encumbered in any manner except as is set forth in the terms of the Restricted Stock Agreement dated             , 2017.”

(b) Book Entry Form . If the shares are held in book entry form, then such entry will reflect, in a manner sufficient to effect in a legally enforceable form that such shares of Restricted Stock are subject to the restrictions of this Award Agreement and the Plan.

(c) Stock Power . Participant will deliver to the Company a stock power, in substantially the form as Exhibit A-1 attached hereto or such form as required by the Company, endorsed in blank, with respect to each Award of Restricted Stock.

(d) Release of Restrictions . Upon vesting of any portion of the shares of Restricted Stock and satisfaction of any other conditions required by the Plan or pursuant to this Award Agreement, the Company shall promptly either issue a stock certificate,

 

Page 9 of 14


without such restricted legend, for any shares of the Restricted Stock that have vested, or, if the shares are held in book entry form, the Company shall remove the notations on the book entry registrations for any shares of the Restricted Stock that have vested.

(e) Prohibition on Transfer . Until restrictions lapse, the Restricted Stock shall not be transferable. No right or benefit hereunder shall in any manner be liable for or subject to any debts, contracts, liabilities, or torts of Participant. Any purported assignment, alienation, pledge, attachment, sale, transfer or other encumbrance of the Restricted Stock, regardless of by whom initiated or attempted, prior to the lapse of restrictions shall be void and unenforceable against the Company. If, notwithstanding the foregoing, an assignment, alienation, pledge, attachment, sale, transfer or other encumbrance of the Restricted Stock is effected by operation of law, court order or otherwise, the affected Restricted Stock shall remain subject to the risk of forfeiture, vesting requirement and all other terms and conditions of this Award Agreement. In the case of Participant’s death or Disability, Participant’s vested rights under this Award Agreement (if any) may be exercised and enforced by Participant’s guardian or legal representative.

6. Forfeiture .

(a) In the event of Participant’s Termination for a reason other than a reason that causes Vesting pursuant to Section 6(b) of this Agreement, the unvested portion of the Restricted Stock held by Participant at that time shall immediately be forfeited and the Company shall repurchase such forfeited shares from the Participant for the lesser of (i) the amount paid by the Participant to the Company for such shares, if any, or (ii) the Fair Market Value of an equivalent number of shares of Common Stock determined on the date the Restricted Stock is forfeited.

(b) The occurrence of any of the following events shall cause the portion of the Restricted Stock which is not yet vested to be considered immediately vested: (i) a Change of Control, (ii) the death of Participant, or (iii) the Disability of Participant.

7. Ownership Rights . Subject to any reservations, conditions or restrictions set forth in this Award Agreement and/or the Plan, upon grant to Participant of the Restricted Stock, Participant shall be entitled to all voting rights applicable to the Restricted Stock during the Restricted Period. In the event of forfeiture of shares of Restricted Stock, the Participant shall have no further rights with respect to such Restricted Stock.

8. Reorganization of the Company . The existence of this Award Agreement shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business; any merger or consolidation of the Company; any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Restricted Stock or the rights thereof; the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

 

Page 10 of 14


9. Certain Restrictions . By executing this Award Agreement, Participant acknowledges that he will enter into such written representations, warranties and agreements and execute such documents as the Company may reasonably request in order to comply with the securities law or any other applicable laws, rules or regulations, or with this Award Agreement or the terms of the Plan.

10. Amendment and Termination . This Award Agreement or the Plan may be amended or terminated in accordance with the terms of the Plan.

11. Taxes and Withholdings .

(a) Tax Consequences . The granting, vesting and/or sale of all or any portion of the Restricted Stock may trigger tax liability. Participant agrees that he/she shall be solely responsible for any such tax liability. Participant is encouraged to contact his/her tax advisor to discuss any tax implications which may arise in connection with the Restricted Stock.

(b) Withholding . Participant acknowledges that the vesting of Restricted Stock granted pursuant to this Award Agreement, the making of an election under Section 83(b) of the Code and the vesting and payment of any accrued dividends may result in federal, state or local tax withholding obligations. Participant understands and acknowledges that the Company will not deliver shares of Common Stock or make any payment of accrued dividends until it is satisfied that appropriate arrangements have been made to satisfy any tax obligation under this Award Agreement or the Plan and agrees to make appropriate arrangements suitable to the Company for satisfaction of all tax withholding obligations. Further, Participant hereby agrees and grants to the Company the right to withhold from any payments or amounts of compensation, payable in cash or otherwise, in order to meet any tax withholding obligations under this Award Agreement or the Plan. As such, if the Company requests that Participant take any action required to effect any action described in this Section and to satisfy the tax withholding obligation pursuant to this Award Agreement and the Plan, Participant hereby agrees to promptly take any such action.

(c) Section 83(b) . Participant understands that any election under Section 83(b) of the Code with regard to the Restricted Stock must be made within thirty (30) days of the Grant Date and that, in the event of such election, Participant will so notify the Company in writing on or before such date.

12. No Guarantee of Tax Consequences . The Company, Board and Committee make no commitment or guarantee to Participant that any federal, state or local tax treatment will apply or be available to any person eligible for benefits under this Award Agreement and assumes no liability whatsoever for the tax consequences to Participant.

13. Severability . In the event that any provision of this Award Agreement is, becomes or is deemed to be illegal, invalid, or unenforceable for any reason, or would disqualify the Plan or this Award Agreement under any law deemed applicable by the Board or the

 

Page 11 of 14


Committee, such provision shall be construed or deemed amended as necessary to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Board or the Committee, materially altering the intent of the Plan or this Award Agreement, such provision shall be stricken as to such jurisdiction, the Participant or this Award Agreement, and the remainder of this Award Agreement shall remain in full force and effect.

14. Terms of the Plan Control . This Award Agreement and the underlying Award are made pursuant to the Plan. Notwithstanding anything in this Award Agreement to the contrary, the terms of the Plan, as amended from time to time and interpreted and applied by the Committee, shall govern and take precedence. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan, the terms of which are incorporated herein by reference.

15. Governing Law . This Award Agreement shall be construed in accordance with (excluding any conflict or choice of law provisions of) the laws of the State of Delaware to the extent federal law does not supersede and preempt Delaware law.

16. Consent to Electronic Delivery; Electronic Signature . Except as otherwise prohibited by law, in lieu of receiving documents in paper format, Participant agrees, to the fullest extent permitted by law, to accept electronic delivery of any documents that the Company may be required to deliver (including, but not limited to, prospectuses, prospectuses supplements, grant or award notifications and agreements, account statements, annual and quarterly reports, and all other forms of communications) in connection with this and any other Award made or offered by the Company. Electronic delivery may be via a Company electronic mail system or by reference to a location on a Company intranet to which Participant has access. Participant hereby consents to any and all procedures the Company has established or may establish for an electronic signature system for delivery and acceptance of any such documents that the Company may be required to deliver, and agrees that his/her electronic signature is the same as, and shall have the same force and effect as, his/her manual signature.

[SIGNATURE PAGE FOLLOWS]

 

Page 12 of 14


COMPANY:
FLOTEK INDUSTRIES, INC.
By:  

 

Name:  

 

Title:  

 

Date:  

 

PARTICIPANT:

 

Steve Reeves

Address:

 

 

Date:  

 

 

Page 13 of 14


EXHIBIT A-1

Assignment Separate from Certificate

FOR VALUE RECEIVED,                      hereby sells, assigns and transfers unto Flotek Industries, Inc., a Delaware corporation (the “Company”),                      (                       ) shares of common stock of the Company represented by Certificate No.              and does hereby irrevocably constitute and appoint                      , or his/her designee or successor, as attorney to transfer the said stock on the books of the Company with full power of substitution in the premises.

 

Dated:                      , 20          .     
  

 

Print Name

  

 

Signature

INSTRUCTIONS: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE. THE PURPOSE OF THIS ASSIGNMENT IS TO ENABLE THE COMPANY TO EXERCISE ITS “REPURCHASE OPTION” SET FORTH IN THE AWARD AGREEMENT WITHOUT REQUIRING ADDITIONAL SIGNATURES ON THE PART OF THE PURCHASER.

 

Page 14 of 14

Exhibit 10.3

February 13, 2017

Flotek Industries, Inc.

10603 W. Sam Houston Parkway N., Suite 300

Houston, Texas 77064

 

  Re: That certain Fifth Amended and Restated Service Agreement dated April 14, 2015 (the “Service Agreement”)

This is to confirm that we have agreed that the Service Agreement shall be and is hereby amended so that the annual fee provided for in Section 4.1 of the Service Agreement is increased to $810,000.

Except as set forth in this letter agreement, the Service Agreement continues in full force and effect, without amendment.

 

            Sincerely,
      Chisholm Management, Inc.
      By:  

/s/ John Chisholm

      Name:  

John Chisholm

      Title:  

President

      Protechnics II, Inc.
      By:  

/s/ John Chisholm

      Name:  

John Chisholm

      Title:  

President

ACCEPTED AND AGREED TO:      
Flotek Industries, Inc.      
By:  

/s/ Richard Walton

     
Name:  

Richard Walton

     
Title:  

Executive Vice President and Chief Financial Officer