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Exhibit 10.1
AGREEMENT
made and entered into by and between Katy Industries, Inc.
(the “Company”), a Delaware corporation, with its
principal place of business at 2461 S. Clark St. Suite 630,
Arlington, VA 22202, and David J. Feldman (the
“Executive”), effective as of the 21st day of
April 2008.
WHEREAS,
the operations of the Company and its Affiliates are a complex
matter requiring direction and leadership in a variety of
arenas, including financial, strategic planning, regulatory,
community relations and others;
WHEREAS,
the Executive is possessed of certain experience and expertise
that qualify him to provide the direction and leadership
required by the Company and its Affiliates; and
WHEREAS,
subject to the terms and conditions hereinafter set forth, the
Company therefore wishes to employ the Executive as its
President and Chief Executive Officer and the Executive wishes
to accept such employment;
NOW,
THEREFORE, in consideration of the foregoing promises and the
mutual promises, terms, provisions and conditions set forth in
this Agreement, the parties hereby agree:
1.
Employment . Subject to the terms and conditions
set forth in this Agreement, the Company hereby offers and the
Executive hereby accepts employment.
2.
Term . The term of the Executive’s
employment hereunder shall commence as of April 21, 2008 (the
“Employment Date”) and shall continue until termination
as hereafter provided. The Executive may be terminated
by the Company or resign at will at any time subject to the
provisions of Section 5 below. The term of this
Agreement is hereafter referred to as “the term of this
Agreement” or “the term hereof”.
3.
Capacity and Performance .
(a)
During
the term hereof, the Executive shall serve the Company as its
President and Chief Executive Officer. In addition, the
Executive shall be appointed to serve as a director of the Company
and a member of the Executive Committee of the Board of Directors
of the Company (the “Board”) upon the commencement of
his employment hereunder, and shall so serve without additional
compensation. At the expiration of the term of such
initial appointment, the Executive shall again serve as a director
of the Company and a member of the Executive Committee of the
Board, if so re-elected or re-appointed from time to time, and
shall so serve without additional compensation; provided, however,
that the Executive’s failure to be so re-elected or
re-appointed shall not constitute a breach of this
Agreement. The Executive shall resign immediately from
the Board, and all committees thereof, upon termination of his
employment hereunder.
(b)
During
the term hereof, the Executive shall be employed by the Company on
a full-time basis, and shall have and perform such usual and
customary duties, responsibilities, and authority of a Chief
Executive Officer and President on behalf of the Company and its
Affiliates.
(c)
During
the term hereof, the Executive shall devote his full business time
(except for permitted vacation periods and reasonable periods of
illness or other incapacity) and his efforts, business judgment,
skill and knowledge exclusively to the advancement of the business
and interests of the Company and its Affiliates and to the
discharge of his duties and responsibilities
hereunder. The Executive shall not engage in any other
business activity or serve in any industry, trade, professional,
governmental or academic position during the term of this
Agreement, except as may be expressly approved in advance by the
Board in writing.
(d)
The
foregoing restrictions shall not limit or prohibit the Executive
from engaging in passive investment, inactive business ventures,
and community, charitable, and social activities, including without
limitation serving as a member of boards of directors (or other
similar bodies) of entities not engaged in competition with the
Company or any of its Affiliates, in each case, so long as such
activities do not interfere with the Executive’s performance
and obligations hereunder, and provided, further, that the
Executive shall not serve as a member of a board of directors of a
publicly-traded Company without the Board’s prior approval
(which approval shall not be unreasonably withheld).
(e)
It
is anticipated that during the term hereof, the headquarters of the
Company will be relocated from Arlington, Virginia to the greater
St. Louis, Missouri metropolitan area. The Executive
shall be required to maintain his office at the Company’s
headquarters in St. Louis and will be required to commute to St.
Louis each week to perform his duties and responsibilities
hereunder; provided, however, that the Executive shall not be
required to relocate his primary residence from the Atlanta,
Georgia area.
4.
Compensation and Benefits . As compensation for
all services performed by the Executive under and during the term
hereof and subject to performance of the Executive’s duties
and obligations to the Company and its Affiliates, pursuant to this
Agreement or otherwise:
(a)
Base Salary . During the term hereof, the Company
shall pay the Executive a base salary at the rate of Four Hundred
Thousand Dollars ($400,000.00) per annum, payable in accordance
with the payroll practices of the Company for its executives and
subject to increase from time to time by the Compensation Committee
of the Board, in its sole and unreviewable
discretion. The Board will review the Executive’s
performance and his base salary annually. Such base
salary, as from time to time increased, is hereafter referred to as
the “Base Salary”.
(b)
Annual Bonus Compensation . During the term
hereof, the Executive will be eligible to earn an annual bonus of
up to 70% of Base Salary actually paid to the Executive (the
“Target Bonus”), subject to the achievement of
performance targets set by the Board, after consultation with the
Executive, and subject further to the terms of the Company’s
management incentive plan (the “Bonus
Plan”). The performance targets for each fiscal
year will be set by the Board, after consultation with the
Executive, within sixty (60) days of the beginning of said fiscal
year. The amount of any Target Bonus awarded shall be
determined by the Board based upon the achievement of said
performance targets and the terms and conditions of the Bonus
Plan. Notwithstanding the above, for fiscal year 2008,
the Executive will receive the full Target Bonus amount, with no
pro-ration, regardless of whether or not the performance targets
are achieved.
(c)
Supplemental Bonus Compensation . During the term
hereof, the Executive will be eligible to receive an additional,
annual, supplemental bonus for performance materially in excess of
annual targets. The decision whether to award a
supplemental bonus and the amount of any such bonus shall be
determined by the Compensation Committee of the Board in its good
faith discretion.
(d)
Timing of Bonus Payments . Any bonus due to the
Executive under Sections 4(b) or 4(c) hereof in respect of a
calendar year shall be paid to the Executive as soon as practicable
after the end of such calendar year (the Company will endeavor to
pay the bonus not later than April 1 of the year following the year
in which the bonus was earned, but in all events will pay the bonus
not later than December 31 of the year following the year in which
the bonus was earned).
(e)
Stock Options . Subject to the approval of the
Board, the Executive shall be granted an option to purchase a total
of 750,000 shares of common stock of the Company (the
“Option”), subject to the terms and conditions set
forth in any applicable award agreement, in the 2008 Chief
Executive Officer’s Plan and in any other applicable plan or
agreement. The Option will be exercisable at the price
of the Company’s shares on the Over-the-Counter Bulletin
Board (“OTC BB”) on the date of the
grant. The Option shall vest in three (3) equal
installments on the first, second and third anniversaries of the
Executive’s Employment Date, and shall have a maximum
exercise period of ten (10) years from the grant
date. In the event of termination of the
Executive’s employment without Cause during the term hereof,
as set forth more fully in the Option award agreement and the
applicable plan documents, the Executive shall be entitled to
exercise the vested portion of the Option for ninety (90) days
following the date of termination of employment. The
unvested portion of the Option shall be canceled as of the date of
termination of employment upon a termination of employment pursuant
to Section 5(c) or 5(e)(i) hereof. The unvested portion
of the Option shall be canceled as of the ninety-first (91) day
following a termination pursuant to Sections 5(a), 5(b), 5(d) or
5(e)(ii) hereof, provided that no Change in Control occurs prior to
such date. Upon the occurrence of a Change in Control at
any time during the Executive's employment hereunder or prior to
the ninety-first (91) day following a termination pursuant to
Sections 5(a), 5(b), 5(d) or 5(e)(ii) hereof, the unvested portion
of the Option shall vest and become immediately
exercisable. During the term hereof, the following
provisions shall also apply:
(i)
If
there is a Change in Control, the Company will make a special bonus
payment to the Executive (the “Change in Control
Bonus”), such Change in Control Bonus to be equal to (Y) the
amount by which the purchase price per share of the Company’s
Common Stock (or, in the case of a Change of Control pursuant to
clause (ii) of the definition thereof, the amount of cash proceeds
per common share received by the Company’s common
stockholders as a result of such transaction) exceeds $6.00,
multiplied by (Z) 565,775. The Change in Control Bonus
shall be payable upon the closing of the Change in Control, but in
no event later than March 15 of the year following the year in
which the Change in Control occurs.
(ii)
Except
as specifically provided in Section 4(e)(i) above, nothing herein
shall prohibit or restrict the Company from taking any corporate
action or engaging in any corporate transaction of any kind,
including, without limitation, the issuance and sale of additional
shares of capital stock of the Company, any merger, consolidation,
liquidation or sale of assets, or create in the Executive any
rights to acquire or receive additional shares of capital stock of
the Company or otherwise be protected against
dilution.
(iii)
The
Company agrees that if the Executive elects to request that the
Company file a Form S-8 with the United States Securities and
Exchange Commission in connection with any of the securities
described in Section 4(e) hereof, the Company shall file such Form
S-8, provided that the Executive must pay to the Company, fifty
percent (50%) of all costs and fees, including applicable
attorneys’ fees, associated with the preparation and filing
of such Form S-8.
(f)
Vacations . During the term hereof, the Executive
shall be entitled to four (4) weeks of vacation per annum, to be
taken at such times and intervals as shall be determined by the
Executive, subject to the reasonable business needs of the
Company. The Executive shall be entitled to cash
compensation in lieu of vacation time not taken during the term
hereof only to the extent approved by the Board or its designee in
writing.
(g)
Other Benefits . During the term hereof and
subject to any contribution therefor generally required of
employees of the Company, the Executive shall be entitled to
participate in any and all employee benefit plans from time to time
in effect for employees of the Company generally, except to the
extent such plans are in a category of benefit otherwise provided
to the Executive. Such participation shall be subject to
(i) the terms of the applicable plan documents, (ii) generally
applicable Company policies and (iii) the discretion of the Board
or any administrative or other committee provided for in or
contemplated by such plan. The Company may alter,
modify, add to or delete its employee benefit plans at any time as
it, in its sole judgment, determines to be appropriate, without
recourse by the Executive; provided, however, that any such
alteration, modification, addition, or deletion applies to the
Company’s executive officers or employees
generally.
(h)
Automobile . During the term hereof, the Company
will pay the Executive an automobile allowance of One Thousand Five
Hundred Dollars ($1,500.00) per month (the “Car
Allowance”). To the extent the Car Allowance
results in the Executive’s recognition of taxable income, he
will be grossed up for applicable income taxes (the
“Automobile Gross-Up Payments”), such that the
Executive receives the full net amount of the Car
Allowance. Automobile Gross-Up Payments shall constitute
taxable income to the Executive.
(i)
Club Membership and Closing Cost Payment
. Beginning in 2009 and continuing during the term
hereof, the Company will reimburse the Executive for dues paid to
maintain a membership in a country club of his choosing not to
exceed Ten Thousand Dollars ($10,000.00) per year (the “Dues
Benefit”). In addition, during 2008 the Executive
shall be entitled to a one-time lump sum payment in an amount not
to exceed Ten Thousand Dollars ($10,000.00) as reimbursement for
closing costs incurred by the Executive in connection with his
purchase of a residence in the St. Louis, Missouri metropolitan
area (the “Closing Cost Payment”). To the
extent the Dues Benefit or Closing Cost Payment results in the
Executive’s recognition of taxable income, he will be grossed
up for applicable income taxes (the “Dues and Closing Cost
Gross-Up Payments”) such that the Executive receives the full
net amount of such Dues Benefit or Closing Cost
Payment. Dues and Closing Cost Gross-Up Payments shall
constitute taxable income to the Executive.
(j)
Executive Physical . Every other year during the
term hereof, the Company shall reimburse the Executive for the cost
to him of an executive physical examination, to the extent such
cost is not covered by applicable insurance.
(k)
Travel Expenses . During the term hereof, the
Company shall reimburse the Executive for out-of-pocket expenses he
incurs in connection with his weekly travel from Atlanta, Georgia
to St. Louis, Missouri, subject to any reasonable restrictions on
such expenses set by the Board or Company policy and such
reasonable substantiation and documentation as may be specified by
the Company from time to time (the “Travel
Expenses”). To the extent the Travel Expenses
result in the Executive’s recognition of taxable income, he
will be grossed up for applicable income taxes (the “Travel
Expenses Gross-Up Payments”), such that the Executive
receives the full net amount of the Travel
Expenses. Travel Expenses Gross-Up Payments shall
constitute taxable income to the Executive.
(l)
Business Expenses . The Company shall pay or
reimburse the Executive for reasonable, customary and necessary
business expenses incurred or paid by the Executive in the
performance of his duties and responsibilities hereunder, subject
to such reasonable substantiation and documentation as may be
specified by the Board or Company policy from time to
time.
(m)
Legal Fees . Within thirty (30) days following
the submission by the Executive of reasonable substantiation and
documentation as may be specified by the Company, the Company shall
reimburse the Executive for reasonable legal fees he incurs with
respect to the negotiation and preparation of this Agreement (the
“Legal Fees Payment”). To the extent the
Legal Fees Payment results in the Executive’s recognition of
taxable income, he will be grossed up for applicable income taxes
(the “Legal Fees Gross-Up Payment”) such that the
Executive receives the full net amount of the Legal Fees
Payment. Legal Fees Gross-Up Payment shall constitute
taxable income to the Executive.
(n)
Additional Gross Up . In the event that it
is determined that any payment or benefit (or the acceleration
of any payment or benefit) provided by the Company to or for the
benefit of the Executive under this Agreement or otherwise will be
subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code or any successor provision ("Section 4999"), the
Company will, prior to the date on which any amount of the excise
tax must be paid or withheld, make an additional lump-sum payment
(the "4999 Gross-Up Payment") to the Executive. The 4999 Gross-Up
Payment will be sufficient, after giving effect to all federal,
state and other taxes and charges (including interest and
penalties, if any) with respect to the 4999 Gross-Up Payment, to
make the Executive whole for all taxes (including withholding
taxes) and any associated interest and penalties, imposed under or
as a result of Section 4999; for the avoidance of doubt, the 4999
Gross-Up Payment shall be in an amount sufficient to make the
Executive whole for all taxes (including any interest or penalties
imposed with respect to such taxes, but excluding any income taxes
and penalties imposed pursuant to Section 409A of the Code),
including income and excise taxes, imposed on the 4999 Gross-Up
Payment.
(i)
Determinations
under this Section 4(n) will be made by the Company’s tax
accountant as of the effective time of the Change in
Control.
(ii)
If
the Internal Revenue Service asserts a claim that, if successful,
would require Company to make a gross-up payment or an additional
gross-up payment, Company and Executive will cooperate fully in
resolving the controversy with the Internal Revenue
Service.
(o)
Timing of Reimbursements and Gross-Up Payments
. Any reimbursements to which the Executive may be
entitled pursuant to this Agreement shall be provided promptly, but
no later than December 31 of the year following the year in which
the expense is incurred and shall be provided in compliance with
Section 409A of the Internal Revenue Code of 1986, as amended
(“Section 409A”) or an exemption
therefrom. Further, any such reimbursement that
would constitute nonqualified deferred compensation subject to
Section 409A shall be subject to the following additional rules:
(i) no reimbursement of any such expense shall affect the
Executive’s right to reimbursement of any such expense in any
other taxable year; and (ii) the right to reimbursement shall not
be subject to liquidation or exchange for any other
benefit. In the event that a Gross-Up Payment is payable
to the Executive under this Agreement, the Company will provide the
Executive with such payment no later than the end of the calendar
year following the calendar year in which the underlying tax is
paid.
5.
Termination of Employment and Severance Benefits
. The Executive’s employment hereunder shall
terminate under the following circumstances:
(a)
Death . In the event of the Executive’s
death during the term hereof, the Company shall pay to the
Executive’s designated beneficiary or, if no beneficiary has
been designated by the Executive, to his estate, (i) any earned and
unpaid Base Salary through the date of his death, payable in
accordance with the normal payroll practices of the Company; (ii) a
pro rata portion of the bonus that would have been earned by the
Executive pursuant to Section 4(b) hereof with respect to the year
in which termination occurs, if any, had the Executive remained
employed through the end of the performance period, payable in a
lump-sum at such time as such bonus would otherwise have been paid
had the Executive’s employment not terminated in accordance
with Section 4(d) hereof (the “Pro Rata Bonus”), (iii)
any bonus amounts previously awarded pursuant to Section 4(b)
hereof but not yet paid on the date of termination, payable in
accordance with Sections 4(b) and 4(d) hereof (“Previously
Awarded Bonus”) and (iv) reimbursement for expenses accrued
and payable under Section 4(l) hereof through the date of death,
payable in accordance with Sections 4(l) and 4(o)
hereof.
(b)
Disability .
(i)
The
Company may terminate the Executive’s employment hereunder,
upon written notice to the Executive, in the event that, in the
good faith judgment of the Company, the Executive becomes disabled
during his employment hereunder through any illness, injury,
accident or condition of either a physical or psychological nature
and, as a result, is unable to perform substantially all of his
duties and responsibilities hereunder for one hundred twenty (120)
days during any period of three hundred and sixty-five (365)
consecutive calendar days. The Board may designate
another employee to act in the Executive’s place during any
period of the Executive’s disability.
(ii)
If
any question shall arise as to whether during any period the
Executive is disabled through any illness, injury, accident or
condition of either a physical or psychological nature so as to be
unable to perform substantially all of his duties and
responsibilities hereunder, the Executive may, and at the request
of the Company shall, submit to a medical examination by a licensed
physician with the appropriate specialty selected by the Company
and practicing within a 100-mile radius of the city or township
nearest to the Executive’s place of residence to whom the
Executive or his duly appointed guardian, if any, has no reasonable
objection to determine whether the Executive is so disabled and
such determination shall for the purposes of this Agreement be
conclusive of the issue. If such question shall arise
and the Executive shall fail to submit to such medical examination,
the Company’s determination of the issue shall be binding on
the Executive.
(iii)
Upon
the giving of notice of termination of the Executive’s
employment hereunder, the Company shall have no further obligation
or liability to the Executive, other than for (1) Base Salary
earned and unpaid through the date of termination, payable in
accordance with the normal payroll practices of the Company; (2)
the Pro Rata Bonus; (3) any Previously Awarded Bonus and (4)
reimbursement for expenses accrued and payable under Section 4(l)
hereof through the date of termination, payable in accordance with
Sections 4(l) and 4(o) hereof.
(c)
By the Company for Cause . The Company may
terminate the Executive’s employment hereunder for Cause at
any time upon written notice to the Executive setting forth in
reasonable detail the nature of such Cause. The
following, shall constitute Cause for termination:
(i)
Willful
failure to perform, or gross negligence in the performance of, the
Executive’s material duti
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