Exhibit 10.7

FLOTEK INDUSTRIES, INC.

2010 LONG-TERM INCENTIVE PLAN

NONQUALIFIED STOCK OPTION AGREEMENT

1. Grant of Nonqualified Stock Option. Subject to the conditions described in
this agreement (the “Award Agreement”) and in the Flotek Industries, Inc 2010
Long-Term Incentive Plan, as amended from time to time (the “Plan”), Flotek
Industries, Inc., a Delaware corporation (the “Company”), hereby agrees to grant
to John W. Chisholm (“Participant”) the right and option (the “Option”) to
purchase, on the terms and conditions hereinafter set forth, all or any part of
an aggregate of 400,000 shares of Common Stock, subject to adjustment as set
forth in the Plan.

2. Nonqualified Stock Option Status: The Option is intended to be a
non-qualified stock option, and is not intended to be treated as an option that
complies with Section 422 of the Internal Revenue Code of 1986, as amended.

3. Grant Date: April 8, 2011.

4. Exercise Price: The Exercise Price shall be $9.19 per share of Common Stock
covered by the Option, which has been determined to be no less than the FMV Per
Share on the Grant Date.

5. Vesting:

(a) Vesting Schedule. Subject to the satisfaction of the terms and conditions
set forth in the Plan and this Award Agreement, including Participant’s
continued employment/service with the Company through April 8, 2013, the Option
shall vest and become exercisable on April 8, 2013.

(b) At any time, the portion of the Option which has become vested and
exercisable as described in this Award Agreement is hereinafter referred to as
the “Vested Portion.”

(c) In the event of the occurrence of any of the following:

(i) Participant’s Termination for a reason other than a reason that cause
Vesting pursuant to Section 5(d) of this Agreement;

(ii) the Company’s failure to achieve “Adjusted EBITDA” for 2011 which equals or
exceeds the minimum amount required pursuant to the 2011 Management Incentive
Plan of the Company for participants thereunder to receive any bonus whatsoever
pursuant to the terms thereof; or

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(iii) the disapproval of the Option by the “Required Lenders” pursuant to
Section 5.14 of the Amended and Restated Credit Agreement dated as of March 31,
2010 among the Company, Whitebox Advisors LLC, as Administrative Agent, and the
Lenders parties thereto, as amended, modified or restated,

the Option shall, to the extent not then vested, be canceled by the Company
without consideration and the Vested Portion of the Option shall remain
exercisable for the period set forth in Sections 6(a) or 6(b).

“Adjusted EBITDA” means the EBITDA of the Company, plus any amounts deducted in
computing EBITDA with respect to stock compensation, financing transaction costs
(whether paid in cash or not), and other noncash and/or nonrecurring charges not
directly related to the ongoing operations of the Company. “EBITDA” means the
sum of (a) the Company’s net income after taxes as determined in accordance with
GAAP, excluding, however, extraordinary items, including any net non-cash gain
or loss arising from the sale, exchange, retirement or other disposition of
capital assets (such term to include all fixed assets and all securities) other
than in the ordinary course of business, and any write-up or write-down of
assets, and the cumulative effect of any change in GAAP plus (b) to the extent
deducted in determining the Company’s net income, total cash interest expense
and other fees and expenses incurred by the Company in connection with any debt
whether paid or accrued, income taxes, depreciation, amortization and other
non-cash charges. Specific determination of Adjusted EBITDA shall be based
solely upon the judgment of the Audit Committee of the Company’s Board of
Directors upon recommendations received from the Company’s Chief Accounting
Officer.

(d) If not already forfeited pursuant to Section 5(c), the occurrence of any of
the following events shall cause the portion of the Option which is not yet
Vested to be considered immediately Vested: (i) a Change of Control, (ii) the
death of Participant, (iii) a Termination by the Company which is not for Cause,
(iv) a Termination by the Participant which is for Good Reason (as hereinafter
defined), or (iv) a Termination which is because of the Disability of
Participant. For purposes hereof, “Good Reason” shall exist upon the occurrence
of one of the following Company actions (unless the Participant consents in
writing to such action(s)): (i) a material reduction of the compensation and
benefits to which the Participant was entitled immediately prior to such
reduction, (ii) a material reduction in the duties, authority or
responsibilities relative to the duties, authority or responsibilities of the
Participant as in effect immediately prior to such reduction, or (iii) the
relocation of Participant to a facility or a location more than fifty (50) miles
from Participant’s then present location; provided, however, that
(A) Participant 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 Participant’s intent to terminate the term of this Agreement based on such
action(s) and (B) the Company will have 30 days from the date that such written
notice is provided by the Participant to cure such action(s).

 

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6. Exercise of Option.

(a) Period of Exercise. Subject to the provisions of the Plan and this Award
Agreement, the Participant may exercise all or any part of the Vested Portion of
the Option at any time prior to the earliest to occur of:

(i) the sixth anniversary of the Grant Date;

(ii) the second anniversary of the date of the Participant’s Termination; or

(iii) the date of Participant’s Termination for a reason other than a reason
that causes Vesting under Section 5(d) of this Agreement.

(b) Extensions. Except with respect to expiration events described in clause
(v) above, if the Participant is prohibited from exercising the Vested Portion
of an Option immediately prior to the expiration thereof due to any applicable
federal, state, local or foreign legal prohibitions, then the expiration of such
Vested Portion of an Option will be delayed until 5 days after the expiration of
such legal prohibition.

(c) Method of Exercise.

(i) Subject to Section 6(a) of this Award Agreement and the Plan, the Vested
Portion of the Option may be exercised by delivering to the Company at its
principal office written notice of intent to so exercise; provided that, the
Option may be exercised with respect to whole shares of Common Stock only. Such
notice shall specify the number of shares of Common Stock for which the Option
is being exercised and shall be accompanied by payment in full of the Exercise
Price (and unless other arrangements have been made with the Committee, any
required withholding taxes). The payment of the Exercise Price shall be made by
Participant (i) in cash or by certified check payable and acceptable to the
Company), or (ii) subject to such conditions and requirements as the Committee
may specify, at the written request of Participant, by the Company’s withholding
from shares otherwise deliverable pursuant to the exercise of the Option shares
of Common Stock having an aggregate Fair Market Value as of the date of exercise
that is not greater than the full Exercise Price for the shares with respect to
which the Option is being exercised and by paying any remaining amount of the
Exercise Price as provided in (i) above.

(ii) No Participant shall have any rights to dividends or other rights of a
stockholder with respect to shares of Common Stock subject to an Option until
Participant has given written notice of exercise of the Option, paid in full for
such shares and, if applicable, has satisfied any other conditions imposed by
the Committee pursuant to the Plan.

(iii) Notwithstanding any other provision of the Plan or this Award Agreement to
the contrary, the Option may not be exercised prior to the completion of any
registration or qualification of the Option or the shares under

 

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applicable state and federal securities or other laws, or under any ruling or
regulation of any governmental body or national securities exchange that the
Committee shall in its sole discretion determine to be necessary or advisable.

(iv) Upon the Company’s determination that the Option has been validly exercised
as to any of the shares, the Company shall issue certificates in the
Participant’s name for such shares or if the shares are held in book entry form,
then the Company will make such entry that will reflect the Participant’s
ownership of such shares. However, the Company shall not be liable to the
Participant for damages relating to any delays in issuing the certificates to
him, any loss of the certificates, or any mistakes or errors in the issuance of
the certificates or in the certificates themselves.

(v) In the event of the Participant’s death, the Vested Portion of the Option
shall remain exercisable by the Participant’s executor or administrator, or the
person or persons to whom the Participant’s rights under this Award Agreement
shall pass by will or by the laws of descent and distribution as the case may
be, to the extent set forth in Section 6(a). Any heir or legatee of Participant
shall take rights herein granted subject to the terms and conditions hereof.

7. Reorganization of the Company. The existence of this Award Agreement shall
not affect in any way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the Company’s capital structure or its business; any merger or
consolidation of the Company; any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting shares of Common Stock, the dissolution
or liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.

8. Certain Restrictions. By executing this Award Agreement, Participant
acknowledges that he will enter into such written representations, warranties
and agreements and execute such documents as the Company may reasonably request
in order to comply with the securities law or any other applicable laws, rules
or regulations, or with this Award Agreement or the terms of the Plan.

9. Amendment and Termination. This Award Agreement or the Plan may be amended or
terminated in accordance with the terms of the Plan and with the express written
consent of Participant.

10. Taxes and Withholdings. The Participant may be required to pay to the
Company or any Affiliate and the Company or its Affiliates shall have the right
and are hereby authorized to withhold any applicable withholding taxes in
respect of the Option, its exercise, or any payment or transfer under or with
respect to the Option and to take such other action as may be necessary in the
opinion of the Committee to satisfy all obligations for the payment of such
withholding taxes.

 

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11. No Guarantee of Tax Consequences. The Company, Board and Committee make no
commitment or guarantee to Participant that any federal, state or local tax
treatment will apply or be available to any person eligible for benefits under
this Award Agreement and assumes no liability whatsoever for the tax
consequences to Participant.

12. Severability. In the event that any provision of this Award Agreement is,
becomes or is deemed to be illegal, invalid, or unenforceable for any reason, or
would disqualify the Plan or this Award Agreement under any law deemed
applicable by the Board or the Committee, such provision shall be construed or
deemed amended as necessary to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Board or the
Committee, materially altering the intent of the Plan or this Award Agreement,
such provision shall be stricken as to such jurisdiction, the Participant or
this Award Agreement, and the remainder of this Award Agreement shall remain in
full force and effect.

13. Terms of the Plan Control. This Award Agreement and the underlying Award are
made pursuant to the Plan. Notwithstanding anything in this Award Agreement to
the contrary, the terms of the Plan, as amended from time to time and
interpreted and applied by the Committee, shall govern and take precedence. All
capitalized terms not otherwise defined herein shall have the meanings set forth
in the Plan, the terms of which are incorporated herein by reference.

14. Governing Law. This Award Agreement shall be construed in accordance with
(excluding any conflict or choice of law provisions of) the laws of the State of
Delaware to the extent federal law does not supersede and preempt Delaware law.

15. Consent to Electronic Delivery; Electronic Signature. Except as otherwise
prohibited by law, in lieu of receiving documents in paper format, Participant
agrees, to the fullest extent permitted by law, to accept electronic delivery of
any documents that the Company may be required to deliver (including, but not
limited to, prospectuses, prospectuses supplements, grant or award notifications
and agreements, account statements, annual and quarterly reports, and all other
forms of communications) in connection with this and any other Award made or
offered by the Company. Electronic delivery may be via a Company electronic mail
system or by reference to a location on a Company intranet to which Participant
has access. Participant hereby consents to any and all procedures the Company
has established or may establish for an electronic signature system for delivery
and acceptance of any such documents that the Company may be required to
deliver, and agrees that his electronic signature is the same as, and shall have
the same force and effect as, his manual signature.

16. Transferability. The Option may not be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by the Participant
otherwise than by will or by the laws of descent and distribution, and any such
purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the Company or any
Affiliate; provided that the designation of a beneficiary shall not constitute
an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. No
such permitted transfer of the Option to heirs or legatees of the Participant
shall be effective to bind the Company unless the Committee shall have been
furnished with written notice thereof and a copy of such evidence as the
Committee may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions hereof.
During the Participant’s lifetime, the Option is exercisable only by the
Participant.

[signature blanks follow]

 

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COMPANY: Flotek Industries, Inc. By:  

 

Name Printed:  

 

Title:  

 

Date:  

 

PARTICIPANT:

 

John W. Chisholm

Address:

 

 

 

Date:  

 

 

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