CEO Employment Agreement - Bill Jayroe

EMPLOYMENT AGREEMENT


This employment agreement is effective as of September 16, 1997, between FLOTEK INDUSTRIES, INC., an ALBERTA, CANADA corporation (hereafter known as "Flotek") and BILL JAYROE.


RECITALS


1. Flotek desires assurance of the continued association and services of Bill Jayroe in order to retain his experience, abilities, and knowledge, and is therefore willing to engage his services on the terms and conditions set forth below.


2. Bill Jayroe desires to continue in the employ of Flotek and is willing to do so on the terms and conditions set forth below.


THEREFORE, in consideration of the above recitals and of the mutual promises and conditions in this agreement, it is agreed as follows:


ARTICLE I


TERM, PLACE, AND DUTIES OF EMPLOYMENT


1.1 TERM OF EMPLOYMENT: Subject to earlier termination as provided in this agreement, Bill Jayroe shall be employed for a three (3) year term beginning September 16, 1997, and ending September 16, 2000.


1.2 AUTOMATIC RENEWAL: This agreement shall be renewed automatically for succeeding terms of one (1) year each unless either party gives notice to the other at least ninety (90) days prior to the expiration of any term of his or its intention not to renew this agreement.


1.3 EMPLOYMENT TERM DEFINED: As used herein, the phrase "employment term" refers to the entire period of employment of Bill Jayroe by Flotek hereunder, whether for the periods provided above, or whether terminated earlier as hereinafter provided or extended by mutual agreement between Flotek and Bill Jayroe.


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1.4 PLACE OF EMPLOYMENT: Unless the parties agree otherwise in writing, during the employment term Bill Jayroe shall perform the services he is required to perform under this agreement at Flotek's offices, located at 7030 Empire Central Drive, Houston, Texas 77040; provided, however, that Flotek may from time to time require Bill Jayroe to travel temporarily to other locations on Flotek's business.


1.5 DUTIES AND AUTHORITY: Bill Jayroe shall be the President and Chief Executive Officer of Flotek, with full power and authority to manage and conduct all the business of Flotek, subject to the directions and policies of Flotek and its board of directors as they may be, from time to time, stated either orally or in writing.


ARTICLE II


EMPLOYEE RESTRICTIONS AND OBLIGATIONS


2.1 RESTRICTIONS ON OUTSIDE BUSINESS ACTIVITY: During his employment, Bill Jayroe shall devote his full business time, energy, and ability exclusively to the business and interests of Flotek, and shall not, without Flotek's prior written consent, render to others services of any kind for compensation, or engage in any other business activity that would materially interfere with the performance of his duties under this agreement, provided, however, that he may continue to serve as a director of Nevada Gold and Casinos and to receive compensation for that service, and, with the Board's approval, may accept similar positions and receive compensation therefor.


a. No Other Commitments: Bill Jayroe represents to Flotek that he has no other outstanding commitments inconsistent with any of the terms of this agreement or the services to be rendered under it.


b. Passive Investments: This agreement shall not be interpreted to prohibit Bill Jayroe from making passive personal investments or conducting private business affairs if those activities do not interfere with the services required under this agreement. However, Bill Jayroe shall not directly or indirectly acquire, hold, or retain any interest in any business competing with or similar in nature to the business of Flotek.


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2.2 COVENANT NOT TO COMPETE DURING TERM: During the employment term, Bill Jayroe shall not, directly or indirectly, whether as partner, employee, creditor, shareholder, or otherwise, promote, participate, or engage in any activity or other business competitive with Flotek's business.


ARTICLE III


COMPENSATION


3.1 BASE SALARY: During the term of this agreement, Flotek agrees to pay Bill Jayroe a Base Salary of One Hundred Fifty Thousand Dollars ($150,000.00). The Base Salary shall be payable as current salary, in semimonthly installments subject to all applicable withholdings and deductions.


3.2 ANNUAL BASE SALARY REVIEW: Flotek's board of directors shall review Bill Jayroe's Base Salary and additional benefits then being paid to Bill Jayroe not less frequently than every twelve (12) months, such review to coincide with the board's review of annual performance goals, which normally will occur on or about the month of May. Following such review, the board may in its discretion increase (but shall not be required to increase) Bill Jayroe's Base Salary or any other benefits, but may not decrease Bill Jayroe's Base Salary during the term of this agreement.


3.3 INCENTIVE COMPENSATION: In addition to the Base Salary provided for above, Flotek shall pay to Bill Jayroe as incentive compensation for each fiscal year of Flotek a graduated bonus which shall be tied to the net profits of Flotek. The bonus shall be calculated as a percentage of Bill Jayroe's annual base salary up to a maximum bonus of one hundred percent (100%) of such base salary. Bonuses shall be calculated and paid as follows:


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GRADUATED BONUS SCHUDULE - NET INCOME - FISCAL 97/98


Total Bonus as a Total Dollar value of
Net Income (CDN) % of Base Salary Bonus in U.S. Dollars
---------------- ---------------- ---------------------

1,200,000 or more 20% $ 30,000
1,500,000 or more 30% $ 45,000
1,800,000 or more 40% $ 60,000
2,100,000 or more 50% $ 75,000
2,400,000 or more 60% $ 90,000
2,700,000 or more 70% $105,000
3,000,000 or more 80% $120,000
3,300,000 or more 90% $135,000
3,600,000 or more 100% $150,000


If earned, all such bonuses shall be paid to Bill Jayroe in full within ninety (90) days after final board approval of the year end financial statements.


For each succeeding year of Bill Jayroe's contract, new performance goals, as proposed by management and agreed to by the Board, will be set. Based on such goals, a similar bonus schedule will be established through a formal budget process developed by management and approved by the board of directors.


a. The term "Net Profits" for purposes of this section shall be defined as follows: "Net profits before taxes, resulting from all operations and from all product lines, excluding extraordinary or unusual items, as set forth in Flotek's annual audited consolidated financial statements of operations and income."


b. The incentive compensation payable to Bill Jayroe under this paragraph shall be prorated for any partial fiscal year that occurs during the employment term. The incentive compensation shall be prorated by multiplying the total net profits for the fiscal year within which such partial fiscal year occurs by (a) the above mentioned percentage and by (b) a number equal to the number of months during any such partial fiscal year in which Bill Jayroe is employed by Flotek within the meaning of this agreement, divided by twelve.


3.4 NON-QUALIFIED STOCK OPTION #1: As previously approved by the Board of Directors of Flotek in January, 1997, and as part of the consideration for this agreement, Flotek granted Bill Jayroe a non-qualified stock option to purchase


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Four Hundred Thousand (400,000) shares of Flotek's common stock at a purchase price of fifty cents ($0.50 CDN) Canadian per share. The terms and conditions of the option grant are memorialized in a separate option agreement previously executed and approved by the VSE.


3.5 NON-QUALIFIED STOCK OPTION #2: As further consideration for this agreement, Flotek wishes to grant Bill Jayroe an additional non-qualified stock option to purchase Three Hundred Thousand (300,000) shares of Flotek's common stock at a purchase price equal to the market price per share (in Canadian dollars) on the close of business as of the date of this agreement.


3.6 FUTURE STOCK OPTION GRANT: As previously approved by the Board of Directors of Flotek in January, 1997, and as part of the consideration for this agreement, Flotek has agreed to grant Bill Jayroe two (2) additional non-qualified stock options to purchase common stock of Flotek on the following terms and conditions:


A. YEAR ONE OF TERM: Provided Bill Jayroe meets or exceeds the minimum net income performance goal necessary to earn a twenty percent (20%) or greater incentive bonus in fiscal 97/98 (as set forth above in paragraph 3.3 of this Article III), Flotek will grant Bill Jayroe a non-qualified stock option to purchase Three Hundred Thousand (300,000) shares of Flotek's common stock at the then current market price. Such option to be granted within thirty (30) days after final Board approval of the year end financial statements.


B. YEAR TWO OF TERM: Provided Bill Jayroe meets or exceeds the minimum net income performance goals in fiscal 98/99 as shall be agreed by the parties as required in paragraph 3.3 of this Article III, Flotek will grant Bill Jayroe an additional non-qualified stock option to purchase another Three Hundred Thousand (300,000) shares of Flotek's common stock at the then current market price. Such option to be granted within thirty (30) days after final Board approval of the year end financial statements.


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In the event Bill Jayroe does not achieve the agreed upon minimum performance goals for either or both fiscal 97/98 or fiscal 98/99, Bill Jayroe shall forfeit his absolute rights to such non-qualified stock option(s). However, if, in the opinion of the compensation committee, the failure to achieve the minimum performance goal(s) was caused by unforeseen events which could not have been reasonably anticipated, the compensation committee shall retain the discretion to authorize the grant to Bill Jayroe of a similar non-qualified stock option for either or both fiscal 97/98 or fiscal 98/99, for any number of shares (for each grant) up to, but not exceeding three hundred thousand (300,000).


Assuming the performance goals are achieved, or if not, options are granted at the compensation committee's discretion, the terms and conditions of each grant, which the parties agree shall be subject to VSE and all other appropriate regulatory approvals, shall be as follows:


1. Each stock option shall be subject to a twenty-four (24) month vesting schedule beginning on the date of each grant, with the total number of shares to vest at the rate of 1/ ...