EMPLOYMENT
AGREEMENT
THIS AGREEMENT (this
“Agreement”) is made effective as of September 1,
2009 (“Effective Date”), between Flotek Industries,
Inc., a Delaware corporation (the “Company”), and Scott
Stanton (“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 Accounting Officer of the Company and shall be
responsible for such duties as are normally performed by a Chief
Accounting Officer in companies similarly situated with the
Company, and such other duties, consistent with the duties
customarily performed by a Chief Accounting Officer or other
officer responsible for accounting and related administrative
functions as may be reasonably prescribed by the Board of Directors
of the Company or the President, or Chief Executive Officer or
Chief Financial 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 $225,000 (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. The amounts of
compensation deferred pursuant to such policy is referred to herein
as the “Deferral.”
(b) Employee shall be entitled to
participate in the Management Incentive Plan of the Company, with a
“Target Bonus” established from time to time by the
Compensation Committee of the Board of Directors of the Company,
with a “Target Bonus” for purposes of such plan of 30%
of Base Salary for years 2009 and 2010 (a “Target
Bonus”).
(c) 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.
(d) 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.
(e) 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 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
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substantially the same form as that attached
hereto as Exhibit B (the “Release Agreement”),
(ii) any revocation right of the Employee under such Release
Agreement shall have expired, and (iii) such Release Agreement
shall have become effective, Employee shall be entitled to receive:
(i) his Base Salary, payable in accordance with the
Company’s general payroll practices subject to required
withholding, for the Severance Period (as hereinafter defined),
(ii) coverage at Company expense under the employee health
insurance plan of the Company for the Severance Period, or, if
less, the maximum time period permitted under COBRA, and
(iii) the payment of the remaining Deferral in full within 10
days of the delivery of the Release Agreement. For purposes hereof,
the term “Severance Period” shall mean the 12 month
period beginning on the Termination Date, unless the “Trading
Price” is less than 175% of the “Exercise Price”
as of the Termination Date, in which case the “Severance
Period” shall be the 18 month period beginning on the
Termination Date. For purposes of the immediately preceding
sentence: (i) the term “Trading Price” shall mean
the average for the twenty business days that precede the
Termination Date of the daily closing trading prices of the common
stock of the Company on the exchange on which such common stock is
then traded, or if there is no such exchange, as reported on the
over the counter market, and (ii) “Exercise Price”
shall have the meaning given said term in that certain Stock Option
Agreement between the Employee and the Company dated April 27,
2009 (the “Stock Option Agreement”). Notwithstanding
the foregoing, however, the “Severance Period” shall be
12 months, and not 18 months, if after all of the options provided
for pursuant to the Stock Option Agreement and all of the shares
issued pursuant to that certain Restricted Stock Agreement dated
April 27, 2009 between the Employee and the Company (the
“Restricted Stock Agreement”) have become vested
pursuant to the terms thereof any of the following occur:
(i) the Employee disposes of any of the shares acquired as a
result of the exercise of any of the options provided for in Stock
Option Agreement for a price in excess of 175% of the price at
which such shares were acquired pursuant to the exercise of such
options, (ii) the Employee disposes of any of the shares
acquired pursuant to the Restricted Stock Agreement for a price in
excess of 175% of the Exercise Price as of the date of such
disposition, or (ii) if the average daily closing trading
prices of the common stock of the Company on the exchange on which
such common stock is then traded, or if there is no such exchange,
as reported on the over the counter market, during any period of
twenty consecutive business days exceeds 175% of the Exercise
Price.
(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.
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(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 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 shall not constitute Good Reason;
(iii) the relocation of the Employee to a facility or a
location more than thirty five (35) miles from the
Employee’s then present location, or (iv) a change in
the membership of the Audit Committee of the Board of Directors of
the Company so that more than half of the members of such committee
are not individuals who are members of such committee as of the
date of this Agreement; provided, however, that (A) Employee
must provide the Company with written notice of the occurrence of
any 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).
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(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 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
indentified 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
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