Item 1.01. Entry into a Material Definitive Agreement.
Cooperation Agreement with BLR Partners LP
On March 19, 2019, Flotek Industries, Inc. (the
Company
) entered into a cooperation agreement (the
Agreement
) with BLR Partners LP and certain of its affiliates named therein (collectively,
BLR Partners
), which has a combined economic and beneficial ownership interest in approximately 2.8% of the
Companys outstanding shares of common stock, par value $0.0001 per share (the
Common Stock
). The following is a summary of the material terms of the Agreement. The summary does not purport to be complete and is qualified in
its entirety by reference to the Agreement, a copy of which is attached as Exhibit 10.1 to this Current Report on Form
8-K
and is incorporated herein by reference.
Pursuant to the Agreement, the Company agreed to, among other things, (i) effective immediately, increase the size of the Companys
Board of Directors (the
Board
) from seven to eight directors and appoint Paul W. Hobby to the Board, the Companys Strategic Capital Committee and the Companys Corporate Governance and Nominating Committee, and
(ii) effective as of the 2019 annual meeting of stockholders (the
2019 Annual Meeting
), separate the roles of Chairman of the Board and Chief Executive Officer of the Company and elect David Nierenberg as
non-executive
Chairman of the Board. Additionally, prior to the regularly scheduled Board meeting in October 2019, the Company agreed that the Board shall determine and procure the resignation of one director from
the Board (provided, such director shall not be Mr. Hobby or Mr. Nierenberg) and upon such resignation decrease the size of the Board from eight directors to seven directors.
Pursuant to the Agreement, if Mr. Hobby is unable or unwilling to serve as a director, resigns as a director or is removed as a director
during the Standstill Period (as defined below), and if at such time BLR Partners has combined beneficial and economic ownership of at least the lesser of (i) 2.0% of the Companys then outstanding Common Stock and (ii) 1,147,000 shares of
Common Stock (subject to customary anti-dilution provisions) (such lesser amount, the
Minimum Ownership Threshold
), BLR Partners may recommend a substitute director who must meet certain criteria specified in the Agreement.
With respect to the 2019 Annual Meeting, BLR Partners agreed to, among other things, vote in favor of (i) each of the Companys
director nominees, (ii) the Companys recommendation with respect to certain
say-on-pay
proposals and (iii) the Companys recommendations
with respect to any other proposals presented to stockholders (provided, (i) that if Institutional Shareholder Services Inc. or Glass, Lewis & Co., LLC recommends otherwise with respect to any such other proposal, BLR Partners is
permitted to vote in accordance with their recommendation, and (ii) BLR Partners shall be permitted to vote in its sole discretion with respect to extraordinary transactions requiring a vote of stockholders). BLR Partners also agreed not to
(i) submit director nominations or proposals at the 2019 Annual Meeting, (ii) submit any proposal for consideration at, or bring any other business before, the 2019 Annual Meeting or (iii) initiate, encourage or participate in any
vote no, withhold or similar campaign with respect to the 2019 Annual Meeting.
BLR Partners also agreed to
certain customary standstill provisions, effective as of the date of the Agreement through the earlier of (x) 30 calendar days prior to the deadline for the submission of stockholder nominations for the Companys 2020 annual meeting of
stockholders and (y) 120 days prior to the first anniversary of the 2019 Annual Meeting (the
Standstill Period
), prohibiting it from, among other things: (i) soliciting proxies regarding any matter to come before any annual
or special meeting of stockholders of the Company, including the election of directors, (ii) entering into a voting agreement or group with other stockholders of the Company, other than affiliates of BLR Partners,
(iii) encouraging any person to submit nominees in furtherance of a contested solicitation for the election or removal of directors or (iv) submitting any proposal for consideration by stockholders of the Company at any annual or special
meeting of stockholders.
The Company and BLR Partners also made certain customary representations and agreed to mutual
non-disparagement
provisions.