EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit
10.2
THIS EXECUTIVE EMPLOYMENT AGREEMENT is
entered into and effective as of July 1, 2008 (“Effective Date”), by and between
LAPOLLA INDUSTRIES, INC., a Delaware Corporation (“Company”) and Xxx X. Xxxxxxx
(“Executive”).
W I T N E
S S E T H:
WHEREAS, Company desires to employ
Executive and Executive desires to accept such employment to act as the Vice
President of a new division to be formed for the purpose of designing, sourcing,
marketing and selling spray polyurethane foam and application equipment, for
residential, commercial and industrial insulation applications (“New Division”),
subject to the terms and conditions hereinafter set forth.
NOW THEREFORE, the parties hereto, in
consideration of the premises and mutual promises contained herein and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, agree as follows:
1.
EMPLOYMENT
TERM. Company hereby agrees to employ the Executive, and the
Executive hereby accepts such employment for a period beginning on the Effective
Date and ending December 31, 2012, unless sooner terminated in accordance with
Section 6 hereof (“Employment Period”).
2.
POSITION;
DUTIES. During the Employment Period, Executive shall hold the
title and position of Vice President of the Company and shall have the duties
and responsibilities usually vested in such capacity, as determined from time to
time by the Chairman of the Board, Board of Directors, Chief Executive Officer,
and By-laws. Executive may only be relocated from his current Georgia
residence upon the mutual agreement of Executive and Company.
3.
MANNER OF
PERFORMANCE. Executive shall serve the Company and devote all
his business time, his best efforts and all his skill and ability in the
performance of his duties hereunder. Executive shall carry out his
duties in a competent and professional manner, to the reasonable satisfaction of
the Chairman of the Board, Board of Directors and Chief Executive Officer of the
Company, and shall work with other Executives of the Company and generally
promote the best interests of the Company and its stockholders. Executive shall
not, in any capacity engage in any activity which is, or may be, contrary to the
welfare, interest or benefit of the business now or hereafter conducted by the
Company.
4.
COMPENSATION AND RELATED
MATTERS. Executive’s compensation for his services shall be as
follows:
4.1 Base
Compensation. During the Employment Period, Executive shall
receive a base salary ("Annual Base Salary") of $240,000, payable in accordance
with the Company’s normal payroll practices.
4.2 Bonuses. During
the Employment Period, Executive shall receive cash bonuses relating to the
overall performance of the New Division, subject to the terms described
below:
4.2.1 Thresholds. In
order for Executive to become eligible for cash bonuses in Section 4.2, the New
Division must meet a minimum of $12,000,000 base gross revenue (“Base Gross
Revenue”), a minimum 23% gross margin (“Base Gross Margin”), and maximum
$2,500,000 base operating expenses (“Base Operating Expenses”), on an annual
basis. A six percent (6 %) annual increase in the Base Operating Expenses is
allowable for growth of the division.
4.2.2 Net Profit
Bonus. Subject to the New Division meeting the thresholds in
Section 4.2.1, Executive shall be entitled to 3% of the net profit of the New
Division, accrued on an annual basis (“Net Profit Bonus”). For
example, assuming the New Division’s gross revenue is equal to $16,485,000,
gross margin is equal to 23%, operating expenses are equal to $2,500,000, and
net profit is $1,291,550 for the 2009 calendar year, then Executive would be
entitled to a Net Profit Bonus of $38,747 for the 2009 calendar
year.
4.2.3 Gross Revenue
Bonus. Executive shall be entitled to ¾ % of gross revenue
greater than Base Gross Revenue, accrued on an annual basis (“Gross Revenue
Bonus”). For example, assuming the New Division’s gross revenue is
equal to $16,485,000, gross margin is equal to 23%, and operating expenses are
equal to $2,500,000 for the 2009 calendar year, then Executive would be entitled
to a Gross Revenue Bonus of $33,638 for the 2009 calendar year.
4.2.4 Payment. The
determination of whether or not a cash bonus has been earned by Executive will
be made by the Compensation Committee based on the annual audited financial
results as approved by the Audit Committee. The cash bonuses due and payable
under this Section 4.2 shall be paid to Executive by the end of the calendar
month after which such determination was made for each year of the Employment
Period. In the event of any dispute concerning the decision of the
Compensation Committee, the parties agree to mediate such dispute in good faith
for a period of up to thirty days following such determination by the
Compensation Committee.
4.3 Awards. During
the Employment Period, Executive shall be entitled to earn awards under equity
or other plans or programs that the Company may from time to time, in its
discretion, determine to put into effect. The administrator of these plans or
programs shall determine the terms, conditions, performance criteria and
restrictions of the awards.
4.4 Compensation and Benefit
Programs. During the term of Executive’s employment hereunder, Executive
(and, to the extent applicable, Executive's family) shall be entitled to
participate in the following plans as they may exist from time to time during
the term hereof, to wit, any and all medical, dental, hospitalization,
accidental death and dismemberment, disability, travel and life insurance plans,
and any and all other plans as offered by the Company from time to time to its
Executives, including savings, pension, profit-sharing, stock options, and
deferred compensation plans, subject to the general eligibility and
participation provisions set forth in such plans.
4.5 Vacation Time and Other
Benefits. Executive shall be entitled to three weeks of
vacation without loss of compensation each year during the Employment
Period. Vacation will be taken at such times as the Executive and the
Company shall mutually determine and provided that no vacation time shall
interfere with the duties required to be rendered by Executive hereunder.
Notwithstanding the foregoing, as an officer of Company, Executive is expected
to utilize his vacation time judiciously and so as not to jeopardize the
business of the Company. Unused vacation may not be carried forth to
the next calendar year without prior written consent by the Company, except that
no written consent is required for carrying over a maximum of five (5) days to
any subsequent year. The Executive will be provided a “No Cost” vehicle by the
Company during the Employment Term, subject to such rules, regulations, terms
and conditions established by the Company. Said vehicle shall be
comparable to that afforded Company's other executives.
4.6 Expense
Reimbursement. Company shall provide the Executive reasonable
reimbursement of out-of-pocket expenses incurred by him in connection with his
duties hereunder, upon submission of appropriate documentation.
4.7 Withholding
Taxes. 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.
5.
NON-COMPETITION;
NON-DISCLOSURE; AND RELATED MATTERS.
5.1 Non-Competition. During
the Employment Period and for a period of two (2) years after the termination of
Executive’s employment with Company for any reason (collectively the
“Restriction Period”), the Executive shall not, either directly or indirectly,
for himself or any third party, anywhere within North America: (a)
engage in or have any interest in any activity that directly or indirectly
competes with the business of the Company or of any of its affiliates (which for
purposes hereof shall include all subsidiaries or parent companies of the
Company, now or in the future during the Employment Period), as conducted at any
time during the Employment Period, including without limitation, accepting
employment from or providing consulting services to any such competitor, owning
any interest in or being a partner, shareholder or owner of any such competitor,
(b) solicit, induce, recruit, or cause another person in the employ of the
Company or its affiliates or who is a consultant or independent contractor for
the Company or its affiliates to terminate his employment, engagement or other
relationship with the Company or its affiliates, or (c) solicit or accept
business from any individual or entity which shall have obtained the goods or
services of, or purchased goods or services from, the Company or its affiliates
during the two year period immediately prior to the end of the Employment Period
or which otherwise competes with or engages in a business which is competitive
with or similar to the business of the Company or any of its affiliates, (d)
call on, solicit or accept any business from any of the actual or targeted
prospective customers of the Company or its affiliates (the identity of and
information concerning which constitute trade secrets and Confidential
Information of the Company) on behalf of any person or entity in connection with
any business competitive with the business of the Company, nor shall the
Executive make known the names and addresses of such customers or any
information relating in any manner to the Company’s trade or business
relationships with such customers, other than in connection with the performance
of Executive’s duties under this Agreement. Notwithstanding the
foregoing, no Restriction Period shall be applicable in the event Executive is
terminated by Company other than for Cause as provided in Section 6.5
below.
5.2 Non-Disclosure. The
Executive shall not at any time during the term hereof or thereafter divulge,
communicate, or use in any way, any Confidential Information (as hereinafter
defined) pertaining to the business of the Company. Any Confidential Information
or data now or hereafter acquired by the Executive with respect to the business
of the Company (which shall include, but not be limited to information
concerning the Company’s financial condition, prospects, technology, customers,
suppliers, sources of leads and methods of doing business) shall be deemed a
valuable, special and unique asset of the Company that is received by the
Executive in confidence and as a fiduciary, and Executive shall remain a
fiduciary to the Company with respect to all of such information. For purposes
of this Agreement, the term “Confidential Information” includes, but is not
limited to, information disclosed to the Executive or known by the Executive as
a consequence of or through his employment by the Company (including information
conceived, originated, discovered or developed by the Executive) prior to or
after the date hereof, and not generally known, about the Company or its
business. Notwithstanding the foregoing, nothing herein shall be deemed to
restrict the Executive from disclosing Confidential Information to the extent
required by law provided that prior to disclosing any such information required
by law, Executive shall give prior written notice thereof to Company and provide
Company with the opportunity to contest the disclosure. The Executive
shall not disclose, without limitation as to time, Confidential Information to
any person, firm, Company, association or other entity for any purpose or reason
whatsoever, except (i) to authorized representatives of the Company, (ii) during
the Employment Period, such information may be disclosed by the Executive as is
specifically required by Company in the course of performing his duties for the
Company, and (iii) to counsel and other advisers of Company subject to Company’s
prior approval and provided that such advisers agree to the confidentiality
provisions of this Section 5.2.
5.3 Ownership of
Developments. All copyrights, patents, trade secrets, or other
intellectual property rights associated with any ideas, concepts, techniques,
inventions, processes or works of authorship developed or created by Executive
during the course of performing work for the Company or its customers
(collectively, the “Work Product”) shall belong exclusively to the Company and
shall, to the extent possible, be considered a work made by the Executive for
hire for the Company within the meaning of Title 17 of the United States
Code. To the extent the Work Product may not be considered work made
by the Executive for hire for the Company, the Executive agrees to assign, and
automatically assign at the time of creation of the Work Product, without any
requirement of further consideration, any right, title, or interest the
Executive may have in such Work Product. Upon the request of the
Company, the Executive shall take such further actions, including execution and
delivery of instruments of conveyance, as may be appropriate to give full and
proper effect to such assignment. All of the foregoing shall also be
deemed Confidential Information for the purposes of Section 5.2,
above.
5.4 Books and Records.
All books, records, and accounts relating in any manner to the Company (i.e.,
financial information, customer, supplier, vendor identity, etc.), whether
prepared by the Executive or otherwise coming into the Executive’s possession,
shall be the exclusive property of the Company and shall be returned immediately
to the Company on termination of the Executive’s employment hereunder or
otherwise on the Company’s request at any time.
5.5 Definition of
Company. Solely for purposes of this Agreement, the term
“Company” also shall include any existing or future subsidiaries of the Company
that are operating during the time periods described herein and any other
entities that directly or indirectly, through one or more intermediaries,
control, are controlled by or are under common control with the Company during
the periods described herein.
5.6 Acknowledgment by
Executive. The Executive acknowledges and confirms that (i)
the restrictive covenants contained in this Section 5 are reasonably necessary
to protect the legitimate business interests of the Company, and (ii) the
restrictions contained in this Section 5 (including without limitation the
geographic area and length of the term of the provisions of this Section 5) are
not overbroad, overlong, or unfair and are not the result of overreaching,
duress or coercion of any kind. The Executive acknowledges and confirms that his
special knowledge of the business of the Company is or will be such as would
cause the Company serious injury or loss and substantially diminish the value of
the business if he were to use such ability and knowledge to the benefit of a
competitor or were to compete with the Company in violation of the terms of this
Section 5. The Executive further acknowledges that the restrictions contained in
this Section 5 are intended to be, and shall be, for the benefit of and shall be
enforceable by, the Company’s successors and assigns and shall be enforced to
the fullest extent of the law applicable at the time that Company deems it
necessary or advisable to enforce the restrictive covenants and other provisions
of this Section 5.
5.7 Injunctive Relief;
Damages. Because of the difficulty of measuring economic
losses to the Company as a result of a breach of the foregoing covenants in this
Section 5, and because of the immediate and irreparable damage that could be
caused to the Company for which it would have no other adequate remedy, the
Executive agrees that the foregoing covenants may be enforced by the Company in
the event of breach by the Executive, by injunctions and restraining
orders. Nothing herein shall be construed as prohibiting the Company
from pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
5.8 Severability; Reformation;
Independent Covenants. The covenants in this Section 5 are severable and
separate, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and the Agreement shall thereby be reformed. Each covenant and agreement of
Executive in this Section 5 shall be construed as an agreement independent of
any other provision in this Agreement, and the existence of any claim or cause
of action by the Executive against the Company (including the affiliates
thereof), whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of such covenants or
agreements. It is specifically agreed that the periods of restriction
during which the agreements and covenants of the Executive made in this Section
5 shall be effective, shall be computed by extending such periods by the amount
of time during which the Executive is in violation of any provision of Section
5. The covenants contained in this Section 5 shall not be affected by any breach
of any other provision hereof by any party hereto.
5.9 Survival. The
obligations of the parties under this Section 5 shall survive the termination of
this Agreement.
6.
TERMINATION OF THE
AGREEMENT.
6.1 Termination for
Cause. The Company may terminate Executive’s employment under
this Agreement for “Cause,” at any time, for any of the following reasons: (i)
Executive’s commission of any act of fraud, embezzlement or dishonesty, (ii)
Executive’s unauthorized use or disclosure of any confidential information or
trade secrets of the Company, (iii) any intentional misconduct or violation of
the Company’s Code of Business Ethics and Conduct by Executive which has a
materially adverse effect upon the Company’s business or reputation, (iv)
Executive’s continued failure to perform the major duties, functions and
responsibilities of Executive’s position after written notice from the Company
identifying the deficiencies in Executive’s performance and a reasonable cure
period of not less than thirty (30) days or (v) a material breach of Executive’s
fiduciary duties as an officer of the Company.
6.2 Effect of Termination for
Cause. In the event of termination of Executive for cause as
set forth in Section 6.1, or a voluntary termination by Executive, Executive
shall have no right to any bonuses, salaries, benefits or entitlements other
than those accrued or required by law or specifically provided under the terms
of the applicable agreement, instrument or plan document. Payment of
any further bonuses or other salaries claimed by Executive will be in the sole
and absolute discretion of the Board of Directors of the Company and Executive
will have no entitlement thereto.
6.3 Disability and
Death. If during the Employment Period Executive should die or
suffer any physical or mental illness that renders him incapable of fulfilling
his obligations under this Agreement, and such incapacity exists or may properly
and reasonably be expected to exist for more than one hundred eighty (180)
calendar days in the aggregate, the Company may, upon five (5) calendar days
written notice to Executive, terminate this Agreement. Such incapacity shall be
determined by a licensed physician selected by Company. The
determination of the physician that Executive is incapable of fulfilling his
obligations under this Agreement shall be final and binding in the absence of
fraud or manifest error. In the event of termination under this
Section 6.3, Executive, or his estate, shall be entitled to an amount equal to
two (2) months Salary and any other accrued compensation, including, without
limitation, plus A Pro-Rated Bonus (determined in the same manner as in Section
6.5(ii) below except substituting two (2) months for four (4) months) and such
additional benefits, if any, as may be approved by the Company’s Board of
Directors. Executive, or his estate, shall, upon termination under the terms of
this Section 6.3, be further entitled to additional compensation, to be
calculated on a pro rata basis according to the number of accrued vacation days,
if any, not taken by Executive during the year defined for the purposes of
vacation, in which Executive was terminated.
6.4 Voluntary Termination by
Executive at the End of the Employment Term. Subject to
Section 6.4 of this Section 6, in the event of voluntary termination by
Executive at the end of the Employment Period, Executive shall be entitled only
to those amounts that have accrued to the date of termination or are expressly
payable under the terms of the Company’s applicable benefit plans or are
required by applicable law. The Company may, in its sole and absolute
discretion, confer such other benefits or payments as it determines, but
Executive shall have no entitlement thereto.
6.5 Termination by Company
during the Employment Term. Subject to Section 6.5 of this
Section 6, in the event of termination by the Company other than at the end of
the Employment Term, other than for Cause under Section 6.1, Executive shall be
entitled to (i) an amount equal to four (4) months annual base salary paid in
accordance with the Company’s regular payroll practices, (ii) a Pro-Rated Bonus
which shall be the product of (I) any Bonuses or Awards described in Sections
4.2 and 4.3, which Executive can show that he reasonably would have received had
Executive remained in such Executive capacity with the Company through the end
of the calendar year or four (4) months after the Date of Termination, whichever
is greater, in which occurs Executive’s Date of Termination, 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 Date of Termination and the
denominator of which is 365, but only to the extent not previously vested,
exercise and/or paid; provided that any payments pursuant to this Section
6.5(ii) shall be made within 30 days following the end of the calendar year in
which occurs Executive’s Date of Termination; (iii) for four (4) months
following the Date of Termination, Company shall continue to provide medical and
dental benefits only to Executive (and, to the extent applicable, to Executive's
family) on the same basis as such benefits are provided during such period to
the senior executive officers of Company; provided, however, that if Company’s
welfare plans do not permit such coverage, Company will provide Executive the
medical benefits (with the same after tax effect) outside of such plans, and
(iv) to the extent not theretofore paid or provided, Company shall timely pay or
provide to Executive any other amounts or benefits which Executive is entitled
to receive through the Date of Termination under any plan, program, policy or
practice or contract or agreement, including accrued vacation to the extent
unpaid (such other amounts and benefits shall be hereinafter referred to as the
"Other Benefits").
6.6 Termination Following Change
in Control. If the Company or any successor terminates this
Agreement at any time during the Employment Period following a Change in Control
of the Company: Executive shall be entitled to (i) an amount equal to one year
Annual Base Salary or the Annual Base Salary which would otherwise be payable
over the remaining term of this Agreement, whichever is lesser; (ii) any Bonuses
that Executive can show that he reasonably would have received had the Company
not undergone a change in control for the particular calendar year in which the
change in control took place; (iii) any Awards (including substituted shares of
the acquiring or surviving Company in the case of a merger or acquisition) held
by Executive that have not vested in accordance with their terms, which
Executive can show that reasonably would have vested had the Company not
undergone a change in control for the particular calendar year in which the
change in control took place, will become fully vested and exercisable at the
time of such termination.
7. DEFINITIONS. As
used in this Agreement, the following terms shall have the following
meanings:
7.1 "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 case 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 Xxxxxxx X. Xxxxx 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.
8.
ASSIGNMENT. Executive
shall not have the right to assign or delegate his rights or obligations
hereunder, or any portion thereof, to any other person.
9.
GOVERNING LAW. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas without regard to its conflict of laws principles to the extent
that such principles would require the application of laws other than the laws
of the State of Texas. Venue for any action brought hereunder shall
be exclusively in Xxxxxx County, Texas and the parties hereto waive any claim
that such forum is inconvenient.
10. ARBITRATION. Any
dispute between the parties to this Agreement in connection with, arising out of
or asserting breach of this Agreement, or any statutory or common law claim by
Executive relating to Executive's employment hereunder, shall be exclusively
resolved by binding statutory arbitration. Such dispute shall be submitted to
arbitration in the city of Houston, County of Xxxxxx, state of Texas, before a
panel of three neutral arbitrators in accordance with the Commercial Rules of
the American Arbitration Association then in effect, and the arbitration
determination resulting from any such submission shall be final and binding upon
the parties hereto. Judgment upon any arbitration award may be entered in any
court of competent jurisdiction.
11. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and, upon its effectiveness, shall
supersede all prior agreements, understandings and arrangements, both oral and
written, between the Executive and the Company with respect to such subject
matter. This Agreement may not be modified in any way unless by
written instrument signed by both the Company and the Executive. No provision of
this Agreement may be modified or waived unless such modification or waiver is
agreed to in writing and signed by Executive and by a duly authorized officer of
the Company. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. Failure by Executive or the Company to insist upon strict
compliance with any provision of this Agreement or to assert any right Executive
or the Company may have hereunder shall not be deemed to be a waiver of such
provision or right or any other provision or right of this
Agreement.
12. NOTICES. All notices
required or permitted to be given hereunder shall be in writing and shall be
personally delivered by courier, sent by registered or certified mail, return
receipt requested or sent by confirmed facsimile transmission addressed as set
forth herein. Notices personally delivered, sent by facsimile or sent by
overnight courier shall be deemed given on the date of delivery and notices
mailed in accordance with the foregoing shall be deemed given upon the earlier
of receipt by the addressee, as evidenced by the return receipt thereof, or
three (3) days after deposit in the U.S. mail. Notice shall be sent (i) if to
Company, addressed to Corporate Secretary at Intercontinental Business Park,
00000 Xxxxxxx Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, and (ii) if to
Executive, to his address as reflected on the payroll records of the Company, or
to such other address as either party hereto may from time to time give notice
of to the other.
13. BENEFITS; BINDING
EFFECT. This Agreement shall be for the benefit of and binding upon the
parties hereto and their respective heirs, personal representatives, legal
representatives, successors and, where applicable, assigns, including, without
limitation, any successor to the Company, whether by merger, consolidation, sale
of stock, sale of assets or otherwise.
14. SEVERABILITY. The
invalidity of any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall not affect the enforceability of the
remaining portions of this Agreement or any part thereof. If any
invalidity is caused by length of time or size of area, or both, the otherwise
invalid provision will be considered to be reduced to a period or area which
would cure such invalidity.
15.
CONSTRUCTION. This
Agreement shall be construed without regard to any presumption or other rule
requiring construction against the party causing the drafting hereof, each party
having been given the opportunity to be represented by counsel of their choice
in connection with the negotiation of this Agreement.
IN WITNESS WHEREOF, the undersigned
have executed this Agreement as of the date first above written.
|
LAPOLLA
INDUSTRIES, INC.
|
|||
|
WITNESS
|
|||
|
By:
|
|||
|
Name: Xxxxxxx
X. Xxxxxx
|
|||
|
Title: President
and CEO
|
|||
|
WITNESS
|
EXECUTIVE
|
||
|
By:
|
|||
|
Name: Xxx
X. Xxxxxxx
|
|||
