Document:

ex10_2.htm

    
      

    

    Exhibit
10.2

    

    PRO
FORMA

    EQUITY
INCENTIVE PLAN

    (AMENDED
MAY 1, 2008)

    

    
      	
              1.

            	
              Establishment, Purpose
      and Term of Plan.

            

    

    

    1.1           Establishment. LaPolla Industries, Inc., a
Delaware corporation, hereby establishes the Equity Incentive Plan ("Plan") effective as of July
12, 2005, the date of its approval by the stockholders of the Company ("Effective
Date").

    

    1.2           Purpose. The purpose of the Plan is
to advance the interests LaPolla Industries, Inc. (“Company”) and its
stockholders by providing an incentive to attract, retain and reward persons
performing services for the Company and by motivating such persons to contribute
to the growth and profitability of the Company. The Plan seeks to achieve this
purpose by providing for Awards in the form of Stock Options and Stock
Bonuses.

    

    1.3           Term of Plan. The
Plan shall continue in effect until the earlier of its termination by the Board
or the date on which all of the shares of Stock available for issuance under the
Plan have been issued and all restrictions on such shares under the terms of the
Plan and the agreements evidencing Awards granted under the Plan have lapsed.
However, all Incentive Stock Options shall be granted, if at all, within ten
(10) years from the date the Plan is duly approved by the stockholders of the
Company.

    

    2.           Definitions and
Construction.

    

    2.1           Definitions. Whenever
used herein, the following terms shall have their respective meanings set forth
below:

    

    (a)            "Award" means any Stock
Option or Stock Bonus granted under the Plan.

    

    (b)            "Award Agreement" means
a written agreement between the Company and a full time employee, director or
consultant of the Company (a “Participant”) setting forth
the terms, conditions and restrictions of the Award granted to the Participant.
An Award Agreement may be an "Option Agreement" or a "Stock Bonus
Agreement."

    

    (c)            "Cause"
means:  (i) with respect to a Participant who is a party to a written
employment agreement with the Company, as the case may be, which contains a "for
cause" definition or "cause" (or words of like import) for purposes of
termination of employment thereunder by the Company, "for cause" or "cause" as
defined in the most recent of such agreements; or (ii) in all other cases, as
determined by the Administrator in its sole discretion, that one or more of the
following has occurred: (A) any failure by a Participant to substantially
perform his or her employment duties which shall not have been corrected within
thirty (30) days following written notice thereof; (B) any engaging by such
Participant in misconduct or, in the case of an officer Participant, any failure
or refusal by such officer Participant to follow the directions of the Company's
Board of Directors or Chief Executive Officer of the Company which, in either
case, is injurious to the Company; (C) any breach by a Participant of any
obligation or specification contained in the instrument pursuant to which an
Option is granted; or (D) such Participant's conviction or entry of a plea of
nolo contendere in respect of any felony, or of a misdemeanor which results in
or is reasonably expected to result in economic or reputational injury to the
Company.

    

    (d)            "Committee" means the
Compensation Committee or other committee of the Board duly appointed to
administer the Plan and having such powers as shall be specified by the Board.
If no committee of the Board has been appointed to administer the Plan, the
Board shall exercise all of the powers of the Committee granted herein, and, in
any event, the Board may in its discretion exercise any or all of such
powers.

    

    (e)            "Disability" means the
permanent and total disability of the Participant, within the meaning of
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended, and any
applicable regulations promulgated thereunder (the “Code”).

    

    (f)            "Dividend Equivalent"
means a credit, made at the discretion of the Committee or as otherwise provided
by the Plan, to the account of a Participant in an amount equal to the cash
dividends paid on one share of Stock for each share of Stock represented by an
Award held by such Participant.

    

    (g)            "Fair Market Value"
means, as of any date, the value of a share of Stock or other property as
determined by the Committee, in its discretion, subject to the following: (i)  If, on such
date, the Stock is listed on a national securities exchange or market system,
the Fair Market Value of a share of Stock shall be the closing price of a share
of Stock (or the mean of the closing bid and asked prices of a share of Stock if
the Stock is so quoted instead) as quoted on the American Stock Exchange or such
other national securities exchange or market system constituting the primary
market for the Stock, as reported in The Wall Street Journal or
such other source as the Company deems reliable. If the relevant date does not
fall on a day on which the Stock has traded on such securities exchange or
market system, the date on which the Fair Market Value shall be established
shall be the first day on which the Stock was so traded after the relevant date,
or such other appropriate day as shall be determined by the Committee, in its
discretion.

    

    (h)            "Incentive Stock
Option" means an Option intended to be (as set forth in the Award
Agreement) and which qualifies as an incentive stock option within the meaning
of Section 422(b) of the Code.

    

    (i)            "Insider" means an
Officer, a member of the Board or any other person whose transactions in Stock
are subject to Section 16 of the Exchange Act.

    
      
         

      

      
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    (j)            "Nonstatutory Stock
Option" means an Option not intended to be (as set forth in the Award
Agreement) an incentive stock option within the meaning of Section 422(b)
of the Code.

    

    (k)            "Option" means the
right to purchase Stock at a stated price for a specified period of time granted
to a participant pursuant to Section 6 of the Plan. An Option may be either an
Incentive Stock Option or a Nonstatutory Stock Option.

    

    (l)            "Predecessor Plan"
means, the Key Employee Stock Option Plan.

    

    (m)            "Service" means a
Participant's employment with the Company as an employee, director or
consultant. Unless otherwise determined by the Board, a Participant's Service
shall be deemed to have terminated if the Participant ceases to render service
to the Company. However, a Participant's Service shall not be deemed to have
terminated merely because of a change in the Company for which the Participant
renders such Service in such initial capacity, provided that there is no
interruption or termination of the Participant's Service. Furthermore, a
Participant's Service shall not be deemed to have terminated if the Participant
takes any bona fide leave of absence approved by the Company of ninety (90) days
or less. In the event of a leave in excess of ninety (90) days, the
Participant's Service shall be deemed to terminate on the ninety-first (91st ) day
of the leave unless the Participant's right to return to Service is guaranteed
by statute or contract. Notwithstanding the foregoing, unless otherwise
designated by the Company or required by law, a leave of absence shall not be
treated as Service for purposes of determining vesting under the Participant's
Award Agreement. A Participant's Service shall be deemed to have terminated
either upon an actual termination of Service. Subject to the foregoing, the
Company, in its discretion, shall determine whether the Participant's Service
has terminated and the effective date of such termination.

    

    (n)            "Stock" means the
common stock of LaPolla Industries, Inc., as adjusted from time to time in
accordance with Section 4.2 of the Plan.

    

    (o)            "Stock Bonus" means
Stock granted to a Participant pursuant to Section 7 of the
Plan.

    

    (p)            "Ten Percent Owner"
means a Participant who, at the time an Option is granted to the Participant,
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company within the meaning of
Section 422(b)(6) of the Code.

    

    2.2           Construction.
Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of the Plan. Except when
otherwise indicated by the context, the singular shall include the plural and
the plural shall include the singular. Use of the term "or" is not intended to
be exclusive, unless the context clearly requires otherwise.

    

    3.           Administration.

    

    3.1           Administration by the
Committee. The Plan shall be administered by the Committee. All questions
of interpretation of the Plan or of any Award shall be determined by the
Committee, and such determinations shall be final and binding upon all persons
having an interest in the Plan or such Award.

    

    3.2           Administration with Respect
to Insiders. With respect to participation by Insiders in the Plan, at
any time that any class of equity security of the Company is registered pursuant
to Section 12 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), the Plan shall be administered in compliance with the
requirements, if any, of Rule 16b-3 under the Exchange Act, as amended from
time to time, or any successor rule or regulation (“Rule 16b-3”).

    

    3.3           Committee Complying with
Section 162(m). If the Company is a "publicly held corporation"
within the meaning of Section 162(m), the Board may establish a Committee
of "outside directors"
within the meaning of Section 162(m) to approve the grant of any Award
which might reasonably be anticipated to result in the payment of employee
remuneration that would otherwise exceed the limit on employee remuneration
deductible for income tax purposes pursuant to Section 162(m).

    

    3.4           Powers of the
Committee. In
addition to any other powers set forth in the Plan and subject to the provisions
of the Plan, the Committee shall have the full and final power and authority, in
its discretion:

    

    (a)           to
determine the persons to whom, and the time or times at which, Awards shall be
granted and the number of shares of Stock to be subject to each
Award;

    

    (b)           to
determine the type of Award granted and to designate Options as Incentive Stock
Options or Nonstatutory Stock Options;

    

    (c)           to
determine the Fair Market Value of shares of Stock or other
property;

    

    (d)           to
determine the terms, conditions and restrictions applicable to each Award (which
need not be identical) and any shares acquired pursuant thereto, including,
without limitation, (i) the exercise or purchase price of shares purchased
pursuant to any Award, (ii) the method of payment for shares purchased
pursuant to any Award, (iii) the method for satisfaction of any tax
withholding obligation arising in connection with Award, including by the
withholding or delivery of shares of Stock, (iv) the timing, terms and
conditions of the exercisability or vesting of any Award or any shares acquired
pursuant thereto, (v) the Performance Goals applicable to any Award and the
extent to which such Performance Goals have been attained, (vi) the time of
the expiration of any Award, (vii) the effect of the Participant's
termination of Service on any of the foregoing, and (viii) all other terms,
conditions and restrictions applicable to any Award or shares acquired pursuant
thereto not inconsistent with the terms of the Plan;

    
      
         

      

      
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    (e)           to
approve one or more forms of Award Agreement;

    

    (f)           to
amend, modify, extend, cancel or renew any Award or to waive any restrictions or
conditions applicable to any Award or any shares acquired pursuant
thereto;

    

    (g)           to
accelerate, continue, extend or defer the exercisability or vesting of any Award
or any shares acquired pursuant thereto, including with respect to the period
following a Participant's termination of Service;

    

    (h)           to
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or any Award Agreement and to make all other determinations and take such
other actions with respect to the Plan or any Award as the Committee may deem
advisable to the extent not inconsistent with the provisions of the Plan or
applicable law.

    

    3.6           Option
Repricing.  Without the affirmative vote of holders of a
majority of the shares of Stock cast in person or by proxy at a meeting of the
stockholders of the Company at which a quorum representing a majority of all
outstanding shares of Stock is present or represented by proxy, the Board shall
not approve a program providing for either (a) the cancellation of outstanding
Options and the grant in substitution therefore of new Options having a lower
exercise price or (b) the amendment of outstanding Options to reduce the
exercise price thereof.

    

    4.           Shares Subject to
Plan.

    

    4.1           Maximum Number of Shares
Issuable.  Subject to adjustment as provided in
Section 4.2, the maximum aggregate number of shares of Stock that may be
issued under the Plan shall be 10,000,000, reduced at any time by the sum of (a)
the number of shares subject to options granted pursuant to the Predecessor Plan
which remain outstanding at such time and (b) the number of shares issued prior
to such time and after the Effective Date of this Plan upon the exercise of
options granted pursuant to the Predecessor Plan. Such shares shall consist of
authorized but unissued or reacquired shares of Stock or any combination
thereof. If an outstanding Award for any reason expires or is terminated or
canceled without having been exercised or settled in full, or if shares of Stock
acquired pursuant to an Award subject to forfeiture or repurchase are forfeited,
the shares of Stock allocable to the terminated portion of such Award or such
forfeited or repurchased shares of Stock shall again be available for issuance
under the Plan.”

    

    4.2           Adjustments for Changes in
Capital Structure. In the event of any change
in the Stock through merger, consolidation, reorganization, reincorporation,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares
or similar change in the capital structure of the Company, or in the event of
payment of a dividend or distribution to the stockholders of the Company in a
form other than Stock (excepting normal cash dividends) that has a material
effect on the Fair Market Value of shares of Stock, appropriate adjustments
shall be made in the number and class of shares subject to the Plan, in the ISO
Share Limit set forth in Section 5.3(b), the Award limits set forth in
Section 5.4 and to any outstanding Awards, and in the exercise or purchase
price per share under any outstanding Award. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded down to the nearest whole number, and in no event may the
exercise or purchase price under any Award be decreased to an amount less than
the par value, if any, of the stock subject to such Award. The adjustments
determined by the Committee pursuant to this Section 4.2 shall be final,
binding and conclusive.

    

    5.           Eligibility and Award
Limitations.

    

    5.1           Persons Eligible for
Awards. Awards may be granted to Employees, Directors and Consultants of
the Company.

    

                  
5.2           Participation.  Awards
are granted solely at the discretion of the Committee. Eligible persons may be
granted more than one (1) Award. However, eligibility in accordance with this
Section shall not entitle any person to be granted an Award, or, having been
granted an Award, to be granted an additional Award.

    

    5.3           Incentive Stock Option
Limitations.

    

    (a)           Persons
Eligible.  An Incentive Stock Option may be granted only to a
person who, on the effective date of grant, is an Employee of the
Company.

    

    (b)           ISO Share Limit. Subject to
adjustment as provided in Section 4.2, in no event shall more than
3,250,000 shares of Stock be available for issuance pursuant to the exercise of
Incentive Stock Options granted under the Plan or the Predecessor Plan (the
"ISO Share
Limit").

    

    (c)           Fair Market Value
Limitation.  To the extent that options designated as Incentive
Stock Options (granted under all stock option plans of the Company, including
the Plan) become exercisable by a Participant for the first time during any
calendar year for stock having a Fair Market Value greater than $100,000, the
portion of such options which exceeds such amount shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5.3(c), options
designated as Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of stock shall be
determined as of the time the option with respect to such stock is granted. If
the Code is amended to provide for a different limitation from that set forth in
this Section 5.3(c), such different limitation shall be deemed incorporated
herein effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason of the
limitation set forth in this Section 5.3(c), the Participant may designate which
portion of such Option the Participant is exercising. In the absence of such
designation, the Participant shall be deemed to have exercised the Incentive
Stock Option portion of the Option first. Upon exercise, each portion shall be
separately identified.

    
      
         

      

      
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    5.4           Award
Limits.

    

    (a)           Aggregate Limit on Stock Bonus
Awards.  Subject to adjustment as provided in Section 4.2,
in no event shall more than one million (1,000,000) shares in the aggregate be
issued under the Plan pursuant to the exercise or settlement of Stock Bonus
Awards.

    

    (b)           Section 162(m) Award Limits.
The following limits shall apply to the grant of any Award if, at the time of
grant, the Company is a "publicly held corporation" within the meaning of
Section 162(m) of the Code (“Section
162(m)”).

    

    (i)           Options. Subject to
adjustment as provided in Section 4.2, no employee, director or consultant
shall be granted within any fiscal year of the Company one or more Options which
in the aggregate are for more than two million (2,000,000) shares of
Stock.

    

    (ii)           Stock Bonuses. Subject to
adjustment as provided in Section 4.2, no employee, director or consultant
shall be granted within any fiscal year of the Company one or more Stock
Bonuses, subject to Vesting Conditions based on the attainment of Performance
Goals, for more than one hundred thousand (100,000) shares of
Stock.

    

    6.           Terms and Conditions of
Options.  Options shall be evidenced by Award Agreements
specifying the number of shares of Stock covered thereby, in such form as the
Committee shall from time to time establish. No Option shall be a valid and
binding obligation of the Company unless evidenced by a fully executed Award
Agreement. Award Agreements evidencing Options may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:

    

    6.1           Exercise Price. The exercise price for each
Option shall be established in the discretion of the Committee; provided,
however, that (a) the exercise price per share shall be not less than the
Fair Market Value of a share of Stock on the effective date of grant of the
Option and (b) no Incentive Stock Option granted to a Ten Percent Owner
shall have an exercise price per share less than one hundred ten percent (110%)
of the Fair Market Value of a share of Stock on the effective date of grant of
the Option.

    

    6.2           Exercisability and Term of
Options. Options
shall be exercisable at such time or times, or upon such event or events, and
subject to such terms, conditions, performance criteria and restrictions as
shall be determined by the Committee and set forth in the Award Agreement
evidencing such Option; provided, however, that (a) no Option shall be
exercisable after the expiration of eight (8) years after the effective date of
grant of such Option and (b) no Incentive Stock Option granted to a Ten
Percent Owner shall be exercisable after the expiration of five (5) years after
the effective date of grant of such Option. Subject to the foregoing, unless
otherwise specified by the Committee in the grant of an Option, any Option
granted hereunder shall terminate eight (8) years after the effective date of
grant of the Option, unless earlier terminated in accordance with its
provisions.

    

    6.3           Payment of Exercise
Price.

    

    (a)           Forms of Consideration
Authorized. Except as otherwise provided below, payment of the exercise
price for the number of shares of Stock being purchased pursuant to any Option
shall be made (i) in cash, by check or cash equivalent, (ii) by tender
to the Company of shares of Stock owned by the Participant having a Fair Market
Value not less than the exercise price; (iii) by tender to the Company of a
written consent to accept a reduction in the number of shares of Stock to which
the Option relates (“Reduced
Number of Shares”), which Reduced Number of Shares, when ascribed a
value, shall be equal to the exercise price of the balance of shares of Stock
covered by the Option; (iv) by delivery of a properly executed notice of
exercise together with irrevocable instructions to a broker providing for the
assignment to the Company of the proceeds of a sale or loan with respect to some
or all of the shares being acquired upon the exercise of the Option (including,
without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of
the Federal Reserve System) (a "Cashless Exercise"),
(v) by such other consideration as may be approved by the Committee from
time to time to the extent permitted by applicable law, or (vi) by any
combination thereof.

    

    (b)           Limitation on Form of
Consideration.  The Company reserves, at any and all times, the
right, in the Company's sole and absolute discretion, to establish, decline to
approve or terminate any program or procedures for the exercise of Options by
means of a Cashless Exercise.

    

    6.4           Effect of Termination of
Service. An Option shall be exercisable after a Participant's termination
of Service to such extent and during such period as determined by the Committee,
in its discretion, and set forth in the Award Agreement evidencing such
Option.

    

    6.5           Transferability of
Options. During the lifetime of the Participant, an Option shall be
exercisable only by the Participant or the Participant's guardian or legal
representative. No Option shall be assignable or transferable by the
Participant, except by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Committee, in its
discretion, and set forth in the Award Agreement evidencing such Option, an
Option shall be assignable or transferable subject to the applicable
limitations, if any, described in the General Instructions to Form S-8
Registration Statement under the Securities Act of 1933, as amended (“Act”).

    

    7.           Terms and Conditions of
Stock Bonuses.  Stock Bonuses shall be evidenced by Award
Agreements specifying the number of shares of Stock subject to the Award, in
such form as the Committee shall from time to time establish. No Stock Bonus
shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Award Agreement. Award Agreements evidencing Stock Bonuses may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:

    

    7.1           Grant.  Stock
Bonuses may be granted upon such conditions as the Committee shall determine,
including, without limitation, upon the attainment of one or more Performance
Goals.  If either the grant of a Stock Bonus or the lapsing of the
Restriction Period is to be contingent upon the attainment of one or more
Performance Goals, the Committee shall use the following
procedures:

    
      
         

      

      
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    (a)           Establishment of Performance Period,
Performance Goals and Stock Bonus Formula.  In granting each
Stock Bonus, the Committee shall establish in writing the applicable Performance
Period, Stock Bonus Formula and one or more Performance Goals which, when
measured at the end of the Performance Period, shall determine on the basis of
the Stock Bonus Formula the final value of the Stock Bonus to be paid to the
Participant. Unless otherwise permitted in compliance with the requirements
under Section 162(m) with respect to "performance-based compensation," the
Committee shall establish the Performance Goal(s) and Stock Bonus Formula
applicable to each Stock Bonus no later than the earlier of (a) the date ninety
(90) days after the commencement of the applicable Performance Period or (b) the
date on which 25% of the Performance Period has elapsed, and, in any event, at a
time when the outcome of the Performance Goals remains substantially uncertain.
Once established, the Performance Goals and Stock Bonus Formula shall not be
changed during the Performance Period. The Company shall notify each Participant
granted a Stock Bonus of the terms of such Award, including the Performance
Period, Performance Goal(s) and Stock Bonus Formula.

    

    (b)           Measurement of Performance
Goals. Performance Goals shall be established by the Committee on the
basis of targets to be attained ("Performance Targets") with
respect to one or more measures of business or financial performance (each, a
"Performance
Measure").

    

    (i)           Performance Measure.
Performance Measures shall have the same meanings as used in the Company's
financial statements, or, if such terms are not used in the Company's financial
statements, they shall have the meaning applied pursuant to generally accepted
accounting principles, or as used generally in the Company's industry.
Performance Measures shall be calculated with respect to the Company and each
subsidiary consolidated therewith for financial reporting purposes or such
division as may be selected by the Committee. For purposes of the Plan, the
Performance Measures applicable to a Stock Bonus shall be calculated in
accordance with generally accepted accounting principles, but prior to the
accrual or payment of any Stock Bonus for the same Performance Period and
excluding the effect (whether positive or negative) of any change in accounting
standards or any extraordinary, unusual or nonrecurring item, as determined by
the Committee, occurring after the establishment of the Performance Goals
applicable to the Stock Bonus. Performance Measures may be one or more of the
following, as determined by the Committee: (a) growth in revenue; (b) operating
margin; (c) gross margin; (d) operating income; (e) pre-tax profit; (f) earnings
before interest, taxes and depreciation; (g) net income; (h) earnings per share;
(i) return on stockholder equity; (j) return on net assets; (k) expenses; (l)
return on capital; (m) market share; and (n) cash flow, as indicated by book
earnings before interest, taxes, depreciation and amortization.

    

    (ii)           Performance Targets.
Performance Targets may include a minimum, maximum, target level and
intermediate levels of performance, with the final value of a Stock Bonus
determined under the applicable Stock Bonus Formula by the level attained during
the applicable Performance Period. A Performance Target may be stated as an
absolute value or as a value determined relative to a standard selected by the
Committee.

    

    7.2           Purchase
Price.  No monetary payment (other than applicable tax
withholding) shall be required as a condition of receiving shares of Stock
pursuant to a Stock Bonus, the consideration for which shall be services
actually rendered to the Company or for its benefit. Notwithstanding the
foregoing, the Participant shall furnish consideration in the form of cash or
past services rendered to the Company or for its benefit having a value not less
than the par value of the shares of Stock subject to such Stock Bonus
Award.

    

    7.3           Vesting and Restrictions on
Transfer. Shares issued pursuant to any Stock Bonus may or may not be
made subject to vesting conditioned upon the satisfaction of such Service
requirements, conditions, restrictions or performance criteria, including,
without limitation, Performance Goals as described in section 7.1(b) (the "Vesting Conditions"), as
shall be established by the Committee and set forth in the Award Agreement
evidencing such Award. During any period (the "Restriction Period") in
which shares acquired pursuant to a Stock Bonus remain subject to Vesting
Conditions, such shares may not be sold, exchanged, transferred, pledged,
assigned or otherwise disposed of other than pursuant to an Ownership Change
Event, as defined in Section 9.1, or as provided in Section 7.7. Upon
request by the Company, each Participant shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder and
shall promptly present to the Company any and all certificates representing
shares of Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions.

    

    7.4           Settlement of Stock
Bonus.

    

    (a)           Determination of Final
Value.  As soon as practicable following the completion of the
Performance Period applicable to a Stock Bonus, the Committee shall certify in
writing the extent to which the applicable Performance Goals have been attained
and the resulting final value of the Award earned by the Participant and to be
paid upon its settlement in accordance with the applicable Stock Bonus
Formula.

    

    (b)           Effect of Leaves of
Absence.  Unless otherwise required by law, payment of the
final value, if any, of a Stock Bonus held by a Participant who has taken in
excess of thirty (30) days of leaves of absence during a Performance Period
shall be prorated on the basis of the number of days of the Participant's
Service during the Performance Period during which the Participant was not on a
leave of absence.

    

    (c)           Notice to
Participants.  As soon as practicable following the Committee's
determination and certification in accordance with Sections 9.5(a) and (b),
the Company shall notify each Participant of the determination of the
Committee.

    

    (d)           Payment in Settlement of Stock
Bonus. As soon as practicable following the Committee's determination and
certification in accordance with Section 7.4(a), payment shall be made to
each eligible Participant (or such Participant's legal representative or other
person who acquired the right to receive such payment by reason of the
Participant's death) of the final value of the Participant's Stock Bonus.
Payment of such amount shall be made in shares of Stock. The number of such
shares shall be determined by dividing the final value of the Stock Bonus by the
value of a share of Stock determined by the method specified in the Award
Agreement. Such methods may include, without limitation, the closing market
price on a specified date (such as the settlement date) or an average of market
prices over a series of trading days. Shares of Stock issued in payment of any
Stock Bonus may be fully vested and freely transferable shares or may be shares
of Stock subject to Vesting Conditions as provided in Section 7.2. Any
shares subject to Vesting Conditions shall be evidenced by an appropriate Award
Agreement and shall be subject to the provisions of Sections 7.3 through
7.7.

    
      
         

      

      
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    7.5           Voting Rights; Dividends and
Distributions. Except as provided in this Section, Section 7.3 and
any Award Agreement, during the Restriction Period applicable to shares subject
to a Stock Bonus, the Participant shall have all of the rights of a stockholder
of the Company holding shares of Stock, including the right to vote such shares
and to receive all dividends and other distributions paid with respect to such
shares. However, in the event of a dividend or distribution paid in shares of
Stock or any other adjustment made upon a change in the capital structure of the
Company as described in Section 4.2, then any and all new, substituted or
additional securities or other property (other than normal cash dividends) to
which the Participant is entitled by reason of the Participant's Stock Bonus
shall be immediately subject to the same Vesting Conditions as the shares
subject to the Stock Bonus with respect to which such dividends or distributions
were paid or adjustments were made.

    

    7.6           Effect of Termination of
Service.  Unless otherwise provided by the Committee in the
grant of a Stock Bonus and set forth in the Award Agreement, if a Participant's
Service terminates for any reason, whether voluntary or involuntary (including
the Participant's death or disability), then the Participant shall forfeit to
the Company any shares acquired by the Participant pursuant to a Stock Bonus
which remain subject to Vesting Conditions as of the date of the Participant's
termination of Service.

    

    7.7           Nontransferability of Stock
Bonus Rights.  Rights to acquire shares of Stock pursuant to a
Stock Bonus may not be subject in any manner to anticipation, alienation, sale,
exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors
of the Participant or the Participant's beneficiary, except by will or the laws
of descent and distribution, and, during the lifetime of the Participant, shall
be exercisable only by the Participant or the Participant's guardian or legal
representative.

    

               7.8           Dividend Equivalents.
In its discretion, the Committee may provide in the Award Agreement evidencing
any Stock Bonus that the Participant shall be entitled to receive Dividend
Equivalents with respect to the payment of cash dividends on Stock having a
record date prior to the date on which the Stock Bonus Shares are settled or
forfeited. Dividend Equivalents may be paid currently or may be accumulated and
paid to the extent that Performance Shares become nonforfeitable, as determined
by the Committee. Settlement of Dividend Equivalents may be made in cash, shares
of Stock, or a combination thereof as determined by the Committee, and may be
paid on the same basis as settlement of the related Stock Bonus Share as
provided in Section 7.4.

    

    8.           Standard Forms of Award
Agreement.

    

    8.1           Award Agreements.  Each Award shall
comply with and be subject to the terms and conditions set forth in the
appropriate form of Award Agreement approved by the Committee and as amended
from time to time. Any Award Agreement may consist of an appropriate form of
Notice of Grant and a form of Agreement incorporated therein by reference, or
such other form or forms as the Committee may approve from time to
time.

    

    8.2           Authority to Vary
Terms.  The Committee
shall have the authority from time to time to vary the terms of any standard
form of Award Agreement either in connection with the grant or amendment of an
individual Award or in connection with the authorization of a new standard form
or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Award Agreement are not
inconsistent with the terms of the Plan.

    

    9.           Change in
Control.

    

    9.1           Definition.  "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 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.

    

    9.2           Effect of Change in Control
on Options. In
the event of a Change in Control, the surviving, continuing, successor, or
purchasing entity or parent thereof, as the case may be (the "Acquiror"), may, without the
consent of any Participant, either assume the Company's rights and obligations
under outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiror's stock. In the event the Acquiror elects
not to assume or substitute for outstanding Options in connection with a Change
in Control, the Committee shall provide that any unexercised and/or unvested
portions of outstanding Options shall be immediately exercisable and vested in
full as of the date thirty (30) days prior to the date of the Change in Control.
The exercise and/or vesting of any Option that was permissible solely by reason
of this Section 9.2 shall be conditioned upon the consummation of the Change in
Control.  Any Options which are not assumed by the Acquiror in
connection with the Change in Control nor exercised as of the time of
consummation of the Change in Control shall terminate and cease to be
outstanding effective as of the time of consummation of the Change in
Control.

    

    9.3           Effect of Change in Control
on Stock Bonuses. The Committee may, in its discretion, provide in any
Award Agreement evidencing a Stock Bonus that, in the event of a Change in
Control, the lapsing of the Restriction Period applicable to the shares subject
to the Stock Bonus held by a Participant whose Service has not terminated prior
to such date shall be accelerated effective as of the date of the Change in
Control to such extent as specified in such Award Agreement. Any acceleration of
the lapsing of the Restriction Period that was permissible solely by reason of
this Section 9.3 and the provisions of such Award Agreement shall be
conditioned upon the consummation of the Change in Control.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    10.           Compliance with Securities
Law.  The grant of Awards and the issuance of shares of Stock
pursuant to any Award shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to such securities
and the requirements of any stock exchange or market system upon which the Stock
may then be listed. In addition, no Award may be exercised or shares issued
pursuant to an Award unless (i) a registration statement under the Act
shall at the time of such exercise or issuance be in effect with respect to the
shares issuable pursuant to the Award or (ii) in the opinion of legal
counsel to the Company, the shares issuable pursuant to the Award may be issued
in accordance with the terms of an applicable exemption from the registration
requirements of the Act. The inability of the Company to obtain from any
regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares hereunder shall relieve the Company of any liability in respect of the
failure to issue or sell such shares as to which such requisite authority shall
not have been obtained. As a condition to issuance of any Stock, the Company may
require the Participant to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as may be requested by
the Company.

    

    11.           Tax
Withholding.

    

    11.1           Tax Withholding in
General. The Company shall have the right to deduct from any and all
payments made under the Plan, or to require the Participant, through payroll
withholding, cash payment or otherwise, including by means of a Cashless
Exercise of an Option, to make adequate provision for, the federal, state, local
and foreign taxes, if any, required by law to be withheld by the Company with
respect to an Award or the shares acquired pursuant thereto. The Company shall
have no obligation to deliver shares of Stock, to release shares of Stock from
an escrow established pursuant to an Award Agreement, or to make any payment in
cash under the Plan until the tax withholding obligations have been satisfied by
the Participant.

    

    11.2           Withholding in
Shares. The Company shall have the right, but not the obligation, to
deduct from the shares of Stock issuable to a Participant upon the exercise or
settlement of an Award, or to accept from the Participant the tender of, a
number of whole shares of Stock having a Fair Market Value, as determined by the
Company, equal to all or any part of the tax withholding obligations of Company.
The Fair Market Value of any shares of Stock withheld or tendered to satisfy any
such tax withholding obligations shall not exceed the amount determined by the
applicable minimum statutory withholding rates.

    

    12.           Termination or Amendment of
Plan.  The Committee may terminate or amend the Plan at any
time. However, without the approval of the Company's stockholders, there shall
be (a) no increase in the maximum aggregate number of shares of Stock that
may be issued under the Plan (except by operation of the provisions of
Section 4.2), (b) no change in the class of persons eligible to
receive Incentive Stock Options, and (c) no other amendment of the Plan
that would require approval of the Company's stockholders under any applicable
law, regulation or rule. No termination or amendment of the Plan shall affect
any then outstanding Award unless expressly provided by the Committee. In any
event, no termination or amendment of the Plan may adversely affect any then
outstanding Award without the consent of the Participant, unless such
termination or amendment is necessary to comply with any applicable law,
regulation or rule.

    

    13.           Miscellaneous
Provisions.

    

    13.1           Provision of
Information. Each Participant shall be given access to information
concerning the Company equivalent to that information generally made available
to the Company's common stockholders.

    

    13.2           Rights as Employee, Director
or Consultant. No person, even though eligible pursuant to
Section 5, shall have a right to be selected as a Participant, or, having
been so selected, to be selected again as a Participant. Nothing in the Plan or
any Award granted under the Plan shall confer on any Participant a right to
remain an employee, director or consultant, or interfere with or limit in any
way any right of the Company to terminate the Participant's Service at any time.
To the extent that an employee, director or consultant of a subsidiary of
LaPolla Industries, Inc. receives an Award under the Plan, that Award can in no
event be understood or interpreted to mean that LaPolla Industries, Inc. is the
employee's, director’s or consultant’s employer or that the employee, director
or consultant has any relationship with LaPolla Industries, Inc.

    

    13.3           Rights as a
Stockholder.  A Participant shall have no rights as a
stockholder with respect to any shares covered by an Award until the date of the
issuance of such shares (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such shares are issued, except as provided
in Section 4.2 or another provision of the Plan.

    

    13.4           Fractional Shares.
The Company shall not be required to issue fractional shares upon the exercise
or settlement of any Award.

    

    13.5           Beneficiary
Designation. Subject to local laws and procedures, each Participant may
file with the Company a written designation of a beneficiary who is to receive
any benefit under the Plan to which the Participant is entitled in the event of
such Participant's death before he or she receives any or all of such benefit.
Each designation will revoke all prior designations by the same Participant and
will be effective only when filed by the Participant in writing with the Company
during the Participant's lifetime. If a married Participant designates a
beneficiary other than the Participant's spouse, the effectiveness of such
designation may be subject to the consent of the Participant's spouse. If a
Participant dies without an effective designation of a beneficiary who is living
at the time of the Participant's death, the Company will pay any remaining
unpaid benefits to the Participant's legal representative.

    

    13.6           Unfunded Obligation.
Participants shall have the status of general unsecured creditors of the
Company. Any amounts payable to Participants pursuant to the Plan shall be
unfunded and unsecured obligations for all purposes, including, without
limitation, Title I of the Employee Retirement Income Security Act of 1974.
The Company shall not be required to segregate any monies from its general
funds, or to create any trusts, or establish any special accounts with respect
to such obligations.

    

    IN WITNESS WHEREOF, the undersigned
Secretary of the Company certifies that the foregoing sets forth the Equity
Incentive Plan as duly adopted on July 12, 2005, as amended on January 16,
2007.

    

    
      	 
      	 
      
	 
      	
              Corporate
      Secretary

            

    

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    Exhibit
A

    

    OPTION
AGREEMENT

    

    THE BOARD OF DIRECTORS of LaPolla
Industries, Inc. authorized and approved the Equity Incentive Plan ("Plan"). The
Plan provides for the grant of Options to employees, directors and consultants
of LaPolla Industries, Inc. (“Company”). Unless otherwise provided herein all
defined terms shall have the respective meanings ascribed to them under the
Plan.

    

    1.           Grant of
Option.  Pursuant to authority granted to it under the Plan,
the Administrator responsible for administering the Plan hereby grants
to________________________________, as an employee, director or consultant of
the Company (“Optionee”) and as of_______________________ __________, ("Grant
Date"), the following Option: ________________________________. Each Option
permits you to purchase one share of LaPolla Industries, Inc.’s common stock,
$.01 par value per share ("Shares").

    

    2.           Character of
Options.  Pursuant to the Plan, Options granted herein may be
Incentive Stock Options or Non-Qualified Stock Options, or both. To the extent
permitted under the Plan and by law, such Options shall first be considered
Incentive Stock Options.

    

    3.           Exercise Price. The
Exercise Price for each Non-Qualified Stock Option granted herein is $
__________ per Share, and the exercise price for each Incentive Stock Option
granted herein shall be $ _______ per Share [except that an Incentive Stock
Option granted to a Ten Percent Owner shall be $_______ per Share].

    

    4.           Exercisability.  The
exercisability of the Options granted hereby is subject to the following
performance criteria and restrictions:
___________________________________________________________________

    _______________________________________.

    

    5.           Term of
Options.  The term of each Option granted herein shall be for a
term of up to ______ (___) years from the Grant Date, provided, however, that
the term of any Incentive Stock Option granted herein to an Optionee who is at
the time of the grant, a Ten Percent Owner, shall not be exercisable after the
expiration of ______ (___) years from the Grant Date.

    

    6.           Payment of Exercise
Price.  Options represented hereby may be exercised in whole or
in part by delivering to the Company your payment of the Exercise Price of the
Option so exercised (i) in cash, by check or cash equivalent, (ii) by
tender to the Company of shares of Stock owned by the Participant having a Fair
Market Value not less than the exercise price; (iii) by tender to the Company of
a written consent to accept a reduction in the number of shares of Stock to
which the Option relates (“Reduced Number of Shares”),
which Reduced Number of Shares, when ascribed a value, shall be equal to the
exercise price of the balance of shares of Stock covered by the Option; (iv) by
delivery of a properly executed notice of exercise together with irrevocable
instructions to a broker providing for the assignment to the Company of the
proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated
from time to time by the Board of Governors of the Federal Reserve System) (a
"Cashless Exercise"),
(v) by such other consideration as may be approved by the Committee from
time to time to the extent permitted by applicable law, or (vi) by any
combination thereof. The Company reserves, at any and all times, the right, in
the Company's sole and absolute discretion, to establish, decline to approve or
terminate any program or procedures for the exercise of Options by means of a
Cashless Exercise.

    

    7.           Limits on Transfer of
Options.  The Option granted herein shall not be transferable
by you otherwise than by will or by the laws of descent and distribution, except
for gifts to family members subject to any specific limitation concerning such
gift by the Administrator in its discretion; provided, however, that you may
designate a beneficiary or beneficiaries to exercise your rights and receive any
Shares purchased with respect to any Option upon your death.  Each
Option shall be exercisable during your lifetime only by you or, if permissible
under applicable law, by your legal representative.  No Option herein
granted or Shares underlying any Option shall be pledged, alienated, attached or
otherwise encumbered, and any purported pledge, alienation, attachment or
encumbrance thereof shall be void and unenforceable against the Company.
Notwithstanding the foregoing, to the extent permitted by the Administrator, in
its discretion, an Option shall be assignable or transferable subject to the
applicable limitations, if any, described in the General Instructions to
Form S-8 Registration Statement under the Securities Act of 1933, as
amended.

    

    8.           Termination of
Employment.  If your employment is terminated with the Company,
the Option and any unexercised portion shall be subject to the provisions
below:

    

    (a)           Upon
the termination of your employment with the Company, to the extent not
theretofore exercised, your Option shall continue to be valid; provided,
however, that:  (i) If the Participant shall die while in the employ
of the Company or during the one (1) year period, whichever is applicable,
specified in clause (ii) below and at a time when such Participant was entitled
to exercise an Option as herein provided, the legal representative of such
Participant, or such Person who acquired such Option by bequest or inheritance
or by reason of the death of the Participant, may, not later than fifteen (15)
months from the date of death, exercise such Option, to the extent not
theretofore exercised, in respect of any or all of such number of Shares
specified by the Administrator in such Option; and (ii) If the employment of any
Participant to whom such Option shall have been granted shall terminate by
reason of the Participant's retirement (at such age upon such conditions as
shall be specified by the Board of Directors), disability (as described in
Section 22(e) of the Code) or dismissal by the Company other than for cause (as
defined below), and while such Participant is entitled to exercise such Option
as herein provided, such Participant shall have the right to exercise such
Option so granted, to the extent not theretofore exercised, in respect of any or
all of such number of Shares as specified by the Administrator in such Option,
at any time up to one (1) year from the date of termination of the Optionee's
employment by reason of retirement or dismissal other than for cause or
disability, provided, that if the Optionee dies within such twelve (12) month
period, subclause (i) above shall apply.

    

    (b)           If
you voluntarily terminate your employment, or are discharged for cause, any
Options granted hereunder shall forthwith terminate with respect to any
unexercised portion thereof.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    (c)           If
any Options granted hereunder shall be exercised by your legal representative if
you should die or become disabled, or by any person who acquired any Options
granted hereunder by bequest or inheritance or by reason of death of any such
person written notice of such exercise shall be accompanied by a certified copy
of letters testamentary or equivalent proof of the right of such legal
representative or other person to exercise such Options.

    

    (d)           For
all purposes of the Plan, the term "for cause" shall mean "cause" as defined in
the Plan or your employment agreement with the Company.

    

    9.           Restriction; Securities
Exchange Listing. All certificates for shares delivered upon the exercise
of Options granted herein shall be subject to such stop transfer orders and
other restrictions as the Administrator may deem advisable under the Plan or the
rules, regulations and other requirements of the Securities and Exchange
Commission and any applicable federal or state securities laws, and the
Administrator may cause a legend or legends to be placed on such certificates to
make appropriate reference to such restrictions. If the Shares or other
securities are traded on a national securities exchange, the Company shall not
be required to deliver any Shares covered by an Option unless and until such
Shares have been admitted for trading on such securities exchange.

    

    10.           Adjustments. If there
is any change in the capitalization of the Company affecting in any manner the
number or kind of outstanding shares of Common Stock of the Company, whether by
stock dividend, stock split, reclassification or recapitalization of such stock,
or because the Company has merged or consolidated with one or more other
corporations (and provided the Option does not thereby terminate pursuant to
Section 5 hereof), then the number and kind of shares then subject to the Option
and the price to be paid therefor shall be appropriately adjusted by the Board
of Directors; provided, however, that in no event shall any such adjustment
result in the Company's being required to sell or issue any fractional shares.
Any such adjustment shall be made without change in the aggregate purchase price
applicable to the unexercised portion of the option, but with an appropriate
adjustment to the price of each Share or other unit of security covered by this
Option.

    

    11.           Change in
Control.  In the event of a Change in Control (as defined in
the Plan), the surviving, continuing, successor, or purchasing entity or parent
thereof, as the case may be (the "Acquiror"), may, without the
consent of any Participant, either assume the Company's rights and obligations
under outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiror's stock. In the event the Acquiror elects
not to assume or substitute for outstanding Options in connection with a Change
in Control, the Committee shall provide that any unexercised and/or unvested
portions of outstanding Options shall be immediately exercisable and vested in
full as of the date thirty (30) days prior to the date of the Change in Control.
The exercise and/or vesting of any Option that was permissible solely by reason
of this Section 11 shall be conditioned upon the consummation of the Change in
Control.  Any Options which are not assumed by the Acquiror in
connection with the Change in Control nor exercised as of the time of
consummation of the Change in Control shall terminate and cease to be
outstanding effective as of the time of consummation of the Change in
Control.

    

    12.           Amendment to Options Herein
Granted.  The Options granted herein may not be amended without
your consent.

    

    13.           Withholding
Taxes.  As provided in the Plan, the Company may withhold from
sums due or to become due to Optionee from the Company an amount necessary to
satisfy its obligation to withhold taxes incurred by reason of the disposition
of the Shares acquired by exercise of the Options in a disqualifying disposition
(within the meaning of Section 421(b) of the Code), or may require you to
reimburse the Company in such amount.

    

    LAPOLLA
INDUSTRIES, INC.

    

    

    
      	 
      	 
      	 
      	 
	
              Corporate
      Secretary

            	 
      	
              Date

            	 

    

    

    

    OPTIONEE

    

    

    
      	 
      	 
      	 
      	 
      	 
      	 
	
              Signature

            	 
      	
              Printed
      Name

            	 
      	
              Date

            	 

    

     

     

    9ex10_1.htm

    
      

    

    Exhibit
10.1

      

      
        		 
      	
                

                  Location:

                  195 Whiting Street 

                    Hingham, Massachusetts 02043 USA

                       

                      Mailing
      Address:

                      P.O. Box 325 

                        Accord,
      Massachusetts 02018
USA

                      

                    

                  

                

              

      

      

      June 6,
2008

      

      Ms.
Leslie Kessler,

      CEO Water
Chef, Inc.

      68 S.
Service Road, Suite 100

      Melville,
NY 11747

      

      
        	
                Re:

              	
                Proposal
      for Professional Services

              

      

      

      Dear Ms.
Kessler:

      

      This
proposal is the result of extensive conversations and discussions related to the
professional services which Hidell-Eyster (HEI) can offer Water Chef (The
Client). On May 21, 2008, HEI presented an extensive proposal for professional
services to The Client. This was drafted after a meeting between the parties
held April 24, 2008 at the HEI offices in Hingham, MA. On May 29, 2008, Henry R.
Hidell met with The Client (Ms. Leslie Kessler and Mr. Terry Lazar) to discuss
the activities outlined in the May 21 proposal.

      

      It was
agreed  during the May 29, 2008 meeting at the office of Lazar Sanders
Thaler & Associates, LLP, Jericho, NY, that HEI would provide professional
technical, marketing and financial consultation on a fixed fee of $15,000 per
month, beginning June 1, 2008, and continue for a period of six (6) months, plus
payment by The Client of pre-approved out of pocket
expenses.   The fee is based on HEI’s Fee Schedule which is
attached hereto.  The purpose of this approach to providing the
necessary services is to permit HEI and The Client to establish a commercial
relationship while The Client more clearly defines its necessary actions and
requirements.  Subsequent to the end of the six month period, The
Client and HEI shall develop a longer term professional services agreement that
more clearly defines the required services and sets targets of achievement for
The Client.

      

      Scope
of Work

      

      As a
matter of general definition, HEI shall assist The Client in the following
activities:

      

      Regulatory
and Licensing Issues

      Marketing

      Quality
Assurance

      Manufacturing
and Logistics

      Financial
Planning and Monitoring

      Sales and
Distribution

      

      

      Resources
Provided and Time Charges Accountability

       

       

      
        	
                E-mail:
      hidell@hidelleyster.com

              	 
      	
                Tel:
      781-749-8040

              	 
      	
                Fax:
      781-749-2304

              

      

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

       

      
        		
                DRAFT 

              

      

      

      HEI will
make its professional staff available to The Client on a monthly basis for a six
month period beginning June 1, 2008 through November 30, 2008. It is expected
that HEI shall provide services to the client at the client’s specific request
during this period.  A time accounting of activities and any related
expenses shall be provided to The Client at the end of each
month.  Balances of time may be carried from one month to the next.
The Client will have access to all senior staff including Steve Keim, Henry R.
Hidell, Kathy Ransome and John Crawford as required.

      

      HEI and
The Client intend to develop a fee schedule regarding any sales HEI may make to
the benefit of The Client during this six month period.  The Client
acknowledges that although a “sales fee” shall be due HEI, it has not been
defined and that as soon as practical but no later than July 10, 2008, a “sales
fee” will be mutually agreed upon and an addendum of same shall be attached
hereto. It is also acknowledged that HEI has introduced The Client to Triton,
LLC of Chapel Hill, NC in the person of Mr. Dave Clark as a potential customer
or commercial partner in some manner yet to be defined.  In the event
a commercial transaction results from this introduction, a “sales fee” shall be
due HEI as noted above.

      

      

      Cost
of Work

      

      HEI will
charge The Client a fixed fee for six months totaling $90,000 invoiced on a
monthly basis of $15,000, due in advance on the first of each month. All out of
pocket expenses in excess of $1,500 per month shall be presented to The Client
prior to incurring.

      

      Future
Requirements and Services

      

      It is
anticipated that HEI will provide the Client services in the
future.  In the event these services can be more fully defined prior
to the termination of this six month agreement, The Client and HEI shall enter
into such agreement for such services.

      

      Acceptance
of Proposal

      

      Acceptance
of this proposal shall be indicated by your endorsement hereof. This proposal is
subject to the attached Statement of Terms and Conditions and Fee Schedule
amended hereto and made part of this agreement. Work under this agreement shall
commence upon receipt of this letter of agreement being executed by both
parties.

      

      The cost
of this work is estimated to be $90,000.00 for
professional time, plus the cost of out-of-pocket expenses including travel,
lodging, meals, photographs, communication (telephone, facsimile, express
delivery service), blueprint and reproduction service, documents, and data base
research.  Payment in the amount of
$15,000 is required for commencement of these services.

      

      Acceptance
of this proposal shall be indicated by your endorsement hereof.  This
proposal is subject to the attached Statement of Terms and Conditions and Fee
Schedule amended hereto and made a part of this Agreement.  Work under
this agreement shall commence upon receipt of this letter agreement executed by
both parties and the payment of the required retainer.

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      

      
        		DRAFT

      

       

      
         

        
          	 
      	
                  Sincerely,

                	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                  Carroll
      S. Keim

                	 
      
	 
      	
                  President

                	 
      
	 
      	
                  For
      Hidell-Eyster International

                	 
      
	 	 	 
	 
      	 
      	 
      
	 
      /s/ Leslie Kessler	
                  6/9/08

                	 
      
	 
      	
                  DATE

                	 
      

        

        For:  Water
Chef, Inc.

      

      PRICES
ARE VALID FOR 30 DAYS FROM DATE OF THIS PROPOSAL

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      
        

        
          
            		 
      	
                    Location:
      

                      195 Whiting Street 

                        Hingham, Massachusetts 02043 USA

                           

                          Mailing
      Address:

                          P.O. Box 325 

                            Accord,
      Massachusetts 02018
USA

                          

                        

                      

                    

                  

          

           

        

        

      

      Statement of Terms and
Conditions

      

      Hidell-Eyster
International shall provide the Client with the services set forth in the
"Proposal for Services" with respect to the subject identified in the proposal,
under the terms and conditions set forth herein which are made a part of the
collective Agreement between the Client and Hidell-Eyster
International.

      

      
        	
                1.

              	
                Definitions:  "Company"
      refers to Hidell-Eyster International.  "Client" refers to the
      individual, partnership, corporation, or association contracting for the
      Company's services.

              

      

      

      
        	
                2.

              	
                Payment:  Unless
      otherwise specified, payment is due in U.S. Dollars from the Client with
      approved credit upon receipt of invoice.  If payment is not
      received by the Company within thirty (30) days following the billing
      date, the Client shall pay interest on the unpaid balance at the rate of
      one and one-half percent (1.5%) per month from the billing date,
      compounded monthly, together with any court costs, attorney's fees, or
      other expenses reasonably incurred in order to collect such
      amount.  Clients without pre-approved credit are subject to
      payment upon delivery for completion for all goods and services provided
      by the Company.  Payment to the Company is the sole
      responsibility of the Client and is not subject to third party
      agreements.

              

      

      

      All fees,
taxes, tariffs and duties incurred as a result of international consultancy
services shall be the responsibility of the Client, with the exception of U.S.
corporate income taxes on fees earned by the Company.

      

      Client
warrants and represents that Client possesses and will continue to possess
sufficient funds to fulfill Client's obligations to make payments under this
contract.  If Company becomes aware that Client has become unable to
make payment as required herein, the Company will so notify Client and will
terminate services until such payment or guarantee of payment is
made.  Such termination of services shall not bar Company from
collecting payments due under the Agreement.

      

      
        	
                3.

              	
                Suspension of
      Work:  Invoice payment must be kept current for work to
      continue.  If the Client fails to pay any invoice due to the
      Company within 45 days of the date of invoice, the Company may, without
      waiving any other claim or right against Client, suspend services under
      this Agreement until the Company has been paid in full all amounts due the
      Company.

              

      

      

      
        	
                4.

              	
                Right of
      Entry:  Endorsement of this contract warrants that the
      Company has the authority to act on behalf of the Client.  The
      Client specifically authorizes the Company to enter upon the subject
      property, search all records relative to the history or present activities
      carried on at the property where such records would indicate the potential
      use of hazardous material on the property, and to communicate with
      appropriate private parties and public agencies regarding the
      site.

              

      

      

      
        	
                5.

              	
                Normal
      Disturbance:  It is understood certain work may cause
      physical disruption of the site or disruption of its use.  All
      effort shall be made to minimize such inconvenience.  The
      Company shall use due diligence and current industry standards relating to
      all aspects of the site investigation.  Under no circumstance
      shall the Company or any of its consultants be held liable for damage or
      events which cause damage as a result of unknown or undisclosed factors,
      or the misrepresentation of information by any
  party.

              

      

      

      
        	
                6.

              	
                Subsurface
      Structures:  In some instances the investigation as
      requested has the potential to be dangerous due to unknown
      circumstances.  Past history of a site may be so remote as not
      to disclose previous buried lines, pipes, tanks, or drums containing
      hazardous materials.  It is for this reason that the Company is
      compelled to advise the Client and owners of properties being investigated
      as to its efforts of due diligence and request that all parties involved
      provide the Company with as accurate information as
    possible.

              

      

      

      
        	
                7.

              	
                Standard of
      Care:  The report issued shall be valid for the date upon
      which the report is issued.  The Company shall not be liable in
      any manner for subsequent events which may occur at the site and which
      could change its professional opinion rendered as of the date of the
      report, nor shall the Company be liable for events which have occurred
      historically and which were either not disclosed in records or interviews
      or as a result of the on-site
investigations.

              

      

      

      
        	
                E-mail:
      hidell@hidelleyster.com

              	 
      	
                Tel:
      781-749-8040

              	 
      	
                Fax:
      781-749-2304

              

      

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      
        		
                DRAFT

              

      

       

      The
Client and Client's Agents shall use due diligence in ensuring that the Company
receives all relevant information about the subject site, including, but not
limited to, any information known to Client or Client's Agents concerning past
and current uses of the site, subsurface soil conditions, subsurface piping,
tanks, etc. and agrees to hold the Company harmless for any willful or negligent
failure to provide such information or the willful providing of false or
inaccurate information.

      

      The
extent of test boring and groundwater sampling data is limited and extrapolation
of this limited data to the site in general is only inferred as a best available
professional judgment.  The Company complies fully with the standards
of the industry for the specific investigation performed at the time of the
investigation and uses its best efforts to accurately interpret factual data
including boring logs and sample analyses.

      

      
        	
                8.

              	
                Liability:  The
      Company expressly denies all liability for indirect, incidental or
      consequential damages which may be asserted against it as a result of this
      contract. The Company will not be liable for any delay in delivery of
      goods or services.  All liability is limited to the amount of
      consideration paid for services performed and is limited to the Client who
      is the signatory of this contract.  The Company expressly denies
      all liability to third parties whether disclosed or
      undisclosed.

              

      

      

      
        	
                9.

              	
                Disclosure of
      Documents:  All information, documents, materials, etc.
      obtained or produced as part of the Company's performance of this
      Agreement shall remain the property of the Company for its exclusive use
      in performing this Agreement.  Any other use or distribution of
      information, documents, materials, etc. obtained or produced during the
      course of the performance of this Agreement is expressly prohibited
      without the express written consent of the Company and such consent will
      only be granted to the Client upon agreement with the
    Company.

              

      

      

      
        	
                10.

              	
                Cancellation/Modification:  Modification
      of this Agreement shall be effective upon the execution of a mutually
      satisfactory Modification Agreement signed by both Client and
      Company.

              

      

      

      Cancellation
of this Agreement shall be effective upon the execution of a mutually
satisfactory Cancellation Agreement signed by both Client and
Company.

      

      However,
the Company reserves the right to cancel or modify this Agreement as necessary
due to fire, labor unrest, accident, acts of civil or military authorities, acts
of God, force majeure or other cause whether or not the foregoing are beyond the
control of the Company.  The Company will promptly notify the Client
of the exercise of the rights reserved hereunder.

      

      
        	
                11.

              	
                Severability:  Shall
      any part hereof be determined to be void, unenforceable, or otherwise
      invalid, such determination shall have no effect upon the
      remainder.

              

      

      

      
        	
                12.

              	
                Notice:  Any
      notices required to be given under this agreement or by an applicable
      provision of the Uniform Commercial Code or other law shall be given to
      the Company in writing by Certified Mail at its principal mailing address
      at P.O. Box 325, Accord,
      Massachusetts  02018-0325.  The Client represents that
      the address on Page 1 of the "Proposal for Services" is the address for
      service of Notice by Certified Mail to the Client.  If the
      address for service of Notice by Certified Mail to the Client is different
      from that address, the Client shall promptly notify the Company of the
      correct address in writing.

              

      

      

      
        	
                13.

              	
                Conflict of
      Laws:  This contract shall be governed and construed by
      the laws of the Commonwealth of
Massachusetts.

              

      

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      

      
        		 
      	
                Location:
      

                  195 Whiting Street 

                    Hingham, Massachusetts 02043 USA

                       

                      Mailing
      Address:

                      P.O. Box 325 

                        Accord,
      Massachusetts 02018
USA

                      

                    

                  

                

              

      

       

      Fee
Schedule

      

      The
following is a schedule of Hidell-Eyster International professional
fees

      

      
        	 
      	 	
                PER DIEM

              	 	 	
                HOURLY

              	 
	 
      	 	 	 	 	 	 
	 
      	 	 	 	 	 	 
	
                Financial
      and Business Services

              	 	$	1,500	 	 	$	150	 
	
                 
      

              	 	 	 	 	 	 	 	 
	
                Marketing
      and Strategic Planning Services

              	 	$	1,500	 	 	$	150	 
	
                 
      

              	 	 	 	 	 	 	 	 
	
                Principals;
      Hydrogeologist; Technical Specialist including Geologist, Biologist,
      Chemist, Environmental Biologist,And Microbiologist

              	 	$	1,500	 	 	$	150	 
	
                 
      

              	 	 	 	 	 	 	 	 
	
                Engineering
      and Design Services

              	 	$	1,500	 	 	$	150	 
	
                 
      

              	 	 	 	 	 	 	 	 
	
                Expert
      Witness Services  - Research and Management

              	 	$	2,500	 	 	$	250	 
	
                 
      

              	 	 	 	 	 	 	 	 
	
                
                  Expert
      Witness Services - Depositions and Testimony (including waiting
      time)

                

              	 	$	4,000	 	 	$	400	 
	
                 
      

              	 	 	 	 	 	 	 	 
	
                Junior
      Staff including Jr. Geologists, Biologists, and Engineers

              	 	$	750	 	 	$	75	 
	
                 
      

              	 	 	 	 	 	 	 	 
	
                Junior
      Staff, including:  Data Processing, Data Base
      Research

              	 	$	500	 	 	$	50	 

      

      

      The per
diem rate is charged whenever more than six hours and up to ten hours in a given
day are devoted to the service of a single client.  Per diem fees are
usually associated with services such as site visitations, attendance at
meetings, consultation with client, representation of client in meetings,
negotiations, court appearances, travel time, etc.  The hourly rate is
usually charged for in house services such as report writing, telephone
consultation, evaluation of laboratory results, data base searches,
etc.

      

      In
addition to the time charges, the client is charged out-of-pocket costs
including travel, lodging, meals, photographs, communication (telephone,
facsimile, express delivery service), field supplies and equipment, blueprint
and reproduction service, documents and maps and data base
research.   Fees for services such as boring crews and laboratory
analyses will be invoiced directly to the client by the
provider.

    

    
       

       

      
        	
                E-mail:
      hidell@hidelleyster.com

              	 
      	
                Tel:
      781-749-8040

              	 
      	
                Fax:
      781-749-2304

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