Exhibit 10.4

Final Execution Copy

FLOTEK INDUSTRIES, INC.

STAND-ALONE PERFORMANCE-BASED STOCK OPTION AWARD AGREEMENT

NOTICE OF STOCK OPTION AWARD

Subject to the terms and conditions of this Notice of Stock Option Award (this
“Notice”), and the attached Flotek Industries, Inc. Stand-Alone
Performance-Based Stock Option Award Agreement (the ”Award Agreement”), Flotek
Industries, Inc. (the “Company”) hereby grants to John Gibson
(the ”Participant”), as a material inducement for him to take employment with
the Company, an option (the “Option”) to purchase the number of shares of Common
Stock set forth below. Unless otherwise specifically indicated, all terms used
in this Notice will have the meaning as set forth in the Award Agreement.

Identifying Information:

 

Participant Name

  John Gibson    Date of Grant:    12/22/2019

    and Address:

     Vesting Commencement Date:    12/22/2019      Exercise Price per Share:   
$1.93

    Type of Option:

  Nonstatutory Stock Option    Total Number of Shares:    2,000,000

Expiration Date:

  12/31/2026      

Vesting Schedule:

Subject to the Participant’s Continuous Service to the Company and the terms of
this Notice and the Award Agreement, the Participant’s rights to purchase the
shares of Common Stock subject to the Option (the “Optioned Shares”) will vest
in accordance with Schedule 1 attached to this Notice (the ”Vesting Schedule”).
Notwithstanding the foregoing, the Participant’s rights to purchase the Optioned
Shares will automatically become fully vested in accordance with the terms of
the Employment Agreement.

Post-Termination Exercise Period:

Except as otherwise set forth in the Employment Agreement, the Participant may
exercise vested Optioned Shares following a termination or interruption of the
Participant’s Continuous Service no later than the later of the Expiration Date
and expiration of the 90-day period that immediately follows such cessation of
Continuous Service.

Representations and Agreements of the Participant:

The Participant has reviewed this Notice and the Award Agreement in their
entirety, has had an opportunity to have such reviewed by his or her legal and
tax advisers, and hereby represents that he or she is relying solely on such
advisors and not on any statements or representations of the Company or any of
its agents or Affiliates. The Participant hereby accepts the Optioned Shares
subject to all of their terms. The Participant hereby agrees that all questions
of interpretation and administration relating to this Notice and the Award
Agreement will be resolved solely by the Committee in the exercise of its
reasonable judgment, subject to the requirements of Section 10(g) of the Award
Agreement.

 

 

[SIGNATURES ON NEXT PAGE]

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Signatures:

By the Participant’s below signature and the below signature of the Company’s
representative, the Participant and the Company hereby agree that the Option is
governed only by the terms and conditions of this Notice and the Award
Agreement, and to the extent stated herein or therein, the Employment Agreement.

 

FLOTEK INDUSTRIES, INC.       PARTICIPANT By:  

                                                          

     

 

        John Gibson Its:  

 

              Dated: December 22, 2019

Dated: December 22, 2019

 

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SCHEDULE 1

FLOTEK INDUSTRIES, INC.

STAND-ALONE PERFORMANCE-BASED STOCK OPTION AWARD AGREEMENT

Pursuant to the terms and conditions of the Notice of Stock Option Award (the
“Notice”) and the Flotek Industries, Inc. Stand-Alone Performance-Based Stock
Option Award Agreement (the ”Award Agreement”) attached thereto, this Schedule 1
to the Notice contains the Vesting Schedule as defined in the Notice. Unless
otherwise specifically indicated, all terms used in this schedule will have the
meaning as set forth in the Notice or the Award Agreement.

To that end, the Option will vest as follows:

 

  1.

General Information. The Option is granted to Employee on December 22, 2019, and
there are 2,000,000 shares of the Company’s common stock subject to the Option.
The period during which the Option may vest runs from January 1, 2020, through
December 31, 2024 (the ”Performance Period”). The concept is that the Option
will vest, if at all, if and to the extent that the performance-based vesting
requirement is satisfied.

 

  2.

Performance-Based Vesting Requirement. In order for the performance-based
vesting requirement to be satisfied, the Company’s Common Stock must achieve the
below stated stock price for a 20-consecutive trading day period during the
Performance Period.

 

    

Stock Price Hurdle

       Percentage Vested*      $ 1.93          0% vested      $ 3.60         
33% vested      $ 5.40          66% vested      $ 7.20          100% vested  

 

*

Note: If the highest stock price achieved over a 20-day consecutive trading day
period from time to time during the Performance Period is greater than $1.93 but
less than $7.20, then the percentage of the Option that has vested with respect
to such 20-day consecutive trading day period is determined using linear
interpolation using the following formula:

Percentage Vested = (A times B) – C

where (i) A equals 18.48, (ii) B equals the average of the closing sale price of
the Company’s Common Stock as reported on the principle securities exchange on
which the Company’s Common Stock is traded for a period of 20 or more
consecutive trading days during the Performance Period and (iii) C equals 33.08.

Provided, however, that for purposes of determining the Percentage Vested amount
under the Option the price the Company’s stockholders receive in a Change of
Control transaction will be deemed to have been achieved over a 20-day
consecutive trading day period during the Performance Period for all purposes of
this award.

Once a percentage of the Option becomes vested pursuant to the foregoing
requirement from time to time, any later downward volatility in the stock price
of the Company’s common stock will cause no change to the percentage vested
(i.e., once it vests, it always remains so vested).

 

  3.

Expiration Date and Post-Termination Exercise Period. The Option shall expire if
not exercised on or prior to December 31, 2026. If Employee’s employment with
the Company is terminated for any reason, then Employee’s post-termination
exercise period within which he must exercise the vested portion of the Option
shall be until December 31, 2026.

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Example 1: Employee’s employment with the Company terminates on January 30,
2025. Employee must exercise the vested portion of the Option, if at all, on or
before December 31, 2026. Effective January 1, 2027, any vested and unexercised
Option shall expire.

Example 2: Employee’s employment with the Company terminates on November 1,
2026. Employee only has two months within which to exercise the vested portion
of the Option. Effective January 1, 2027, any vested and unexercised Option
shall expire.

*    *    *    *    *

 

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FLOTEK INDUSTRIES, INC.

STAND-ALONE PERFORMANCE-BASED STOCK OPTION AWARD AGREEMENT

STOCK OPTION AWARD AGREEMENT

Subject to the terms and conditions of the Notice of Stock Option Award (the
“Notice”), this Flotek Industries, Inc. Stand-Alone Performance-Based Stock
Option Award Agreement (this “Award Agreement”), Flotek Industries, Inc., a
Delaware corporation (the ”Company”), hereby grants the individual set forth in
the Notice (the “Participant”) a stock option (the “Option”) to purchase shares
of Common Stock. Unless otherwise specifically indicated, all terms used in this
Award Agreement have the meanings set forth in Section 8 or the Notice.

1. Grant of the Option. The principal features of the Option, including the
number of Optioned Shares subject to the Option, are set forth in the Notice.
The Option is a non-statutory stock option, that by its terms, is not intended
to qualify for incentive stock option treatment. The exercise price equals the
fair market value of a share of Common Stock on the Date of Grant. The exercise
price of the Option may not be repriced without stockholder approval.

2. Vesting Schedule and Risk of Forfeiture.

(a) Vesting Schedule. Subject to the Participant’s Continuous Service with the
Company and any other limitations set forth in the Notice or this Award
Agreement, the Option will vest in accordance with the Vesting Schedule provided
in the Notice.

(b) Risk of Forfeiture. The Option will be subject to a risk of forfeiture until
such time the risk of forfeiture lapses on the Vesting Date set forth in the
Notice. All or any portion of the unvested Option subject to the foregoing risk
of forfeiture will immediately and automatically be forfeited and terminated
upon the first day the Participant fails to provide Continuous Service to the
Company. Additionally, vested and unexercised Optioned Shares and unvested
Optioned Shares will immediately and automatically be forfeited upon the
Participant’s employment with the Company being validly terminated by the
Company for Cause. The Company may implement any forfeiture under this
Section 2(b) in a unilateral manner, without the Participant’s consent, and with
no payment to the Participant, cash or otherwise, for the forfeited Optioned
Shares.

3. Exercise of Option.

(a) Right to Exercise. The Optioned Shares will be exercisable during their term
cumulatively according to the Vesting Schedule and the applicable provisions of
the Notice and the Award Agreement; however, the Optioned Shares may not be
exercised for a fraction of a share of Common Stock. Additionally, and
notwithstanding anything in the Notice or this Award Agreement, in connection
with or following the termination or interruption of Participant’s Continuous
Service for any reason, the Participant may exercise vested Optioned Shares only
during, and not after, the Post-Termination Exercise Period set forth in the
Notice. Vested Optioned Shares will automatically expire, and the vested
Optioned Shares will automatically terminate, upon the end of the
Post-Termination Exercise Period set forth in the Notice. Finally, all Optioned
Shares will automatically expire and terminate upon the Expiration Date (as set
forth in the Notice) to the extent not then exercised. Thereafter, no vested
Optioned Shares may be exercised.

 

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(b) Method of Exercise. The Option will be exercisable to the extent then vested
by delivery of a written exercise notice in a form reasonably acceptable to the
Committee (the ”Exercise Notice”), which must state the election to exercise the
Option, the number of shares of Common Stock with respect to which the Option is
being exercised, and such other representations and agreements as may be
required by the Company. The Exercise Notice must be signed by the Participant
(or by the Participant’s beneficiary or other person entitled to exercise the
Option in the event of the Participant’s death under the Notice of this Award
Agreement) and must be delivered in person or by certified mail to the Secretary
of the Company at the Company’s principal executive office. The Exercise Notice
must be accompanied by payment of the aggregate Exercise Price as to all
Optioned Shares exercised. The Option will be deemed to be exercised as of the
date (the “Exercise Date”): (i) on which the Company receives (as determined by
the Committee in its sole, but reasonable, discretion) the fully executed
Exercise Notice accompanied by payment of the aggregate Exercise Price, and
(ii) all other applicable terms and conditions of the Award Agreement are
satisfied in the sole but reasonable discretion of the Committee.

(c) Compliance Restrictions on Exercise. No shares of Common Stock will be
issued pursuant to the exercise of an Option unless the issuance and exercise,
including the form of consideration used to pay the Exercise Price, comply with
applicable laws. The Participant will not have any rights as a stockholder with
respect to any shares of Common Stock subject to the Option prior to the
Exercise Date.

(d) Issuance of Shares of Common Stock. After receiving the Exercise Notice, the
Company will cause to be issued a certificate or certificates (or electronic
equivalent) for the shares of Common Stock as to which the Option has been
exercised, registered in the name of the person exercising this Option (or in
the names of such person and his or her spouse as community property or as joint
tenants with right of survivorship). The Company will cause the certificate or
certificates to be delivered to or upon the order of the person exercising the
Option.

4. Method of Payment. Payment of the aggregate Exercise Price may be by any of
the following forms of consideration, or a combination thereof, at the election
of the Participant: (i) cash or check; or (ii) if approved by the Committee (in
its sole discretion), consideration received by the Company under a formal
cashless exercise program adopted by the Company, or in connection with a net
exercise feature.

5. Non-Transferability of Option. The Option and the rights and privileges
conferred hereby may not be sold, transferred by gift, pledged, hypothecated, or
otherwise transferred or disposed of (whether by operation of law or otherwise)
in any manner other than by will or by the laws of descent or distribution, and
will not be subject to sale under execution, attachment, levy or similar process
and may be exercised during the lifetime of the Participant only by the
Participant. The terms of the Notice and this Award Agreement are binding upon
the executors, administrators, heirs, successors and assigns of the Participant.
Any attempt to transfer the Option in violation of this Section 5 will be null
and void and will be disregarded.

 

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6. Term of Option. The Option will in any event expire on the Expiration Date
set forth in the Notice, and may be exercised prior to the Expiration Date only
in accordance with the terms of the Notice and this Award Agreement.

7. Taxes. The Participant hereby acknowledges and understands that he or she may
suffer adverse tax consequences as a result of the Participant’s exercise of the
Option or disposition of the Optioned Shares.

(a) Representations. The Participant has reviewed with the Participant’s tax
advisors the tax consequences of this Award Agreement and the Optioned Shares
granted hereunder, including any U.S. federal, state and local tax laws, and any
other applicable taxing jurisdiction. The Participant is relying solely on such
advisors and not on any statements or representations of the Company or any of
its agents. The Participant hereby acknowledges and understands that the
Participant (and not the Company) will be responsible for the Participant’s tax
liability that may arise as a result of the Participant receiving this Award
Agreement and the Optioned Shares granted hereunder.

(b) Payment of Withholding Taxes. The Participant will make appropriate
arrangements with the Company for the satisfaction of all U.S. federal, state,
local and non-U.S. income and employment tax withholding requirements applicable
to the Option exercise. The Committee has the sole authority to determine
whether a “net withholding” may be permitted or is required for purposes of the
Participant satisfying his or her obligations under this Section 7(b). The
Participant hereby acknowledges the Company’s obligations under this Award
Agreement are fully contingent on the Participant first satisfying this
Section 7(b).

8. Definitions. As used herein, the following definitions will apply:

(a) “Affiliate” means as defined in the Flotek Industries, Inc. 2018 Long-Term
Incentive Plan.

(b) “Board” means the Board of Directors of the Company.

(c) “Cause” means as defined in the Employment Agreement.

(d) “Change of Control” means as defined in the Flotek Industries, Inc. 2018
Long-Term Incentive Plan.

(e) “Code” means the Internal Revenue Code of 1986, as amended from time to
time, and U.S. Treasury regulations promulgated thereunder. Any reference to a
section of the Code will be deemed a reference to any successor or amended
section of the Code.

(f) “Committee” means the Compensation Committee of the Board.

(g) “Common Stock” means the common stock, $0.0001 par value per share, of the
Company.

 

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(h) “Company” means Flotek Industries, Inc., a Delaware corporation, and any
successor thereto.

(i) “Continuous Service” means the Participant’s provision of services to the
Company or its subsidiaries or their successors as an employee, member of the
Board or a consultant is continuous and uninterrupted. For this purpose,
Continuous Service will be deemed interrupted upon the actual cessation of
providing services to the Company or its subsidiaries or their successors,
notwithstanding any required notice period that must be fulfilled before a
termination as an employee, member of the Board or consultant can be effective
under applicable laws. Continuous Service will not be considered interrupted in
the case of (x) any approved leave of absence (including sick leave, military
leave, or any other authorized personal leave); (y) transfers among the Company
and its subsidiaries, or any successor thereof; or (z) any change in the
Participant’s employment status so long as the Participant remains in the
service of the Company or its subsidiaries and their successors as an employee,
member of the Board or a consultant. For avoidance of doubt, a change in status
by the Participant from one category of employee, member of the Board or
consultant to another of such category will not be considered a breach of
Continuous Service.

(j) “Employment Agreement” means the employment agreement by and between the
Participant and the Company effective December 22, 2019.

9. Changes in Equity. In the event of any change in the outstanding shares of
Common Stock by reason of any stock split, stock dividend or other non-recurring
dividends or distributions, recapitalization, merger, consolidation, spin-off,
combination, repurchase or exchange of stock, reorganization, liquidation,
dissolution or other similar corporate transaction that affects the Common
Stock, an adjustment will be made, as the Committee reasonably deems necessary
or appropriate, in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Notice and this Award
Agreement. Such adjustment may include an adjustment to the number and class and
exercise price of shares of Common Stock that may be delivered under the Option.
Notwithstanding the foregoing, the number of shares of Common Stock subject to
the Option will always be a whole number.

10. General Provisions.

(a) Legality of Initial Issuance. The Committee has determined that: (i) the
Company and the Participant have taken all actions required to register the
shares of Common Stock covered by this Award Agreement under the Securities Act
of 1933, as amended, or to perfect an exemption from the registration
requirements thereof, if applicable; (ii) all applicable listing requirements of
any stock exchange or other securities market on which the Shares are listed has
been satisfied; and (iii) any other applicable provision of any applicable law
has been satisfied.

(b) Notice. Any notice required by the terms of this Award Agreement must be
given in writing and will be deemed to be effective upon personal delivery or
upon deposit with the United States Postal Service, by registered or certified
mail, with postage and fees prepaid. Notice must be addressed to the Company at
its principal executive office and to the Participant at the address that he or
she most recently provided to the Company.

 

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(c) Successors and Assigns. Except as provided herein to the contrary, the
Notice and this Award Agreement is binding upon and will inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.

(d) No Assignment. Except as otherwise provided in this Award Agreement, the
Participant may not assign any of his or her rights under the Notice or this
Award Agreement without the prior written consent of the Committee, which
consent may be withheld in its sole discretion. The Committee is permitted to
assign its rights or obligations under the Notice or this Award Agreement, but
no such assignment will release the Company of any obligations pursuant to the
Notice and this Award Agreement.

(e) Construction and Severability. The captions used in this Award Agreement are
inserted for convenience and are not to be deemed to be a part of this Award
Agreement for construction or interpretation. Except where otherwise indicated
by the context, the singular form includes the plural form and the plural form
includes the singular form. Use of the term “or” is not intended to be
exclusive, unless the context clearly requires otherwise. The validity, legality
or enforceability of the remainder of this Award Agreement will not be affected
even if one or more of the provisions of this Award Agreement are held to be
invalid, illegal or unenforceable in any respect.

(f) Amendment and Termination. The Company has the right to unilaterally amend
the Notice and/or this Award Agreement to the minimum extent necessary to comply
with applicable laws and such amendment will not be deemed to materially impair
the rights of the Participant to the Option.

(g) Administration and Interpretation. Any question or dispute regarding the
interpretation of the Notice or this Award Agreement or the receipt of the
Optioned Shares hereunder must be submitted by the Participant to the Committee
and is subject to the resolution provisions in Section 15 of the Employment
Agreement.

(h) Counterparts. The Notice may be executed in any number of counterparts, any
of which may be executed and transmitted by facsimile or by electronic
transmission, and each of which will be deemed to be an original, but all of
which together will be deemed to be one and the same instrument.

(i) Entire Agreement; Governing Law; and Amendments. The provisions of the
Notice and the Employment Agreement are incorporated herein by reference. The
Notice, this Award Agreement, and the Employment Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and the
Participant with respect to the subject matter hereof, and may not be modified
adversely to the Participant’s interest except by means of a writing signed by
the Company and the Participant. The Notice and this Award Agreement are
governed by the laws of the State of Texas applicable to contracts executed in
and to be performed in that State.

 

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(j) Venue. The Company, the Participant and the Participant’s assignees agree
that any suit, action or proceeding arising out of or related to the Notice or
this Award Agreement must be brought in the United States District Court for the
Southern District of Texas (or should such court lack jurisdiction to hear such
action, suit or proceeding, in a state court in Harris County, Texas) and that
all parties submit to the jurisdiction of such court. The parties irrevocably
waive, to the fullest extent permitted by law, any objection the party may have
to the laying of venue for any such suit, action or proceeding brought in such
court. If any one or more provisions of this Section 10(j) are for any reason
held invalid or unenforceable, it is the specific intent of the parties that
such provisions be modified to the minimum extent necessary to make it or its
application valid and enforceable.

(k) No Guarantee of Continued Service. THE PARTICIPANT ACKNOWLEDGES AND AGREES
THAT THE VESTING OF THE OPTIONED SHARES PURSUANT TO THE VESTING SCHEDULE IS
EARNED ONLY BY CONTINUOUS SERVICE AT THE WILL OF THE COMPANY IN ACCORDANCE WITH
THE TERMS OF THE EMPLOYMENT AGREEMENT (NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED THE OPTION OR ACQUIRING SHARES HEREUNDER). THE PARTICIPANT FURTHER
ACKNOWLEDGES AND AGREES THAT THE NOTICE AND THIS AWARD AGREEMENT, THE RIGHTS
GRANTED HEREUNDER, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING
SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED SERVICE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND DO NOT
INTERFERE IN ANY WAY WITH THE PARTICIPANT’S RIGHT OR THE COMPANY’S (OR ANY
AFFILIATE’S) RIGHT TO TERMINATE THE PARTICIPANT’S RELATIONSHIP AS AN EMPLOYEE AT
ANY TIME, WITH OR WITHOUT CAUSE, AS PROVIDED IN THE EMPLOYMENT AGREEMENT.

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