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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 .
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.
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 dissol
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