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): May 20, 2019

 

 

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))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value   FTK   New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 1.02

Termination of a Material Definitive Agreement.

On May 20, 2019, Flotek Industries, Inc. (the “Company”), John W. Chisholm, President, Chief Executive Officer and Chairman of the board of directors (the “Board”) of the Company, Protechnics II, Inc. (“Protechnics”) and Chisholm Management, Inc. (“CMI,” and together with Protechnics, the “Chisholm Companies”) entered into a Termination and Release Agreement.

Pursuant to the Termination and Release Agreement, the parties agreed to terminate the Fifth Amended and Restated Services Agreement, dated as of April 15, 2014, by and among the Chisholm Companies and the Company (the “Services Agreement”) and that certain Letter Agreement, dated as of April 15, 2014, by and between the Company and Mr. Chisholm (the “Letter Agreement”). In connection with such termination, Mr. Chisholm and the Company entered into the Chisholm Employment Agreement (as defined below).

Summaries of the material terms of each of the Services Agreement and the Letter Agreement may be found in the Current Report on Form 8-K filed by the Company on April 21, 2014, which summaries are incorporated herein by reference.

 

Item 5.02

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

Employment Agreement with John W. Chisholm

On May 20, 2019, the Company and Mr. Chisholm entered into an Employment Agreement (the “Chisholm Employment Agreement”) dated effective as of April 1, 2019 (the “Effective Date”), pursuant to which Mr. Chisholm will continue to serve as the Chief Executive Officer and President of the Company under the terms set forth therein. The Chisholm Employment Agreement provides for a term of employment from the Effective Date until the earlier of (i) March 31, 2020 or any extension or renewal period, (ii) Mr. Chisholm’s resignation with or without Good Reason (as defined in the Chisholm Employment Agreement) or Mr. Chisholm’s death or disability, or (iii) Mr. Chisholm’s termination by the Company with or without cause.

The Chisholm Employment Agreement provides, among other things, that (i) Mr. Chisholm will earn an annual base salary of $550,000, (ii) Mr. Chisholm will be granted 85,000 shares of restricted stock of the Company under the Company’s 2018 Long-Term Incentive Plan and related award agreement, which shall vest upon Mr. Chisholm’s termination of employment or March 31, 2020, whichever is earlier; (iii) Mr. Chisholm will be eligible for quarterly and annual bonuses in accordance with (1) the Company’s management incentive plan at a level of 110% of base salary for 2019 and 2020 and (2) the Company’s performance unit plan at an award value factor of 2.25 in 2019 and 2020; (iv) Mr. Chisholm will be reimbursed by the Company for all reasonable expenses incurred in the course of performing duties under the Chisholm Employment Agreement; and (v) upon termination of Mr. Chisholm’s employment by the Company for any reason, by Mr. Chisholm with Good Reason, and upon expiration of the Chisholm Employment Agreement at the end of his employment period, and subject to the satisfaction of certain other specified conditions, Mr. Chisholm will be entitled to receive severance compensation of (1) $3,612,000, payable in monthly installments at the end of each of the 24 full calendar months following the execution and effectiveness of a release agreement and in an amount equal to one-twenty-fourth of such severance compensation, (2) the time-vested portion of the 2019 Performance Unit Plan (the “2019 PUP”), and (3) certain continued health coverage reimbursements upon election.

In connection with the Chisholm Employment Agreement, on May 20, 2019, Mr. Chisholm and the Company entered into a Confidentiality and Restrictive Covenants Agreement (the “Confidentiality Agreement”). Pursuant to the Confidentiality Agreement, among other things, for a period of six months following the termination of his employment with the Company, Mr. Chisholm agreed not to (i) disclose or use the Company’s Confidential Information (as defined in the Confidentiality Agreement) for any purpose other than the performance of his duties or as otherwise provided in the Confidentiality Agreement; (ii) compete against the Company; (iii) solicit customers of the Company; or (iv) solicit or hire Company employees.

 

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The description of the Chisholm Employment 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.

First Amendment and Restated Employment Agreement with Elizabeth T. Wilkinson

On May 20, 2019, the Company and Elizabeth T. Wilkinson entered into the First Amended and Restated Employment Agreement (the “Wilkinson Employment Agreement”), dated effective as of the Effective Date, pursuant to which Ms. Wilkinson will continue to serve as Chief Financial Officer of the Company. The Wilkinson Employment Agreement provides for a term of employment from the Effective Date until the earlier of (i) December 31, 2020, (ii) Ms. Wilkinson’s resignation with or without Good Reason (as defined in the Wilkinson Employment Agreement) or Ms. Wilkinson’s death or disability, or (3) Ms. Wilkinson’s termination by the Company with or without Cause (as defined in the Wilkinson Employment Agreement).

The Wilkinson Employment Agreement provides, among other things, that (i) Ms. Wilkinson will earn an annual base salary of $350,000; (ii) Ms. Wilkinson will be eligible for quarterly and annual bonuses in accordance with (1) the Company’s management incentive plan at a level of 75% of base salary for 2019 and (2) the Company’s performance unit plan at an award value factor of 1.35 in 2019; (iii) Ms. Wilkinson will be reimbursed by the Company for all reasonable expenses incurred in the course of performing duties under the Wilkinson Employment Agreement; and (iv) upon termination of Ms. Wilkinson’s employment by the Company without Cause or by Ms. Wilkinson with Good Reason prior to the end of her employment period, and subject to the satisfaction of certain other specified conditions, Ms. Wilkinson will be entitled to receive severance compensation of (1) an amount equal to 150% of her annual base salary and target bonus under the then applicable Management Incentive Plan of the Company payable in nine monthly installments equal to one-ninth of such severance compensation, payable at the end of each of the next nine full calendar months following the first full calendar month after Ms. Wilkinson’s execution and effectiveness of a release agreement and (2) certain continued health coverage reimbursements upon election.

The description of the Wilkinson Employment 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 herein by reference.

Wilkinson Restricted Stock Grant

On May 20, 2019, the Board approved a grant to Ms. Wilkinson of 40,000 shares of restricted stock of the Company under the Company’s 2018 Long-Term Incentive Plan and related award agreement, which shall vest on May 24, 2020.

Compensatory Arrangements of Certain Officers

2019 Management Incentive Plan

On May 20, 2019, the Compensation Committee (the “Compensation Committee”) of the Board adopted a Management Incentive Plan (the “2019 MIP”) with respect to certain of its senior executive officers in order to provide appropriate incentives to work towards the continued growth and success of the Company.

The 2019 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 annual base salary as of the date the 2019 MIP becomes applicable to a participant (the “Target Bonus Percentage”). The Target Bonus Percentage for Mr. Chisholm is 110% of base salary. The Target Bonus Percentage for other participants is 75% of base salary.

Bonuses under the 2019 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”).

 

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The EBITDA Bonus and the Revenue Bonus are determined for four bonus periods: the second, third, and fourth quarter of 2019, and for all of 2019, based on quarterly financial targets established by the Compensation Committee. The Goal Bonus applies to each of the four quarters of 2019.

The EBITDA Bonus accounts for 50% of the total bonus potentially payable under the 2019 MIP. The EBITDA Bonus is based on the Company’s 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 noncash stock compensation and the 2019 MIP. The Compensation Committee has discretion to equitably adjust Adjusted EBITDA for other noncash and/or nonrecurring charges not directly related to the ongoing operations of the Company and the effect of any acquisition or disposition of any assets and/or lines of business or the impact of any extraordinary or nonrecurring items. The EBITDA Bonus target amount of a participant equals 50% of the target bonus of that participant. Depending on the performance of the Company’s Adjusted EBITDA for a bonus period, a percentage (ranging from 0-150%) will be applied to 25% of the each participant’s EBITDA target bonus amount to determine the EBITDA Bonus for a participant for that bonus period.

The Revenue Bonus accounts for 20% of the total bonus potentially payable under the 2019 MIP. The Revenue Bonus is based on the performance of the Company’s “Revenue.” Revenue is consolidated revenue, as determined pursuant to GAAP, excluding the results from any operations considered discontinued operations for GAAP purposes. The Compensation Committee has the discretion to equitably adjust Revenue 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, (i) the Revenue Bonus target amount of a participant equals 20% of the target bonus of that participant, and (ii) depending on the performance of the Company’s Revenues, a percentage (ranging from 0-150%) will be applied to 25% of the Revenue Bonus target amount to determine the Revenue Bonus for a participant for that bonus period.

The Goal Bonus accounts for 30% of the total bonus potentially payable under the 2019 MIP. The Compensation Committee will inform the participant each quarter 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 30% of the Goal Bonus Percentage of that participant, multiplied by the annual base salary of the participant as of the date that the 2019 MIP becomes applicable to the participant. The Goal Bonus percentage ranges between 0% and 200% depending on the level of achievement by the individual participant.

2019 Performance Unit Plan

On May 20, 2019, the Compensation Committee adopted the 2019 PUP to provide appropriate incentives to work towards the continued growth and success of the Company.

The 2019 PUP permits the Company to grant shares of restricted stock and Performance Units (collectively, the “Awards”) to its senior executive officers. Pursuant to the 2019 PUP, the Awards will be based on a dollar value (the “Award Value”) determined by multiplying a factor as set forth in the table below by the annual salary of the participant. The total Award Value for each participant is allocated as follows:

 

   

40% restricted stock;

 

   

30% Performance Units based on total shareholder return (“TSR”) in connection with the Company’s peer group (the “TSR Peer Group Awards”); and

 

   

30% Performance Units based on TSR in connection with the Oilfield Equipment and Services and Oil and Gas Drilling Global Industry Classification Standard (GICS) constituent companies (n=49) of the Russell 2000 Index (“Russell 2000 OFS Index”) (the “TSR Index Awards” and together with the TSR Peer Group Awards, the Performance Unit Awards”).

 

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Each participant will be granted the number of shares of restricted stock equal to 40% of the Award Value of the participant divided by $4.00 per share. The shares of restricted stock vest in one-third increments, with the last vesting December 31, 2021.

Each participant will be granted the number of TSR Peer Group Awards and TSR Index Awards each equal to 30% of the Award Value of the participant divided by $4.00 per share. The Performance Unit Awards have a three-year performance period ending December 31, 2021.

With respect to the TSR Peer Group Awards, “Total Shareholder Return” is calculated with respect to the Performance Period for the Company and each company in the Company’s peer group, based on a comparison between (i) the average closing price of common stock of the respective company for the last 20 trading days before the end of the applicable Performance Period (adding to such amount, if any, dividends paid per share by any of the companies during the Performance Period) (the “Ending Value”), and (ii) the average closing price of Common Stock for the 20 trading days immediately preceding the first day of the Performance Period (the “Beginning Price”). Total Shareholder Return is to be measured by subtracting the Beginning Price from the Ending Value to determine the “Value Increase”, and then dividing the Value Increase by the Beginning Price. Participants can earn restricted shares equal to 0% to 200% of the TSR Peer Group Awards depending on the Company’s performance relative to its peer group.

With respect to the TSR Index Awards, “Total Shareholder Return” is calculated with respect to the Company’s stock price relative to the Russell 2000 OFS Index, based on a comparison between (i) Ending Value, and (ii) Beginning Price. Total Shareholder Return is to be measured by subtracting the Beginning Price from the Ending Value to determine the “Value Increase”, and then dividing the Value Increase by the Beginning Price. Participants can earn restricted shares equal to 0% to 200% of the TSR Index Awards depending on the performance of the Company’s stock price relative to the Russell 2000 OFS Index.

 

Item 9.01.

Financial Statements and Exhibits.

(d)    Exhibits.

 

Exhibit
Number

  

Description

10.1    Chisholm Employment Agreement, dated effective April 1, 2019
10.2    Wilkinson Employment Agreement, dated effective April 1, 2019

 

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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: May 24, 2019      

/s/ Elizabeth T. Wilkinson

      Elizabeth T. Wilkinson
      Chief Financial Officer

 

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Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS AGREEMENT (this “Agreement”) is entered into on May 20, 2019 and effective as of April 1, 2019 (“Effective Date”), between Flotek Industries, Inc., a Delaware corporation (the “Company”), and John W. Chisholm (“Employee”).

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.     Employment . The Company shall employ Employee, and Employee shall be employed with the Company, upon the terms set forth in this Agreement for the period beginning April 1, 2019 and ending on March 31, 2020 (the “Expiration Date”), unless terminated earlier as set forth herein, or unless extended or renewed by mutual written agreement of the parties hereto prior to the then existing Expiration Date. The period during which the Employee is employed by the Company is referred to as the “Employment Period.”

2.     Position and Duties .

(a)    Employee shall serve as Chief Executive Officer and President of the Company and shall be responsible for such duties as may be reasonably prescribed by the Board of Directors of the Company which are consistent with the customary duties of such offices. Employee will report to the Board of Directors of the Company and based in the Company’s Houston office.

(b)     Employee shall devote his reasonable best efforts and his full business time and attention (except for permitted vacation periods, periods of illness or other incapacity) to the business and affairs of the Company, and it shall not be considered a violation of this Agreement for the Employee to, (a) engage in or serve such professional, civic, trade association, charitable, community, religious or similar types of organizations or speaking selections as the Employee may select; (b) serve with the consent of the Board of Directors of the Company on the boards of directors or advisory committees of any entities, or engage in other business activities; and (c) attend to the Employee’s personal matters and finances so long as such services and activities in (a) – (c) do not significantly interfere with the performance of Employee’s responsibilities as an employee of the Company.

(c)     As part of his duties, Employee shall support and assist Company to the best of his ability in identifying and hiring his successor as Company’s new C.E.O. and President, and shall assert his best efforts in transitioning duties to the successor, once hired.

(d)     As partial consideration for, and as a condition of, Employee’s employment with the Company, Employee has executed contemporaneously with the execution of this Agreement, the Confidentiality and Restrictive Covenants Agreement attached hereto as Exhibit A.

3.     Base Salary, Equity Award and Benefits .

(a)     Employee’s annual base salary for the Employment Period shall initially be $550,000 (the “Base Salary”). The Base Salary shall be payable in equal installments in


accordance with the Company’s general payroll practices and shall be subject to required withholding. Any change in Base Salary shall, subject to Section 5, be at the sole discretion of the Compensation Committee of the Board of Directors of the Company. During the Employment Period, Employee will be eligible to participate in the Company’s employee benefit programs on the same basis as other employees of the Company.

(b)     Employee shall be eligible for quarterly and annual bonuses in accordance with the Management Incentive Plan (the “MIP”) of the Company, pursuant to the terms of such plan and such terms as shall be established by the Compensation Committee of the Board. The Employee’s target bonus percentage for the 2019 MIP and 2020 MIP shall be one hundred ten percent (110%). Employee will be eligible to participate in the Performance Unit Plan (the “PUP”) of the Company or other equity plan for senior executives pursuant to the terms of that plan and such terms as shall be established by the Compensation Committee of the Board. The factor for the 2019 PUP and 2020 PUP to determine the Employee’s award value shall be 2.25.

(c)    Promptly after the execution of this Agreement, Employee shall be granted 85,000 share of restricted Company stock, which shall vest upon Employee’s termination of employment, or March 31, 2020, whichever is earlier.

(d)    The Company shall reimburse Employee for all reasonable expenses incurred in the course of performing duties under this Agreement which are consistent with the Company’s policies in effect with respect to travel, entertainment and other business expenses pursuant to applicable Treasury Regulations.

(e)    Employee may be eligible to receive annual merit raises approved at the discretion of the Compensation Committee of the Board of Directors of the Company.

(f)    Employee shall be eligible for vacations in accordance with Company policies with a minimum of five weeks’ vacation during each year in the Employment Period.

4.     Employment Term and Termination .

(a)    The Employment Period shall continue until terminated upon the earlier of (i) the Expiration Date of this Agreement or of any extension or renewal period; (ii) Employee’s resignation with or without Good Reason or Employee’s death or Disability or (iii) the termination of the Employee by the Company with or without cause.

(b)    Employee’s employment with the Company will be “At Will,” meaning that either Employee or the Company may terminate Employee’s employment at any time and for any reason, with or without cause or Good Reason. The date on which the Employee’s employment is terminated is referred herein as the “Termination Date.” Notwithstanding any other provisions of this agreement or any other agreement, upon termination of employment by the Company for any reason, termination by Employee for Good Reason, and upon expiration of this Agreement at the end of the Employment Period, Employee will receive a severance package consistent with the terms and conditions set forth in Section 5 below.


5.     Severance .

(a)    Provided that Employee has not terminated his employment without Good Reason, and provided that Employee signs and delivers to the Company a Confidential Severance and Release Agreement in the form set forth in Exhibit B attached hereto and to be provided by the Company within 5 days of the Termination Date (the “Release Agreement”) within 60 days following the termination of Employee’s employment with the Company (such 60 th day following termination being referred to as the “Release Date”) and does not revoke such signed Release Agreement pursuant to the terms thereof, Employee, upon termination of employment prior to or upon the expiration of the Employment Period (which must qualify as a “Separation from Service” within the meaning of Section 409A of the Code to the extent applicable), shall be entitled to receive severance compensation equal to the following:

(i)    The sum of $3,612,000, which shall be payable in twenty-four (24) monthly installments equal to one-twenty-fourth of such severance compensation, subject to required withholding, with the first payment made on the last day of the month in which the Release Date falls, and subsequent payments on the last day of each of the next twenty-three (23) full calendar months following the Release Date.”

(ii)    if the Employee timely and properly elects health continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall reimburse the Employee for the monthly COBRA premium paid by the Employee for Employee and Employee’s dependents who were covered under the Company’s health plan immediately preceding the Date of Termination. The reimbursement under Section 5(a)(2) shall be paid to the Employee prior to the last day of the month immediately following the month in which the Executive timely remits the premium payment, and the Employee shall be eligible to receive such reimbursement until the earliest of: (i) the 12-month anniversary of the Date of Termination; (ii) the date the Employee (or Employee’s dependents, if applicable) is no longer eligible to receive COBRA continuation coverage; and (iii) the date on which the Employee receives coverage from another employer or other source.

(iii)    The time vested portion of the 2019 PUP, which equals 123,750 shares. Any decision by the Company to vest shares under the 2018 PUP in the event of early termination, shall be made by the full Board.

(iv)    Any benefits earned for quarterly or annual bonuses under the MIP, but not yet paid as of the termination date.

(c)    Employee shall receive none of the severance compensation outlined in Sections 5(a)(i) and 5(a)(ii), if Employee resigns without Good Reason, but Employee shall be entitled to receive: (i) Employee’s Base Salary earned and payable through the Termination Date; (ii) any accrued but unused vacation/time off to the extent required under applicable law; (iii) reimbursement for all incurred but unreimbursed expenses to the extent Employee is entitled to be reimbursed; and (iv) any other earned but unpaid compensation, if applicable, as of the Termination Date.


(d)    For purposes of this Agreement, the following terms shall have the meanings set forth below:

“Disability” shall have the meaning assigned to such term in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”).

“Good Reason” shall exist upon the occurrence of one of the following Company actions (unless Employee consents in writing to such action(s)): (i) a material reduction of the Employee’s base salary and employee benefits to which the Employee was entitled immediately prior to such reduction, (ii) a material reduction in the duties, authority or responsibilities relative to the Employee’s duties, authority or responsibilities as in effect immediately prior to such reduction, or (iii) the relocation of the Employee to a facility or a location more than fifty (50) miles from the Employee’s then present location; provided, however, that in all cases (A) Employee must provide the Company with written notice of the occurrence of such action(s) described under (i), (ii) or (iii) above within 60 days of the initial occurrence of such action(s) and of his intent to terminate employment based on such action(s), (B) the written notice must describe the event constituting Good Reason in reasonable detail, (C) the Company shall have 30 days from the date that such written notice is received by the Company in which to cure such action(s), and (D) any termination of employment for Good Reason must take place within the six-month period following the initial occurrence of the Good Reason event.

6.     Section 409A. Notwithstanding anything herein to the contrary, to the extent required to comply with Section 409A of the Code (“Section 409A”), (i) each reimbursement or in-kind benefit provided under this Agreement shall be provided in a manner and at a time that complies with Section 409A; (ii) if at the time of Employee’s termination of employment with the Company, Employee is a “specified employee” within the meaning of Section 409A, any payments and/or benefits provided under this Agreement that constitute “nonqualified deferred compensation” subject to Section 409A that are provided to Employee or for Employee’s benefit on account of his separation from service shall not be provided until the first payroll date to occur following the six-month anniversary of Employee’s termination date (“Specified Employee Payment Date”), and the aggregate amount of any payments that would otherwise have been made to Employee during such six-month period shall be paid in a lump sum to Employee on the Specified Employee Payment Date without interest and, thereafter, any remaining payments shall be paid without delay in accordance with their original schedule; (iii) a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination also constitutes a “Separation from Service” within the meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment,” “separation from service” or like terms shall mean Separation from Service;, and (iv) each payment identified in Section 5(a)(i)-(ii), including each separate installment payment identified thereunder, will be considered a separate payment for purposes of Section 409A. Terms defined in the Agreement will have the meanings given such terms under Section 409A if and to the extent required to comply with Section 409A. Notwithstanding any other provision in the Agreement, the Company and Employee will cooperate in good faith to amend or modify the Agreement so that the payments under this Agreement qualify for exemption from or comply with Code Section 409A; provided, however, that the Company makes no representations that the payments under the Agreement shall be exempt from or comply with Section 409A of the Code and any such taxes shall be the responsibility of the Employee.


7.     Parachute Payments .

(a)    Notwithstanding anything contained in this Agreement to the contrary, (i) to the extent that any payment, benefit or distribution of any type to or for the Employee by the Company, any affiliate of the Company, any person or entity (referred to herein as a “ Person ”) who acquires ownership or effective control of the Company or ownership of a substantial portion of the Company’s assets (within the meaning of Section 280G of Internal Revenue Code of 1986 (the “ Code ”), as amended, and the regulations and other guidance issued thereunder), or any affiliate of such Person, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “ Payments ”) constitute “parachute payments” (within the meaning of Section 280G of the Code), and if (ii) such Payments would result in the imposition of an excise tax under Section 4999 of the Code (the “ Excise Tax ”), then such Payments shall be reduced (but not below zero) if and to the extent necessary so that no Payments to be made or benefit to be provided to the Employee shall be subject to the Excise Tax. If the Payments are so reduced, the Company shall reduce or eliminate the Payments (A) by first reducing or eliminating the portion of the Payments which are not payable in cash (other than that portion of the Payments subject to clause (C) hereof), (B) then by reducing or eliminating cash payments (other than that portion of the Payments subject to clause (C) hereof) and (C) then by reducing or eliminating the portion of the Payments (whether payable in cash or not payable in cash) to which Treasury Regulation § 1.280G-1 Q/A 24(c) (or any successor thereto) applies, in each case in reverse order beginning with payments or benefits which are to be paid the latest in time.

(b)    It is possible that after the determinations and selections made pursuant to this Section 7 Employee will receive 280G benefits that are, in the aggregate, more than the amount provided under this Section 7 (hereafter referred to as an “ Excess Payment ”). If it is established, pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved, that an Excess Payment has been made, then Employee shall promptly pay an amount equal to the Excess Payment to the Company, together with interest on such amount at the applicable federal rate (as defined in and under Section 1274(d) of the Code) from the date of Employee’s receipt of such Excess Payment until the date of such payment.

8.     Notices . Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by a nationally recognized overnight delivery service, or mailed by first class mail, return receipt requested, to the recipient at the address below indicated:

Notices to Employee :

John W. Chisholm

40 Buttonbrush Court

Spring, TX 77380


Notices to the Company :

Flotek Industries, Inc.

Attn: General Counsel

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

Houston, TX 77043

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given when so delivered or, if sent by first class mail, three (3) days after so mailed.

9.     Severability . Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

10.     Employee s Attorney Fees . Company shall pay the reasonable attorney fees incurred by Employee to obtain advice regarding his employment with the Company and in reviewing and negotiating the terms of this Agreement, in an amount up to $20,000.

11.     Complete Agreement . Except with respect to the aforementioned Confidentiality and Restrictive Covenants Agreement between the Company and the Employee, this Agreement embodies with respect to the subject matter hereof the complete agreement and understanding among the parties and supersedes and preempts with respect to the subject matter hereof any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

12.     Counterparts . This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

13.     Successors and Assigns . This Agreement is intended to bind and inure to the benefit of and be enforceable by Employee, the Company and their respective heirs, successors and assigns, except that Employee may not assign his rights or delegate his obligations hereunder without the prior written consent of the Company except by operation of law to Employee’s estate upon the death of Employee.

14.     Choice of Law . All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas.


15.     Consent to Personal Jurisdiction . Any suit, action or other proceeding arising out of or based upon this Agreement and any other agreement with the Company which is not subject to the arbitration provisions of Section 13, shall be brought in a court in the State of Texas. -

16.     Arbitration and Equitable Remedies . The parties agree that any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach of this Agreement, shall be settled by arbitration to be held in Houston, Texas, in accordance with the rules then in effect of the American Arbitration Association, provided however, the parties will be entitled to full and liberal evidentiary discovery in accordance with the rules governing civil litigation in courts of the same jurisdiction. The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction. The Company shall pay the legal costs and expenses of such arbitration; however, the prevailing party shall be entitled to recover from the non-prevailing party all reasonable legal costs and expenses incurred including time of law firm staff, court costs, attorneys’ fees, and all other related expenses incurred in such arbitration.

17.     Amendment and Waiver . The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Employee, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of such provision or any other provision of this Agreement.

18.     Withholding . All compensation, payments and benefits provided for herein shall be subject to all applicable taxes and withholdings.


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.

 

FLOTEK INDUSTRIES, INC.
By:  

/s/Elizabeth T. Wilkinson

Name:  

Elizabeth T. Wilkinson

Title:  

Chief Financial Officer

Date of Signature:  

5-20-19

 

/s/John W. Chisholm

John W. Chisholm
Date of Signature:  

5/20/19

 

SIGNATURE PAGE TO EMPLOYMENT AGREEMENT

Exhibit 10.2

FIRST AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

THIS FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is entered into on May 20, 2019 to be effective as of April 1, 2019 (“Effective Date”), between Flotek Industries, Inc., a Delaware corporation (the “Company”), and Elizabeth Wilkinson (“Employee”).

WHEREAS, Employee previously entered into that certain Employment Agreement dated effective as of December 28, 2018 with the Company (the “Original Employment Agreement”); and

WHEREAS, Employee and the Company wish to amend certain terms of the Original Employment Agreement;

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Original Employment Agreement shall be hereby amended and restated as follows:

1.     Employment . The Company shall employ Employee, and Employee shall be employed with the Company, upon the terms set forth in this Agreement for the period beginning on April 1, 2019 and ending on December 31, 2020 (the “Expiration Date”), unless terminated earlier as set forth herein. The period during which the Employee is employed by the Company is referred to as the “Employment Period.”

2.     Position and Duties .

(a)    Employee shall serve as Chief Financial Officer of the Company and shall be responsible for such duties as may be reasonably prescribed by the Board of Directors of the Company or the Chief Executive Officer of the Company. Employee will report to the Chief Executive Officer of the Company and work in the Company’s Houston office.

(b)    Employee shall devote her reasonable best efforts and her full business time and attention (except for permitted vacation periods, periods of illness or other incapacity) to the business and affairs of the Company, and it shall not be considered a violation of this Agreement for the Employee to, (a) engage in or serve such professional, civic, trade association, charitable, community, religious or similar types of organizations or speaking selections as the Employee may select; (b) serve with the consent of the Chief Executive Officer of the Company on the boards of directors or advisory committees of any entities, or engage in other business activities; and (c) attend to the Employee’s personal matters and finances so long as such services and activities in (a) – (c) do not significantly interfere with the performance of Employee’s responsibilities as an employee of the Company.


3.     Base Salary, Equity Award and Benefits .

(a)    Employee’s annual base salary for the Employment Period shall initially be $350,000 (the “Base Salary”). The Base Salary shall be payable in equal installments in accordance with the Company’s general payroll practices and shall be subject to required withholding. Any change in Base Salary shall be at the sole discretion of the Compensation Committee of the Board of Directors of the Company. During the Employment Period, Employee will be eligible to participate in the Company’s employee benefit programs.

(b)    Employee shall be eligible for annual bonuses in accordance with the Management Incentive Plan (the “MIP”) of the Company, pursuant to such terms as shall be established by the Compensation Committee of the Board. The Employee’s target bonus percentage for the 2019 MIP shall be seventy-five percent (75%). Employee will be eligible to participate in the Performance Unit Plan (the “PUP”) of the Company pursuant to the terms of that plan and such terms as shall be established by the Compensation Committee of the Board. The factor for the 2019 PUP to determine the Employee’s award value shall be 1.35.

(c)    The Company shall reimburse Employee for all reasonable expenses incurred in the course of performing duties under this Agreement which are consistent with the Company’s policies in effect with respect to travel, entertainment and other business expenses pursuant to applicable Treasury Regulations.

(d)    Employee may be eligible to receive annual merit raises approved at the discretion of the Compensation Committee of the Board of Directors of the Company.

(e)    Employee shall be eligible for vacations in accordance with Company policies with a minimum of four weeks’ vacation during each year in the Employment Period.

4.     Employment Term and Termination .

(a)    The Employment Period shall continue until terminated upon the earlier of (i) the Expiration Date, (ii) Employee’s resignation with or without Good Reason or Employee’s death or Disability or (iii) the termination of the Employee by the Company with or without Cause.

(b)    Employee’s employment with the Company will be “At Will,” meaning that either Employee or the Company may terminate Employee’s employment at any time and for any reason, with or without Cause or Good Reason. The date on which the Employees’ employment is terminated is referred herein as the “Termination Date.” If the reason for termination is without Cause or with Good Reason, Employee would receive a severance package consistent with the terms and conditions set forth in Section 5 below.

5.     Severance .

(a)    If Employee’s employment with the Company is terminated by the Company without Cause or by Employee with Good Reason prior to the Expiration Date, and provided that Employee signs and delivers to the Company a Confidential Severance and Release Agreement


in a reasonable form as provided by the Company (the “Release Agreement”) within 60 days following the termination of Employee’s employment with the Company (such 60 th day being referred to as the “Release Date”) and does not revoke such signed Release Agreement pursuant to the terms thereof, Employee shall be entitled to receive severance compensation equal to the following:

(i)    150 percent of the Employee’s annual Base Salary and Target Bonus (determined regardless of the actual results of the Company for that year) in effect at the Termination Date, which amount under Section 5(a)(i) or (ii), as applicable, shall be payable in nine (9) monthly installments equal to one-ninth of such severance compensation, subject to required withholding, payable at the end of each of the next nine (9) full calendar months following the first full calendar month following the Release Date, and

(ii)    if the Employee timely and properly elects health continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall reimburse the Employee for the monthly COBRA premium paid by the Employee for Employee and Employee’s dependents who were covered immediately preceding the Termination Date. The reimbursement under Section 5(a)(2) shall be paid to the Employee prior to the last day of the month immediately following the month in which the Executive timely remits the premium payment, and the Employee shall be eligible to receive such reimbursement until the earliest of: (i) the 12-month anniversary of the Termination Date; (ii) the date the Employee (or Employee’s dependents, if applicable) is no longer eligible to receive COBRA continuation coverage; and (iii) the date on which the Employee receives substantially similar coverage from another employer or other source.

(b)    Notwithstanding anything to the contrary herein contained, except to the extent required by law, the Company shall not be required to pay any amounts under this Section 5 or elsewhere in this Agreement if Employee is in breach of any of its obligations under this Agreement or any other Agreement with the Company, including without limitation, all employee policies of the Company and any obligation relating to the treatment of Company confidential information and any non-compete obligation, but as to all of these, only if materially injurious to the Company.

(c)    If Employee’s employment with the Company is terminated for Cause or death or Disability, or Employee resigns without Good Reason, Employee shall be entitled to receive: (i) Employee’s Base Salary earned and payable through the Termination Date; (ii) any accrued but unused vacation/time off to the extent required under applicable law; (iii) reimbursement for all incurred but unreimbursed expenses to the extent Employee is entitled to be reimbursed; and (iv) any other earned but unpaid compensation, if applicable, as of the Termination Date.

(d)    For purposes of this Agreement, the following terms shall have the meanings set forth below:

“Cause” shall mean (i) Employee’s failure to substantially perform one or more of Employee’s essential duties and obligations to the Company (other than any such failure resulting from a Disability) which Employee fails to remedy in a reasonable period of


time (not to exceed 60 days) after receipt of written notice from the Company; (ii) Employee’s refusal or failure to comply with the reasonable and legal directives of the Board of Directors after written notice from the Board describing Employee’s failure to comply and Employee’s failure to remedy same within 21 days of receiving written notice; (iii) any act of personal dishonesty, fraud or misrepresentation taken by Employee which was intended to result in or resulted in substantial gain or personal enrichment of the Employee at the expense of the Company; (iv) Employee’s violation of a federal or state law or regulation applicable to the Company’s business which violation was or is reasonably likely to be materially injurious to the Company; (v) Employee’s conviction of, or plea of nolo contendere or guilty to, a felony under the laws of the United States or any State that is reasonably likely to reasonably likely to be materially injurious to the Company; (vi) Employee’s abuse of drugs, other narcotics or alcohol during working hours or where such abuse (whenever occurring) impacts on Employee’s working day, (vii) Employee’s breach of any of his obligations under any written agreement with the Company (including without limitation this Agreement and any proprietary information and inventions assignment agreement with the Company) which, to the extent such breach is remediable, Employee fails to remedy in a reasonable period of time (not to exceed 60 days) after receipt of written notice from the Company; or (viii) Employee’s violation of a policy of the Company which, to the extent such failure is remediable, Employee fails to remedy in a reasonable period of time (not to exceed 30 days) after receipt of written notice from the Company.

“Disability” shall have the meaning assigned to such term in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”).

“Good Reason” shall exist upon the occurrence of one of the following Company actions (unless Employee consents in writing to such action(s)): (i) a material reduction of the Employee’s salary and employee benefits to which the Employee was entitled immediately prior to such reduction unless such reduction applies to all similarly situated executives, (ii) a material reduction in the duties, authority or responsibilities relative to the Employee’s duties, authority or responsibilities as in effect immediately prior to such reduction, provided, however, that if the Company assigns to the Employee duties for another senior executive position with the Company, such assignment shall not constitute Good Reason; or (iii) the relocation of the Employee to a facility or a location more than fifty (50) miles from the Employee’s then present location; provided, however, that (A) Employee must provide the Company with written notice of the occurrence of such action(s) within 60 days of the initial occurrence of such action(s) and of her intent to terminate employment based on such action(s), (B) the written notice must describe the event constituting Good Reason in reasonable detail, and (C) within 30 days from the date that such written notice is received by the Company, the Company must cure such action(s).

(e)    If there is a Change of Control of the Company prior to the Expiration Date: (i) 60,000 shares of restricted common stock of the Company issued to Employee pursuant to the Restricted Stock Agreement between Employee and the Company dated December 28, 2018 will become vested as set forth in such Restricted Stock Agreement, (ii) awards granted pursuant to the then applicable MIP and PUP will become subject to, and affected by, the Change of Control


provisions contained in such plans, and (iii) if Employee’s employment with the Company is terminated by the Company without Cause or by Employee for Good Reason prior to the Expiration Date, Employee will thereafter be entitled to receive severance pursuant and subject to the terms and conditions of Section 5 of this Agreement.

(f)    Notwithstanding anything herein to the contrary, (i) to the extent required by Section 409A of the Code, each reimbursement or in-kind benefit provided under this Agreement shall be provided in a manner and at a time that complies with Section 409A; (ii) if at the time of Employee’s termination of employment with the Company, Employee is a “specified employee” within the meaning of Section 409A of the Code, and the deferral of the commencement of any payments or benefits (or portions thereof) otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the payment or benefits shall be delayed to the earliest date required under Section 409A of the Code to the extent and amount necessary to comply with Section 409A of the Code, with such delayed payments to be accumulated and made in lump sum on the first business day following the earliest date permitted by Section 409A of the Code, (iii) for purposes of this Section 5, a termination of employment only occurs if it constitutes a “separation from service” under Section 409A of the Code, and (iv) each payment identified in Section 5(a)(i)-(iii), including each separate installment payment identified thereunder, will be considered the right to a series of separate payments. Notwithstanding any other provision in the Agreement, the Company and Employee will cooperate in good faith to amend or modify the Agreement so that the payments under this Agreement qualify for exemption from or comply with Code Section 409A; provided, however, that the Company makes no representations that the payments under the Agreement shall be exempt from or comply with Section 409A of the Code.

6.     Notices . Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by a nationally recognized overnight delivery service, or mailed by first class mail, return receipt requested, to the recipient at the address below indicated:

Notices to Employee :

Elizabeth Wilkinson

827 Greenbelt Drive

Houston, Texas 77079

Notices to the Company :

Flotek Industries, Inc.

Attn: General Counsel

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

Houston, TX 77043

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given when so delivered or, if sent by first class mail, three (3) days after so mailed.


7.     Severability . Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

8.     Complete Agreement . Except with respect to any proprietary information and inventions assignment agreement between the Company and the Employee, this Agreement embodies with respect to the subject matter hereof the complete agreement and understanding among the parties and supersedes and preempts with respect to the subject matter hereof any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way, including but not limited to the Original Employment Agreement.

9.     Counterparts . This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

10.     Successors and Assigns . This Agreement is intended to bind and inure to the benefit of and be enforceable by Employee, the Company and their respective heirs, successors and assigns, except that Employee may not assign her rights or delegate her obligations hereunder without the prior written consent of the Company except by operation of law to Employee’s estate upon the death of Employee.

11.     Choice of Law . All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas.

12.     Consent to Personal Jurisdiction . Any suit, action or other proceeding arising out of or based upon this Agreement and any other agreement with the Company which is not subject to the arbitration provisions of Section 13, shall be brought in the U.S. District Court for the Southern District of Texas, Houston Division.

13.     Arbitration and Equitable Remedies . Employee agrees that any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach of this Agreement, shall be settled by arbitration to be held in Houston, Texas, in accordance with the rules then in effect of the American Arbitration Association, provided however, the parties will be entitled to full and liberal evidentiary discovery in accordance with the rules governing civil litigation in courts of the same jurisdiction. The arbitrator may grant injunctions


or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction.    The Company shall pay the legal costs and expenses of such arbitration; however, the prevailing party shall be entitled to recover from the non-prevailing party all reasonable legal costs and expenses incurred including time of law firm staff, court costs, attorneys’ fees, and all other related expenses incurred in such arbitration.

14.     Amendment and Waiver . The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Employee, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of such provision or any other provision of this Agreement.


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.

 

FLOTEK INDUSTRIES, INC.
By:  

/s/John W. Chisholm

Name:  

John W. Chisholm

Title:  

CEO/President

 

 

/s/Elizabeth T. Wilkinson

  Elizabeth Wilkinson

SIGNATURE PAGE TO EMPLOYMENT AGREEMENT