Exhibit 10.4
EMPLOYMENT
AGREEMENT
THIS AGREEMENT (this
“Agreement”) is made as of August 11, 2009
(“Effective Date”), between Flotek Industries, Inc., a
Delaware corporation (the “Company”), and Jesse
“Jempy” Neyman (“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 and continue to employ Employee, and Employee shall be
employed and continue to be employed with the Company, upon the
terms and conditions set forth in this Agreement for the period
beginning on the date hereof and ending on the Termination Date, as
defined in Section 4 hereof (the “Employment
Period”).
2. Position and Duties
.
(a) Employee shall initially serve
as a Chief Financial Officer of the Company and shall be
responsible for such duties as are normally performed by a Chief
Financial Officer in companies similarly situated with the Company,
and such other duties, consistent with the duties customarily
performed by a Chief Financial Officer or other officer responsible
for finance and administrative functions as may be reasonably
prescribed by the Board of Directors of the Company or the
President or Chief Executive Officer of the Company.
(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.
3. Base Salary and Benefits
.
(a) Employee’s annual base
salary for the Employment Period shall be $250,000 (the “Base
Salary”). The Base Salary shall be payable in approximately
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 in the sole discretion of the Board
of Directors of the Company. During the Employment Period, Employee
shall be entitled to participate in all of the Company’s
employee benefit programs for which employees of the Company are
generally eligible, at a level commensurate with Employee’s
position in the Company. The Company currently has a compensation
deferral policy pursuant to which 15% of the compensation of the
Employee is deferred. The Employee will continue to be subject to
such policy so long as such policy is in place.
(b) If the Employee does not die,
suffer a Disability, resign from his employment (other than
resignation for Good Reason) with the Company and has not been
terminated by the Company for Cause prior to the earlier of:
(i) date of the appointment of a new Chief Executive Officer
of the Company on a basis which is not an interim basis or
(ii) December 31, 2009, he shall be entitled to receive a
one-time bonus pursuant to this Section 3(b) equal to 30% of
his annual Base Salary in effect for 2009. Such bonus shall be
payable on the earlier of: (A) January 31, 2010 or
(B) within 30 days of the appointment of such new Chief
Executive Officer.
(c) Employee shall be granted stock
options pursuant to the Long-Term Incentive Plans of the Company
for 150,000 shares of the Company as of the Effective Date, with
such grant conditioned upon shareholder approval of (i) an
amendment to the Certificate of Incorporation of the Company to
increase the number of authorized shares of common stock and
(ii) to the extent necessary, an amendment to the 2007
Long-Term Incentive Plan (the “2007 LTIP”) to increase
the number of shares of common stock that may be granted under the
2007 LTIP (the “Required Amendments”). Any options
granted hereunder shall be incentive stock options for purposes of
Section 422 of the Internal Revenue Code of 1986, as amended
(the “Code”) to the greatest extent permitted
thereunder. All such awards of stock options shall be subject to
the standard terms of a stock option grant under the 2007 LTIP;
provided, however, that the terms of such option shall provide that
(1) the option will subject to a four year level vesting
requirement and shall vest immediately upon Employee’s death,
resignation for Good Reason, Employee’s termination without
Cause or a “change of control” of the Company as
defined in the 2007 LTIP, (2) the option will not be
exercisable until the later of shareholder approval of the Required
Amendments or the vesting of the options, and (3) the exercise
price of the option will be the fair market value of a share of
common stock as of the Effective Date (i.e. the date of grant of
the option). If shareholder approval of the Required Amendments
does not occur on or before January 31, 2010, then Employee
shall be entitled to demand a bonus in the amount of $250,000. Such
demand must be made in writing to the Company after
January 31, 2010 and prior to the first to occur of the date
of shareholder approval of the Required Amendments or
December 31, 2010. If Employee demands the $250,000 bonus,
such bonus will be in lieu of the stock option grants to be made as
described in this Section 3(c), and Employee shall not be
entitled to the stock option grants as described in this
Section 3(c) if such bonus is paid and, in such event, such
stock option grants will be cancelled and be of no further force or
effect upon the payment of such bonus. Once shareholder approval of
the Required Amendments is received, Employee rights to any unpaid
bonus will be cancelled and be of no further force or effect. In
addition, if Employee’s employment with the Company is
terminated on account of the resignation by Employee for Good
Reason or by the Company for any reason other than for Cause prior
to the payment of the bonus and approval of the Required
Amendments, such termination will not impact the conditional grant
of the stock option or the right to the bonus described in this
Section 3(c), and the Company agrees to amend the applicable
option agreement in a form agreed to by the parties to ensure that
Employee has no less than 30 days following the approval of the
Required Amendments to exercise the option to the extent vested on
the date of such exercise. For clarity, if Employee’s
employment with the Company is terminated by the Company for Cause
or by virtue of the resignation by Employee (except for Good
Reason) prior to the payment of the bonus and approval of the
Required Amendments, all rights to any stock options and the bonus
described in this Section 3(c) shall terminate.
(d) Employee shall be entitled to
annual bonuses in accordance with the Management Incentive Plan of
the Company, with a “Target Bonus” for purposes of such
plan of 50% of Base Salary (a “Target Bonus”) for years
2009 and 2010.
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(e) The Company shall reimburse
Employee for all reasonable expenses incurred by him in the course
of performing his duties under this Agreement which are consistent
with the Company’s policies in effect from time to time for
its employees with respect to travel, entertainment and other
business expenses, subject to the Company’s requirements for
its employees with respect to reporting and documentation of such
expenses pursuant to applicable Treasury Regulations.
(f) In addition to the Base Salary,
Employee will be eligible to receive raises, bonuses and incentive
compensation to the extent approved from time to time by the Board
of Directors of the Company, in its discretion.
(g) Employee shall be eligible for
vacations as permitted under Company’s policies in effect
from time to time, with a minimum of four weeks vacation during
each year in the Employment Period.
4. Term and Termination
.
(a) The Employment Period shall
continue until terminated upon the earlier of
(i) Employee’s resignation with or without Good Reason
or Employee’s death or Disability or (ii) the
termination of the Employment Period by the Company with or without
Cause. The date on which Employee’s employment with the
Company terminates is referred to herein as the “Termination
Date.”
(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. Any contrary representations that may have been made
to Employee are superseded by this Agreement. However, depending on
the reason for such termination, Employee may be eligible for a
severance package on the terms and conditions set forth
below.
(c) Except as provided in
Section 3(c) or in this Section 4(c), any restricted
stock and stock options held by Employee under the 2007 Long Term
Incentive Plan of the Company will be governed by the terms of the
2007 LTIP and other governing documents as of the Effective Date.
Notwithstanding the above, in the event the Employment Period
terminates on account of the death of Employee, the Company shall
cause all restricted stock and stock options in effect on the
Effective Date to vest and be exercisable.
5. Severance . In no way
limiting the Company’s policy of employment at
will:
(a) If Employee’s employment
with the Company is terminated by the Company without Cause or by
Employee with Good Reason, and provided that all of the following
have occurred within 60 days following the termination of
Employee’s employment with the Company: (i) Employee
first signs and delivers to the Company a Confidential Severance
and Release Agreement in substantially the same form as that
attached hereto as Exhibit B (the “Release Agreement”),
(ii) any revocation right of the Employee
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under such Release Agreement shall have expired,
and (iii) such Release Agreement shall have become effective,
(the date that all of the conditions set forth in (i),
(ii) and (iii) above are met to be referred to as the
“Release Date”), Employee shall be entitled to
receive:
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(i)
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An amount equal
to one-half of the sum of his annual Base Salary and Target Bonus
in effect for the year in which the Termination Date occurs,
subject to required withholding, payable at the end of the first
full calendar month following the Release Date; and
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(ii)
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An amount equal
to one-twelfth of the sum of his annual Base Salary and Target
Bonus in effect for the year in which the Termination Date occurs,
subject to required withholding, payable at the end of each of the
next thirteen full calendar months following the first full
calendar month following the Release Date;
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(iii)
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An amount equal
to five-twelfths of the sum of his annual Base Salary and Target
Bonus in effect for the year in which the Termination Date occurs,
subject to required withholding, payable at the end of the
fifteenth full calendar month following the Release Date;
and
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(iv)
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Coverage at
Company expense under the employee health insurance plan of the
Company for period of twenty four (24) months following the
Release Date, or, if less, the maximum time period permitted under
COBRA.
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(b) Notwithstanding anything to the
contrary herein contained, 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, any obligation relating to the treatment of
Company confidential information and any non-compete
obligation.
(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 only: (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 continued 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, 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;
(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, if such failure is remediable, Employee’s
failure to
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remedy same within 10 days of
receiving written notice; (iii) any act of personal
dishonesty, fraud or misrepresentation taken by Employee which was
intended to result 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 material
obligations under any written agreement with the Company (including
without limitation this Agreement and any proprietary information
and inventions assignment agreement with the Company); or
(viii) Employee’s violation of a material 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, (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 as but not limited to a position
responsible for Business Development or Strategic Planning) 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 his or her
intent to terminate employment based on such action(s) and
(B) the Company will have 30 days from the date that such
written notice is provided by Employee to cure such
action(s).
(e) Notwithstanding anything herein
to the contrary, (i) 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 Company will defer
the payment of any such payments or benefits (or portions thereof)
hereunder (without any reduction in such payments or benefits
ultimately paid or provided to Employee) until the date that is six
months following Employee’s termination of employment with
the Company (or the earliest date as is permitted 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 made in lump sum on the first day of the seventh
month
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following the end of such six month period, and
(ii) if any other payments of money or other benefits due to
Employee hereunder could cause the application of an accelerated or
additional tax under Section 409A of the Code, such payments
or other benefits shall be deferred if deferral will make such
payment or other benefits compliant under Section 409A of the
Code, or otherwise such payment or other benefits shall be
restructured, to the extent possible, in a manner, determined by
the Board, that does not cause such an accelerated or additional
tax. The Company shall consult with Employee in good faith
regarding the application of this Section 5(e).
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
Code Section 409A and makes no undertaking to preclude Code
Section 409A from applying to payments under the Agreement.
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 the
regulations promulgated thereunder. With respect to the payments
identified in Section 5(a)(i)-(iii), each payment, including
each separate installment payment identified thereunder, will be
considered the right to a series of separate payments.
6. Confidential Information
.
(a) Company Information . The
Company agrees, in consideration for Employee’s agreement to
the various terms of this Agreement, to provide Employee with
Confidential Information (as defined below) belonging to the
Company. Employee agrees at all times, during the term of
employment and thereafter, to hold in strictest confidence, and not
to use, except for the benefit of the Company or in connection with
Employee’s responsibilities under his employment, or to
disclose to any person, firm, corporation or other entity without
written authorization of an officer of the Company any Confidential
Information of the Company. Employee further agrees not to make
copies of such Confidential Information except as authorized in
writing by the Company or required for the performance of
Employee’s responsibilities under his employment. Any such
copies made pursuant to the preceding sentence shall be available
to, and shall remain the sole property of, the Company at all
times. Employee understands that “Confidential
Information” means any Company proprietary information,
technical data, trade secrets or know-how, including, but not
limited to, (i) information derived from reports,
investigations, experiments, research and work in progress,
(ii) methods of operation, (iii) market data,
(iv) technology, hardware, proprietary computer programs and
code (in object code and source code format), (v) drawings,
designs, plans and proposals, (vi) marketing and sales
programs, (vii) customer, licensee and supplier lists and any
other information about the Company’s relationships with
others, (viii) historical financial information and financial
projections, (ix) network and system architecture,
(x) all other formulae, patterns, devices or compilations,
concepts, ideas, materials and information prepared or performed
for or by the Company, (xi) all information related to the
business plan, business, products, purchases or sales of the
Company or any of its suppliers and customers, (xii) software
or applications of software, developments, inventions, models,
samples, flowcharts, statistical data and compilations,
(xiii) computer programs, disks, diskettes, tapes, and
(xiv) all other proprietary information disclosed to Employee
by the Company either directly or indirectly in writing, orally or
by drawings or observation, or
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created by Employee during the period of his
employment, using Company time and/or materials or equipment.
Employee understands that Confidential Information includes, but is
not limited to, information pertaining to any aspects of the
Company’s business which is either information not known by
actual or potential competitors of the Company, or proprietary
information of the Company or its customers or suppliers or other
third parties with which it has business relationships, whether of
a technical or financial nature, or otherwise. Employee further
understands that Confidential Information does not include any of
the foregoing items which are publicly available or which become
publicly known and made generally available through no wrongful act
of Employee or of others who were under confidentiality obligations
as to the item or items involved.
( b) Former Employer Information . Employee
represents and warrants that Employee’s performance of this
Agreement has not breached, and will not breach, any agreement or
trust relationship between himself and any former, concurrent, or
subsequent employer or other third party (collectively,
“Other Party”), including, without limitation, any
agreement with
