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Exhibit
10.1
EXECUTIVE
EMPLOYMENT AGREEMENT
THIS
AGREEMENT, effective as of May 5, 2008, by and between LAPOLLA INDUSTRIES, INC. a
Delaware corporation (the “Company”) and DOUGLAS J. KRAMER (the
“Executive”).
WHEREAS,
Executive is currently employed as President and Chief Executive Officer of the
Company; and
WHEREAS,
Company and Executive previously entered into an Executive Employment Agreement
effective as of July 25, 2005 (the “Prior Agreement”); and
WHEREAS,
Company and Executive have determined that it would be in each of their best
interests to amend certain provision of the Prior Agreement and to enter into a
new agreement subject to the terms and conditions hereinafter set forth in place
of the Prior Agreement; and
WHEREAS,
the Company has determined to provide the Executive with compensation and other
benefits on the terms and conditions set forth in this Agreement (the
“Agreement”), and the Executive is willing to accept such terms and conditions
and to continue to perform services for the Company on the terms and conditions
hereinafter set forth.
NOW
THEREFORE, in consideration of the respective agreements of the parties
contained herein, it is agreed as follows:
1. EMPLOYMENT
TERM. Subject to the provisions of Section 4 hereof, this
agreement shall be effective commencing on May 5, 2008 and ending on December
31, 2010 (the “Term”).
2. POSITIONS;
DUTIES.
2.1. The
Company agrees to employ the Executive, and the Executive agrees to serve during
the term hereof, as President and Chief Executive Officer of the
Company.
2.2 While
employed, the Executive agrees to devote all of his working time and efforts
(excluding any periods of vacation and sick leave and any other permitted
absences), using his ability, experience and talent, to the performance of
services, duties and responsibilities in connection with the positions named
above. The Executive shall perform such duties and exercise such powers,
commensurate with his position, and shall be subject to such restrictions, as
the Chairman of the Board and Board of Directors of the Company shall from time
to time assign to him or impose. Provided, however, Executive’s
duties, powers and responsibilities shall at all times be consistent with the
duties, powers and responsibilities of a President and Chief Executive
Officer.
2.3 Nothing
in this Agreement shall preclude the Executive from (a) engaging in charitable
and community affairs (including serving on the board of any not-for-profit
organization) so long as, in the reasonable determination of the Board of
Directors, such activities do not interfere with his duties and responsibilities
hereunder; (b) managing any passive investment made by him in publicly traded
equity securities or other property (provided that no such investment may exceed
5% of the equity of any entity without the prior approval of the Board of
Directors); or (c) serving, subject to the prior approval of the Board of
Directors, as a member of corporate boards of directors or as a trustee of any
other corporation, association or entity.
3. COMPENSATION AND RELATED
MATTERS.
3.1 Base
Compensation. The Company shall pay the Executive a base
salary (“Base Salary”) calculated at an annual rate of $350,000. The Base Salary
may be increased in the discretion of the Board during the Employment Term and,
as so increased, shall not be decreased and shall constitute “Base Salary”
hereunder.
3.2 Annual
Bonus. As determined by the Compensation Committee of the
Board of Directors, Executive shall be eligible for bonus consideration
(“Bonus”) as and if bonuses are paid to other Executives on an annual
basis.
3.3 Transaction
Bonus. In addition to his Base Salary, provided Executive is
still employed by the Company upon the consummation of a Change in Control (as
defined in Section 4.7 below), or in the event Executive’s employment is
terminated within one year immediately preceding the consummation of a Change in
Control (other than by the Company for “Cause” as defined below or by Executive
without “Good Reason” as defined below), the Executive shall be entitled to
receive a bonus (the “Transaction Bonus”) in addition to any other payments or
benefits applicable thereto under this Agreement. The Transaction Bonus shall be
in an amount equal to six percent (6%) of the “Transaction Value”, which means
the total amount of consideration paid in respect of the transaction that
resulted in the Change in Control. The Transaction Bonus shall be
paid at the same time and in the same form of consideration (e.g., cash, stock
in the acquiring company, promissory note or a combination thereof) as is the
consideration received by the holders of the majority of the outstanding voting
securities of the Company who participate in the transaction. In the
Company’s sole and absolute discretion, it may pay in cash all or any portion of
the Transaction Bonus that would otherwise be paid in a form of consideration
other than cash pursuant to this Section. Upon request and at his
sole expense, Executive shall be entitled to have the Company’s outside auditors
prepare a full and complete accounting of the calculation of the Transaction
Value and the Transaction Bonus.
3.4 Automobile. During
the Employment Term, Executive shall be entitled to the use of an automobile and
the Company shall reimburse the Executive for all reasonable automobile expenses
incurred by him.
3.5 Employee Benefit Programs,
Plans and Practices. During the Term, the Executive shall be
entitled to participate in all employee pension, welfare and fringe benefit
programs, plans and practices (including, without limitation, the Company’s
vacation plan under which Executive is entitled to three (3) weeks of paid
vacation time per year, up to seven (7) days of which may be carried over to the
following year without the written consent of the Company), and any incentive
compensation plans, all in accordance with the terms thereof and subject to the
changes that may be made to them during the Term, which the Company makes
available to its executives.
3.6 Expenses. The
Executive is authorized to incur reasonable expenses in carrying out his duties
and responsibilities under this Agreement, including, without limitation,
expenses for travel and similar items related to such duties and
responsibilities. The Company will reimburse the Executive for all such expenses
upon presentation by the Executive from time to time of appropriately itemized
and approved (consistent with the Company’s policy) accounts of such
expenditures.
3.7 Withholding
Taxes. The Company shall have the right to deduct or withhold
from all payments due to Executive hereunder any and all sums required for any
and all federal, social security, state and local taxes, assessments or charges
now applicable or that may be enacted and become applicable in the
future.
4. TERMINATION OF
EMPLOYMENT.
2
4.1 Termination by Company
Without Cause or by Executive with Good Reason During the
Term. If this Agreement and the Executive’s employment
hereunder are terminated during its term by the Company without “Cause” (as
defined below) or by the Executive with “Good Reason” (as defined below), the
Executive shall be entitled to the following compensation and
benefits:
(a) A
severance amount equal to the lesser of (i) twenty-four (24) months Base Salary;
or (ii) Base Salary for the remainder of the Term, paid in equal monthly
installments. The amount of any severance otherwise payable to
Executive shall be reduced by the amount of earned income to which Executive
shall be entitled for services performed during the severance payment period for
other than the Company;
(b) The
product of (i) the Value (as defined below), as of the last day of the calendar
year containing the Termination Date, of any equity or equity based awards
granted under any plans or other arrangements, if any, they may be adopted or
implemented by Company after May 5, 2008, which Executive can show that he
reasonably would have received had he remained employed by the Company through
the end of the calendar year containing the Termination Date, or four (4) months
after the Termination Date, whichever is greater, multiplied by (ii) a fraction,
the numerator of which is the number of days in the calendar year in which the
Date of Termination occurs through the Termination Date and the denominator of
which is 365, but only to the extent not previously vested, exercised and/or
paid. For purposes of this paragraph, the Value of any equity or
equity based awards shall be determined by the Company’s independent
accountants, whose determination shall be final; and
(c) Reimbursement
for reasonable and necessary expenses incurred by the Executive on behalf of the
Company during the period ending on the Termination Date;
(d) To
the extent not theretofore paid or otherwise provided for under this Agreement,
Company shall timely pay or provide to Executive, any other amounts or benefits
which Executive is then entitled to receive through the Termination Date under
any plan, program, policy or practice or contract or agreement maintained by the
Company for the benefit of Executive, including any unused vacation that is
accrued and unpaid as of the Termination Date; and
(e) Health
benefits. For twelve (12) months from the Termination Date, continued
participation in any plan(s) providing medical, hospitalization and dental
coverage for Executive as of the Termination Date, subject to the same terms and
conditions, including but not limited to those requiring contributions by
Executive, as were applicable to Executive immediately prior to the Termination
Date. Any coverage to be provided for Executive under this paragraph
shall be conditioned upon his timely election of COBRA or any other laws
providing for continuation of coverage upon employment termination, effective as
of the Termination Date. If, for any reason, Company’s plan(s) do not
permit such coverage subsequent to termination of employment, Company will, to
the extent it is able to do so, provide Executive with similar coverage (with
the same after tax effect) outside of such plan(s).
4.2 Except
as otherwise provided in this Agreement, all payments required to be paid by the
Company to the Executive pursuant to Section 4.1 are payable on the Termination
Date or as soon thereafter as is practical based upon the nature of the
payment.
4.3 Termination by Company For
Cause or by Executive Without Good Reason. If the
Company hereunder terminates Executive’s employment at any time for Cause (as
defined below) or Executive terminates his employment without Good Reason,
Executive shall have no right to any bonuses, salaries, benefits or other
compensation other than those accrued through the date of employment termination
or required by law to be provided.
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4.4 Termination On Account of
Death or Disability. Company shall treat termination of
Executive’s employment on account of his Death or Disability as a Termination
without Cause for purposes of this Agreement. In the event of
Executive’s Death, the Termination Date shall be his date of
death. In the event of Executive’s Disability, the Termination Date
shall be the date that is five (5) days after the date on which Company gives
Executive written notice of termination of employment on account of his
Disability. Such written notice may be given by Company at any time
after Executive has suffered a physical or mental illness that renders him
incapable of fulfilling his obligations under this Agreement, and such physical
or mental illness existed and rendered him incapable of fulfilling his
obligations for a period of at least ninety (90) days within a consecutive one
hundred and eighty (180) day period. The Company’s determination that
Executive is incapable of fulfilling his obligations under this Agreement shall
be final and binding in the absence of fraud.
4.5 As
used herein, the term “Cause” shall mean (i) willful malfeasance or willful
misconduct by Executive in connection with his employment, (ii) continuing
refusal by Executive to perform his duties hereunder or follow any lawful
direction of the Board, (iii) any material breach of the provisions of Sections
12 or 13 of this Agreement by Executive, (iv) engaging in conduct detrimental to
the interest or reputation of the Company, without regard to whether such
conduct was in connection with the Executive’s employment, or (v) the
Executive’s conviction of, or plea of nolo contendere to, a felony (other than a
traffic violation), which, in each event in (i), (ii) or (iii), actually has a
material effect on the Company and its business. The cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard before the Board),
finding that, based upon a reasonable good faith determination of the Board, the
Executive is guilty of the conduct described above, and specifying the
particulars thereof in detail. The Executive shall have ten (10) days after the
date that such written notice has been given to the Executive in which to cure
such conduct, to the extent such cure is possible.
4.6 As
used herein, the term “Good Reason” shall mean (i) a reduction in the
Executive’s Base Salary; (ii) a substantial diminution of the Executive’s duties
and responsibilities; or (iii) a relocation of the Executive’s primary workplace
that is not agreed to by him and is to a location that is greater than fifty
(50) miles from Executive’s primary workplace as of the date of this
Agreement. The Company’s employment of another officer in a
newly created position or otherwise, at a position beneath that of the
Executive, shall not be deemed to constitute, or result in, a substantial
diminution of the Executive’s duties or responsibilities for purposes of this
Agreement.
4.7 Termination following a
Change in Control. If the Company or any successor terminates
this Agreement at any time during the Term following a “Change in Control” (as
defined below) of the Company: (i) Executive shall be entitled to an
amount equal to the Base Salary which would otherwise be payable over the
remaining term of this Agreement, payable in a lump sum; and (ii) any
outstanding Awards (including substituted shares of the acquiring or surviving
Company in the case of a merger or acquisition) held by Executive or other
benefits under any Company plan or program, which have not vested in accordance
with their terms will become fully vested and exercisable at the time of such
termination. “Change in Control” means an Ownership Change Event or
series of related Ownership Change Events (collectively, a “Transaction”) in which the
stockholders of the Company immediately before the Transaction do not retain
immediately after the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting securities of the Company, or in the event of an ownership
Change Event, the entity to which the assets of the Company were
transferred. An “Ownership Change Event”
shall be deemed to have occurred if any of the following occurs with respect to
the Company: (i) the direct or indirect sale or exchange by the stockholders of
the Company of all or substantially all of the voting stock of the Company; (ii)
a merger or consolidation in which the Company is a party; (iii) the sale,
exchange, or transfer of all or substantially all of the assets of the Company
(other than a sale, exchange or transfer to one or more subsidiaries of the
Company); or (iv) a liquidation or dissolution of the Company. The
sole exception to Change in Control and Ownership Change Event as described
above shall be any Change in Control or Ownership Change Event that may result
from the death or incapacity of Richard J. Kurtz wherein his interest is
transferred to his heirs only. In such event for the purposes hereof,
no Change in Control or Ownership Change Event shall be deemed to have
occurred.
4
4.8 Release of
Claims. Upon good and valuable consideration, the receipt of
which the Executive and the Company each hereby acknowledge, upon termination of
the Executive’s employment for any reason set forth in Section 4, with the
exception of the reasons for termination provided under Section 4.3, the Company
and the Executive agree to execute a release of claims, substantially in the
form attached hereto as Exhibit A, with
respect to claims that arise on or prior to the date of the execution of the
release. The Executive’s execution of such release shall be a condition
precedent to the payment of any of the compensation and benefits referred to in
this Section 4.
4.9 NOTICE OF
TERMINATION. Any purported termination by the Company or by
the Executive shall be communicated by written notice of termination to the
Executive or the Company, respectively, delivered on or prior to the effective
date of such termination.
5. TERMINATION
DATE. “Termination Date” shall mean, in the case of the
Executive&
