MEMBERSHIP INTEREST PURCHASE AGREEMENT

Exhibit 10.1  

MEMBERSHIP INTEREST

PURCHASE AGREEMENT

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT, dated as of October 5, 2006 (the " Agreement "), is by and among PRESTON PHENES (" Seller ") and TURBECO, INC., a Texas corporation (" Buyer ").

WITNESSETH :

WHEREAS, Buyer desires to purchase the ownership interest of Seller in and with respect to CAVO Drilling Motors, Ltd. Co., a Texas limited liability company, and its business and assets (the " Company ");

WHEREAS, pursuant to Section 6.1(d) of this Agreement it is contemplated that Buyer will prior to Closing exchange his interest in the Company for a fifty percent (50%) interest in the New Company (as defined herein);

NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, agree as follows:

ARTICLE I

THE PURCHASE

Section 1.1.   Purchase . On and subject to the terms and conditions of this Agreement, at the Closing, Buyer will purchase: (i) the Acquired Interest, and (ii) Seller’s fifty percent (50%) general partnership interest in Diamond Rock, a Texas general partnership with B.L. Perez (" Diamond Rock ") which owns the facility located at 2450 Black Gold Court, Houston, Texas 77073 and the adjacent property at 2425 Black Gold Court, Houston, Texas 77073 (the " Real Estate "). For purposes hereof, the term " Acquired Interest " shall mean all of the rights and interests of the Seller with respect to the New Company, including but not limited to: (i) all of his rights under the Texas Limited Liability Company Act with respect to the New Company, (ii) any agreement entered into by him with respect to the New Company, (iii) his capital account with respect to the New Company, and (iv) all of his rights to share in the profits and losses of the New Company, and (v) all of his rights to receive distributions from the New Company. If the New Company is not formed and the Buyer waives in writing the condition set forth in Section 6.1(d), references to the "New Company" in the immediately preceding sentence shall instead refer to the Company.

Section 1.2.   Purchase Price for Acquired Interest .   As consideration for the sale to it of the Acquired Interest, Buyer shall:

(a)   Pay cash at Closing in the aggregate amount of Two Million Seven Hundred Eighty-One Thousand Seven Hundred Four and No/100 Dollars ($2,781,704) (the " Cash Payment ");

(b)   Cause Flotek Industries, Inc. (" Flotek ") to issue to Seller, as additional purchase price for the Acquired Interest, an aggregate number of shares (the " Flotek Shares ") of the common stock of Flotek, .0001 par value per share (the " Flotek Common Stock ") determined by dividing One Million Eight Hundred Fifty-Four Thousand Four Hundred Sixty-Nine and No/100 Dollars ($1,854,469) by the Share Value. For purposes herein, the term " Share Value " shall mean the value of the Flotek Shares based on the average for the ten business days that precede the Closing Date of the daily closing trading prices of the Flotek Common Stock on the American Stock Exchange;

(c)   Issue to Seller a promissory note substantially in the form attached hereto as Exhibit 1.2(c) in the original principal amount of One Million Five Hundred Forty-Five Thousand Three Hundred Ninety-One and No/100 Dollars ($1,545,391); and

(d)   Assume the liability of Seller with respect the Wells Fargo mortgage which encumbers the Real Estate (the " Diamond Rock Mortgage ").

Section 1.3.   Assumption of Liabilities . Buyer has not and will not assume from the Company or the Seller any liability or obligation with the exception of the Diamond Rock Mortgage.

Section 1.4.   Allocation . The parties will allocate for all purposes (including, but not limited to, financial accounting and tax purposes) the purchase price of the Acquired Interest as indicated on Schedule 1.4.

Section 1.5.   Closing . The closing (the " Closing ") of the transactions contemplated by this Agreement (the " Purchase Transaction ") shall take place at the offices of the attorneys for Buyer in Houston, Texas as promptly as practicable (but in any event within five business days) following the date on which the last of the conditions set forth in Article VI is fulfilled or waived, or at such other time and place as Buyer and the Company shall agree. The date on which the Closing occurs is referred to in this Agreement as the " Closing Date ." The Closing will be effective as of October 1, 2006 (the " Effective Time ").

Section 1.6.   Transfer Documents . At the Closing, each of the parties hereto will perform such acts and deliver such documents as are required pursuant to the terms hereof to be delivered at Closing, including but not limited to:

(a)   Seller shall execute, acknowledge and deliver to Buyer:

(i)   all assignments, and other good and sufficient instruments of conveyance, sale, transfer and assignment as shall be required to vest effectively in Buyer good and indefeasible title in and to the Acquired Interest, free and clear of all liens or encumbrances, including specifically, but not by way of limitation, a membership interest assignment in the form of Exhibit 1.6(a) (the " Assignment ");

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(ii)   Employment Agreement in the form of Exhibit 5.6 (the " Employment Agreement ");

(iii)   execute and deliver to Buyer a voting agreement concerning the voting by Seller of its interest in the Company on behalf of Buyer in the form required by Buyer, in its sole and absolute discretion, in the event the New Company is not formed before Closing;

(iv)   execute and deliver to Buyer a general warranty deed and any other documents required to vest in Buyer title to his interest in Diamond Rock and the Real Estate.    

(b)   Buyer shall:

(i)   deliver to the Company the Cash Payment in the form of bank check or wire transfer;

(ii)   execute and deliver the Assignment and the Employment Agreements;

(iii) execute and deliver the Promissory Note; and

(iv)   execute and deliver such documents as are required to assume the Diamond Rock Mortgage.

Section 1.7.   Index . An index identifying the sections in which the definitions of certain terms are set forth in Exhibit A.

ARTICLE II

REPRESENTATIONS AND

WARRANTIES OF BUYER

Buyer represents and warrants to the Seller as follows:

Section 2.1.   Organization and Qualification . Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. Flotek is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted.

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Section 2.2.   Authority; Non-Contravention; Approvals .

(a)   Buyer and Flotek each have full corporate power and authority to execute and deliver this Agreement to consummate the transactions contemplated hereby. Other than the approval by the Board of Directors of Buyer and Flotek, no corporate proceedings on the part of Buyer or Flotek are necessary to authorize the execution and delivery of this Agreement or the consummation by Buyer and Flotek of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Buyer and Flotek, and, assuming the due authorization, execution and delivery hereof by Seller, constitutes a valid and legally binding agreement of Buyer and Flotek enforceable against each of them in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (ii) general equitable principles.

(b)   The execution and delivery of this Agreement by Buyer and Flotek and the consummation by Buyer and Flotek of the transactions contemplated hereby do not and will not violate or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of Buyer or Flotek under any of the terms, conditions or provisions of (i) the charter or bylaw of Buyer and Flotek, (ii) any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any court or governmental authority applicable to Buyer or Flotek or any of their properties or assets or (iii) any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument, obligation or agreement of any kind to which Buyer or Flotek is now a party or by which Buyer or Flotek or any of its properties or assets may be bound or affected.

Section 2.3.   Reports . Flotek has previously made available or delivered to the Company and Seller copies of the Form 10-KSB filed by it with the Securities and Exchange Commission for the period ended December 31, 2005 (the " SEC ") and its quarterly report filed with the SEC on Form 10-QSB for the periods ending March 31, 2006 and June 30, 2006 (" Flotek SEC Reports "). As of their respective dates, the Flotek SEC Reports did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Neither Buyer nor Flotek has made any other representation to the Company or Seller regarding the Flotek Shares. The Flotek Shares will be restricted stock which will not be tradable on the open market under the applicable securities laws for a period of one year.

Section 2.4.   Brokers and Finders . Buyer has not entered into any contract, arrangement or understanding with any person or firm which may result in the obligation of Buyer to pay any finder's fees, brokerage or agent commissions or other like payments in connection with the transactions contemplated hereby. There is no claim for payment by Buyer of any investment banking fees, finder's fees, brokerage or agent commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

OF SELLER

The Seller represents and warrants to Buyer that:

Section 3.1.   Organization and Qualification . The Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Texas and has the requisite power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. The Company is duly qualified to do business and is in good standing in each jurisdiction in which the properties owned, leased, or operated by it or the nature of the business conducted by it makes such qualification necessary. True, accurate and complete copies of the Company’s organizational documents, as in effect on the date hereof, including all amendments thereto, have heretofore been delivered to Buyer.

Section 3.2.   Ownership . Seller owns fifty percent (50%) of the issued and outstanding membership interest in the Company and B.L. Perez (" Perez ") owns the remaining fifty percent (50%) of the issued and outstanding membership interest in the Company. The only members and managers of the Company are the Seller and Perez. There are no agreements between the Seller and Perez with respect to the management, operation, ownership, or tax classification of the Company, or any other matter relating to the Company. The Acquired Interest is owned by the Seller free and clear of any lien, encumbrance or agreement. The Acquired Interest has been duly authorized and issued, is nonassessable, and is not subject to any agreement to contribute capital to the Company or any other agreement. The transfer of the Acquired Interest by the Seller to Buyer pursuant to the terms hereof is not subject to any right of first refusal or similar right, and will not violate any agreement or understanding between the Seller and Perez. There are no outstanding options, conversion rights or similar rights granting any party the right to acquire any ownership interest in the Company other than the Acquired Interest and the interest held by Perez as described herein.

Section 3.3.   Other Entities . The Company does not own stock or other ownership interests in any other entity.

Section 3.4.   Authority; Non-Contravention; Approvals .

(a)   No further actions on the part of the Company are necessary to authorize the execution and delivery of this Agreement or the consummation by the Company of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Seller, and, assuming the due authorization, execution and delivery hereof by Buyer, constitutes a valid and legally binding agreement of Seller, enforceable against Seller in accordance with its terms, except that such enforcement may be subject to (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (b) general equitable principles.

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(b)   Except as set forth in the disclosure schedule attached to this Agreement (the " Disclosure Schedule "), the execution and delivery of this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby do not and will not violate or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of the Company under any of the terms, conditions or provisions of (i) the organizational documents of the Company or Diamond Rock, (ii) any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any court or governmental authority applicable to the Seller, Diamond Rock, or the Company or any of their properties or assets, or (iii) any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, or any agreement to which the Seller, Diamond Rock, or the Company is now a party or by which the Company or any of its properties or assets may be bound or affected.

Section 3.5.   Financial Statements . The Seller has furnished Buyer with a balance sheet of the Company as of December 31, 2004 and December 31, 2005, and the related statement of income for the calendar years then ended (including the notes thereto) and a balance sheet as of August 31, 2006 and the related statement of income for the seven month period then ended (collectively, the " Financial Statements "). The Financial Statements have been prepared in accordance with generally accepted accounting principles, consistently applied, and are accurate and complete and fairly present the financial condition and result of operations of the Company.

Section 3.6.   Absence of Undisclosed Liabilities . Except as disclosed in the Disclosure Schedule, neither the Company nor Diamond Rock has incurred any liabilities or obligations (whether absolute, accrued, contingent or otherwise) of any nature, except liabilities or obligations (a) which are provided for in the Financial Statements or reflected in the notes thereto, (b) which were incurred after August 31, 2006, and were incurred in the ordinary course of business and consistent with past practices, or (c) liabilities or obligations under this Agreement.

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Section 3.7.   Absence of Certain Changes or Events . Since August 31, 2006, the business of the Company has been conducted in the ordinary course of business consistent with past practices, and there has not been any event, occurrence, development or state of circumstances or facts which has had, or could reasonably be anticipated to have, individually or in the aggregate, a Material Adverse Effect. Specifically, but not by way of limitation, since August 31, 2006, the Company has not engaged in or been subject to any of the actions described in Section 4.1. " Material Adverse Effect " means any event, occurrence, fact, condition, change, development, circumstance, or effect with respect to the business, assets (including intangible assets), liabilities, condition (financial or other), operations, properties (including intangible properties), results, or prospects of the Company with respect to which there is a substantial likelihood that the event, occurrence, fact etc. would have been viewed by a reasonable investor as having a significantly negative effect on the value of the consideration such reasonable investor would have been willing to pay for the purchase of the Acquired Interest.

Section 3.8.   Accounts Receivable . The accounts receivable of the Company indicated on the Financial Statements are valid, genuine and subsisting, arise out of bona fide sales and delivery of goods, performance of services or other business transactions in the ordinary course of business and are current and collectible. Each of the accounts receivable will be collected in full, without any set-off and without resort to litigation, within 120 days after the Closing except as indicated in the Disclosure Schedule.

Section 3.9.   Tangible Assets . The Financial Statements reflect all of the items of tangible personal property owned by the Company (the " Tangible Personal Property ") and all of the assets leased by the Company (the " Leased Assets "). The Tangible Personal Property and the Leased Assets constitute all of the tangible personal property necessary for the conduct by the Company of its business as now conducted. The Company has good and indefeasible title to the Tangible Personal Property, free and clear of all mortgages, liens, pledges, charges, or encumbrance of any nature whatsoever. The Tangible Personal Property and Leased Assets are in good, serviceable condition and fit for the particular purposes for which they are used in the business of the Company, subject only to normal maintenance requirements and wear and tear reasonably expected in the ordinary course of business.

Section 3.10.   Employee Benefits . Each employee benefit plan of the Company (a " Company Plan ") is or was in compliance with the provisions of all applicable laws, rules and regulations, including, without limitation, ERISA and the Code. None of the Company Plans has incurred any "accumulated funding deficiency" (as defined in Section 412(a) of the Code). The Company has not incurred any liability to the Pension Benefit Guaranty Corporation under Section 4062, 4063 or 4064 of ERISA, or any withdrawal liability under Title IV of ERISA with respect to any multiemployer plan. The Disclosure Schedule describes all bonuses and other compensation which will be payable to any of the employees of the Company as a result of the consummation of the Purchase Transaction, and any obligation to pay severance payments.

Section 3.11.   Litigation . There are no claims, suits, actions, or proceedings pending or, to the Knowledge of the Company, threatened against or relating to the Company, before any court, governmental department, commission, agency, instrumentality or authority, or any arbitrator. The Company is not subject to any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or authority, or any arbitrator. For purposes of this Agreement, " Knowledge " means actual or constructive knowledge of officers of the Seller after reasonable inquiry.

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Section 3.12.   No Violation of Law . The Company is not in violation of or has been given notice or been charged with any violation of, any law, statute, order, rule, regulation, ordinance or judgment (including, without limitation, any applicable Environmental Law) of any governmental or regulatory body or authority. Except as disclosed in the Disclosure Schedule, as of the date of this Agreement, to the Knowledge of the Seller, no investigation or review by any governmental or regulatory body or authority is pending or threatened, nor has any governmental or regulatory body or authority indicated an intention to conduct the same. The governmental permits or licenses of the Company (the " Permits ") are sufficient for the Company to conduct its business in the manner currently conducted, and the Company is not in violation of the