Document:

Exhibit

Exhibit 10.2

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT is entered into as of April 6, 2017 and effective as of April 6, 2017 (“Effective Date”), by and between LAPOLLA INDUSTRIES, INC., a Delaware Corporation (“Company”) and MICHAEL T. ADAMS (“Executive”).

W I T N E S S E T H:

WHEREAS, Company acknowledges that Executive has been working for the Company in various capacities since January 1997 and is currently the Chief Governance Officer, a Vice President and Corporate Secretary of the Company; and

WHEREAS, the Company and the Executive are parties to an Executive Employment Agreement, dated, January 16, 2015 (the “Prior Agreement”);

WHEREAS, the Company and the Executive now wish to terminate the Prior Agreement and enter into this Agreement; and

WHEREAS, Company wishes to continue Executive’s employment and Executive wishes to accept such continued employment, 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, 2017, unless sooner terminated in accordance with Section 6 hereof (“Employment Term”).  The Executive hereby releases and waives all claims related to the Executive’s employment with the Company prior to the Effective Date.

2.    POSITION; DUTIES.  During the Employment Term, Executive shall hold the title and position of Chief Governance Officer, Vice President and Corporate Secretary of the Company and shall have the duties and responsibilities usually vested in such capacities, as determined from time to time by the Chief Operating Officer and By-laws.

3.    MANNER OF PERFORMANCE.  Executive shall serve the Company with his best efforts and all his skill and ability in the performance of his duties hereunder and shall carry out his duties in a competent and professional manner, to the satisfaction of the Chief Operating Officer.  While employed, Executive agrees to devote all of his working time and efforts (excluding any periods of vacation and sick leave and any other permitted absences), using his ability, experience and talent, to the performance of services, duties and responsibilities in connection with the positions named above.

4.    COMPENSATION AND RELATED MATTERS.  Executive’s compensation for his services shall be as follows:
    
4.1    Base Compensation.  During the Employment Term, Executive shall receive an annual base salary of $200,000, payable in accordance with the Company’s normal payroll practices ("Annual Base Salary"). Executive’s Annual Base Salary will be reviewed by the Chief Operating Officer on an annual basis, and may be increased from time to time, with recommendation by the Chief Operating Officer and approval by the Compensation Committee. The term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as adjusted from time to time.

4.2    Annual Bonus.  Executive shall be entitled to an annual bonus (“Bonus”) equal to twenty-five percent (25%) of his Annual Base Salary if Company achieves its “Budgeted” earnings before interest, taxes, depreciation, amortization, and share based compensation (“Adjusted EBITDA”) for the Company’s fiscal year. The Company’s Budgeted earnings for each fiscal year shall be established by the Company, and approved by the Board of Directors or its designee, in its discretion. The Bonus shall be increased to: (a) thirty percent (30%) of Executive’s Annual Base Salary if Company achieves 110% of its budgeted Adjusted EBITDA; and (b) thirty-five percent (35%) of Executive’s Annual Base Salary if Company achieves 120% of its budgeted Adjusted EBITDA.  If the Company achieves greater than 120% of its budgeted Adjusted EBITDA, the Chief Executive Officer, in his discretion, may recommend that the Executive receive a Bonus greater than thirty-five percent of his Annual Base Salary, subject to review and approval by the Compensation Committee. Any such Bonus to which the Executive is entitled under this Section shall be paid to him by the Company in a single lump sum within thirty (30) days after the issuance of the Company’s audited financial statements for such fiscal year and, in all events, by December 31 of the fiscal year following the fiscal year to which the Bonus applies. In addition to the foregoing, Executive shall be entitled to a fixed bonus of $5,000 at the end of each calendar year during the Employment Term, payable to Executive by the Company within thirty (30) days after the end of each such calendar year.

4.3    Awards.  During the Employment Term, Executive may 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 (“Awards”). The administrator of these plans or programs shall determine the terms, conditions, performance criteria and restrictions of the Awards.
4.4    Transaction Bonus.  In addition to his Annual Base Salary and other amounts payable to Executive hereunder, provided Executive is still employed by the Company upon the consummation of a Change in Control (as defined in Section 7.1 below), or in the event Executive’s employment is terminated within one year immediately preceding the consummation of a Change in Control (other than by the Company for “Cause” as defined in Section 6.1 or by Executive without “Good Reason” as defined below), the Executive shall be entitled to receive a bonus (the “Transaction Bonus”) in addition to any other payments or benefits applicable thereto under this Agreement. The Transaction Bonus shall be in the following amount:

(a)  No Transaction Bonus shall be paid to the extent the “Transaction Value” does not exceed the sum of $25,940,000.  For purposes of this Section 4.4, “Transaction Value” shall mean the consideration realized (or assumed to be realized) by the Company’s shareholders in connection with the Transaction (assuming for this calculation that one hundred percent (100%) of the Company is sold (even if a lesser amount is, in fact, sold)).  In no event shall “Transaction Value” include any Company debt that remains with the Company upon the consummation of a Change in Control or any debt or personal guarantee of Company debt which a selling shareholder is relieved of in connection with a Change in Control.

(b)  To the extent the Transaction Value does not exceed $90,000,000, an amount equal to 0.5% of the Transaction Value less $25,940,000, multiplied by the percentage of the Company sold.

(c)  To the extent the Transaction Value exceeds $90,000,000, an amount equal to 0.5% of the Transaction Value multiplied by the percentage of the Company sold.  Notwithstanding the foregoing, no Transaction Bonus shall be payable on any portion of the Transaction Value in excess of $200,000,000. 

(d)  In the event of a Transaction, as defined under Section 7.1 hereof, which does not constitute a “Change in Control” as the stockholders of the Company immediately before the Transaction do not relinquish fifty percent (50%) or more of the total combined voting power of the outstanding voting securities of the Company, but do relinquish twenty percent (20%) or more of the total combined voting power of the outstanding securities of the Company, the Transaction Bonus shall be calculated in the manner as set forth above upon a Change in Control.  However, such amount shall then be reduced by the percentage of the sales proceeds of the Transaction allocable to the Company’s then majority shareholder which is not currently distributed to such shareholder as a result of the Transaction.

Any amounts payable to Executive under this subsection (d) shall be applied against the first dollars otherwise payable to Executive upon a subsequent Change in Control under subsections (b) and (c) above. 

In addition, if a Transaction Bonus is payable to the Executive upon a Change in Control, he shall not be entitled to any additional Transaction Bonus under this Section 4.4 upon the occurrence of a subsequent Transaction unless: (i) the subsequent Transaction is related to the Change in Control; and (ii) the Executive is still employed with the Company upon the consummation of the subsequent Transaction or is no longer so employed as a result of having been terminated without Cause or having resigned for Good Reason.  In the event a series of related Transactions occurs subsequent to a Change in Control, the Executive shall be entitled to a Transaction Bonus on each Transaction in the series, provided the requirements of (i) and (ii) above are satisfied with respect to each such Transaction.  For purposes of this provision, a subsequent Transaction shall be “related” to a Change in Control if it was agreed upon at the time of, and is consummated within two (2) years of the consummation of, the Change in Control.

A Transaction Bonus payable under this Section 4.4 upon the occurrence of a Transaction or a Change in Control shall be paid as soon as practicable after the closing of such transaction but in no event later than March 15 of the year following the year in which the closing of such transaction occurs.  Notwithstanding the foregoing sentence, any Transaction Bonus payable under this Section 4.4 on account of the occurrence of a transaction that constitutes a change in the ownership of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated pursuant thereto (“Section 409A”), shall be paid on the same schedule, under the same terms and conditions and in the same form of consideration (e.g., cash, stock in the acquiring company, promissory note or a combination thereof) as is the consideration received by the holders of the majority of the outstanding voting securities of the Company who participate in the transaction; provided, however, that in no event shall any portion of the Transaction Bonus be paid to Executive on a date that is later than five (5) years after such transaction.  In the Company’s sole and absolute discretion, it may pay in cash all or any portion of the Transaction Bonus that would otherwise be paid in a form of consideration other than cash pursuant to this Section.  Upon request and at his sole expense, Executive shall be entitled to have the Company’s outside auditors prepare a full and complete accounting of the calculation of the Transaction Value and the Transaction Bonus.

As used herein, the term “Good Reason” shall mean a relocation of the Executive’s primary workplace that is not agreed to by him and is to a location that is greater than fifty (50) miles from Executive’s primary workplace as of the date of this Agreement, provided, however, that any required travel related to the business of the Company, including but not limited to its planned expansion in the international market, shall not be deemed to constitute, or result in, the relocation of the Executive’s primary workplace for purposes of this Agreement.  Notwithstanding the foregoing and for purposes of clarity, the termination of the Prior Agreement and the Executive’s entry into this Agreement and the corresponding changes made to the Executive’s compensation arrangements, duties and responsibilities shall not be considered Good Reason.  By executing this Agreement, the Executive acknowledges and agrees that he shall have no right to resign his employment for Good Reason due to the changes made to the Executive’s compensation arrangements, duties and responsibilities.

4.5    Compensation and Benefit Programs. During the Employment Term, Executive 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.

4.6    Vacation Time and Other Benefits.  Executive shall be entitled to three (3) weeks of vacation without loss of compensation each year during the Employment Term. Vacation will be taken at such times as Executive and the Chief Operating Officer 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 be carried forth to the next calendar year to the extent permitted under, and in accordance with, Company policy as may be in effect from time to time.

4.7    Expense Reimbursement.  Company shall provide the Executive reasonable reimbursement of out-of-pocket expenses incurred by him in connection with his duties hereunder.  The Company shall reimburse the Executive for all such expenses upon presentation by the Executive, from time-to-time, of appropriately itemized and approved (consistent with Company’s policy) accounts of such expenditures.  Company shall also provide the Executive an automobile allowance, which allowance shall not exceed $750 per month.  The portion of the allowance allocable to the business usage of the automobile, as properly documented to the Company in its discretion, shall be excludable from the Executive’s income.

4.8    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.

4.9    Adjustments.  If the outstanding shares of common stock of the Company are increased, decreased or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed in respect of such shares of common stock (or any stock or securities received with respect to such common stock), through merger, consolidation, sale or exchange of all or substantially all of the properties of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, spin-off or other distribution with respect to such shares of common stock (or any stock or securities received with respect to such common stock), then the number of shares of common stock shall be equitably and appropriately adjusted.  Adjustments under this Section 4.9 will be made by the applicable authority, whose determination as to what adjustments will be made and the extent thereof will be final, binding and conclusive. No fractional interests will be issued from any such adjustments.  Notice of any adjustment shall be given by Company to Executive and shall be final and binding on Executive.

5.    NON-COMPETITION; NON-DISCLOSURE; AND RELATED MATTERS.

5.1    Non-Competition.  During the Employment Term and for a period of twelve (12) months 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 or outside the United States (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 Term), as conducted at any time during the Employment Term, 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 one (1) year period immediately prior to the end of the Employment Term 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.

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 and any of its subsidiaries or affiliates. 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 Term, 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 of a similar nature 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 Section 5, 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 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 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 ten (10) days or (v) a material breach of Executive’s fiduciary duties as a Vice President 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, Transaction Bonus or entitlements other than those accrued or required by law or specifically provided under the terms of the applicable agreement, instrument or plan document.

6.3    Disability and Death.  If during the Employment Term Executive should die or become disabled as provided in Section 7.2, the Company may, upon five (5) calendar days written notice to Executive, terminate this Agreement. The determination of the Company 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 twelve (12) months’ Annual Base Salary and any other accrued compensation.

6.4    Voluntary Termination by Executive at the End of the Employment Term.  In the event of voluntary termination by Executive at the end of the Employment Term, Executive shall be entitled only to those amounts that have accrued to the effective date of the Executive’s termination of employment (“Date of Termination”) or are expressly payable under the terms of the Company’s applicable benefit plans or are required by applicable law.

6.5    Termination by Company during the Employment Term.  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 twelve (12) months Annual Base Salary paid in equal monthly installments commencing on the date that is sixty (60) days after the Date of Termination and continuing each month thereafter on the same day of the month as the initial installment payment.  Said amount shall be reduced by the amount of earned income to which Executive shall be entitled for services performed during the severance pay period for any person or entity other than the Company;

(ii)  the product of (I) any Awards described in Section 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 period covered by the Award (“Award Period”), or twelve (12) months after the Date of Termination, whichever period is greater, multiplied by (II) a fraction, the numerator of which is the number of days during the Award Period up to the Date of Termination occurs through the Date of Termination and the denominator of which is the total number of days in the Award Period, but only to the extent not previously vested, exercised and/or paid; provided that any payments pursuant to this Section 6.5(ii) shall be made within thirty (30) days following the end of the Award Period;

(iii)  for twelve (12) months following the Date of Termination, Company shall continue to provide medical and dental benefits only to Executive on the same basis, and subject to the same terms and conditions, including but not limited to those requiring contributions by Executive, as such benefits are provided during such period to the senior executive officers of Company.  Any coverage to be provided for Executive under this paragraph shall be conditioned upon his timely election under COBRA or any other laws providing for continuation of coverage upon employment termination, effective as of the Date of Termination.  If, for any reason, Company’s welfare plans do not permit such coverage subsequent to termination of employment, Company will, to the extent it is able to do so, provide Executive with similar medical benefits (with the same after tax effect) outside of such plans;

(iv)  an amount equal to the Transaction Bonus (as defined, and paid as provided for, in Section 4.4 above) which Executive can show that he reasonably would have received had Executive remained in such Executive capacity with the Company twelve (12) months after the Date of Termination; and

(v)  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 (hereinafter referred to as the "Other Benefits").

6.6    Termination Following Change in Control.  If the Company or any successor terminates this Agreement, other than for Cause, at any time during the Employment Term following a Change in Control of the Company: (i) Executive shall be entitled to an amount equal to the Annual Base Salary which would otherwise be payable over the remaining term of this Agreement, payable in a lump sum within ninety (90) days after the date of such termination of employment; and (ii) any outstanding Awards (including substituted shares of the acquiring or surviving Company in the case of a merger or acquisition) held by Executive or other benefits under any Company plan or program, which have not vested in accordance with their terms will become fully vested and exercisable at the time of such termination.

6.7    Except as otherwise provided in this Agreement, all payments required to be paid by the Company to the Executive pursuant to Section 6 are payable on the date that is sixty (60) days after the Date of Termination.  Notwithstanding any other provision of this Agreement to the contrary, if the Executive is a “specified employee” within the meaning of Section 409A as of the date of his separation from service with the Company, no amount that constitutes deferred compensation within the meaning of Section 409A shall be paid to executive on account of his separation from service prior to the date that is six (6) months after the date of such separation from service (or, if earlier, the date of death of the Executive).  Any such payments to which Executive would otherwise be entitled during the six-month period immediately following the date of his separation from service shall be accumulated and paid on the first day of the seventh month after separation from service.

6.8    Section 409A.  This Agreement is intended to comply with, and shall be administered, interpreted and construed in a manner consistent with Section 409A.  It is further intended that any payment or benefit provided pursuant to or under this Agreement that is considered to be a deferral of compensation within the meaning of Section 409A:  (i) shall be paid and provided in a manner, and at such time and in such form, that complies with the applicable requirements of Section 409A to avoid the imposition of additional taxes or interest thereunder; and (ii) if payable on account of the Executive’s termination of employment, notwithstanding any other provision of this Agreement to the contrary, the Executive shall not be entitled to such payment or benefit unless his termination of employment constitutes a “separation from service” within the meaning of Section 409A. Notwithstanding any other provision of this Agreement, to the extent any amount payable under this Agreement would cause Executive to be liable 

for the additional tax imposed under Section 409A, this Agreement shall be amended, to the extent permitted under Section 409A and applicable law, in such manner as may be necessary to comply, or to evidence or further evidence required compliance, with Section 409A; provided, however, that no such amendment shall deprive the Executive of a right accrued under this Agreement prior to the date of the amendment. The Company does not guarantee any particular tax effect with respect to any payment provided for under this Agreement.  The Company shall not be liable for any payment that is determined to result in an additional tax, penalty, or interest under Section 409A, nor for reporting in good faith any payment made under this Agreement as an amount includible in gross income under Section 409A.  Executive shall remain liable for all taxes, interest or penalties imposed against him under Section 409A.

6.9    Release of Claims.  Upon good and valuable consideration, the receipt of which the Executive and the Company each hereby acknowledge, upon termination of the Executive’s employment for any reason set forth in Section 6, with the exception of the reasons for termination provided under Section 6.1 and Section 6.4, the Company and the Executive agree to execute a release of claims, substantially in the form attached hereto as Exhibit A, with respect to claims that arise on or prior to the date of the execution of the release.  The Executive’s execution of such release and the release becoming effective and irrevocable within the sixty (60) day period immediately following his termination of employment shall be a condition precedent to the payment of any of the compensation and benefits referred to in this Section 6.

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 fifty percent (50%) or more 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; or (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).  

Notwithstanding the foregoing, no Change in Control, Ownership Change Event or Transaction shall be deemed to have occurred for any purpose under this Agreement as a result or on account of: (i) a transfer or other disposition, by sale, gift or otherwise, of an interest in the Company by Richard J. Kurtz (“Kurtz”) to his spouse, children or grandchildren, or the spouses of his children, either directly or indirectly for their benefit, in trust or otherwise; or (ii) the death or incapacity of Kurtz wherein his interest is transferred to his heirs only.  The Executive shall not be entitled to any payment under this Agreement upon the occurrence of, or calculated with reference to, any such transfer or disposition.  

7.2    "Disability" means Executive’s absence from his duties with Company on a full-time basis for at least 90 days during any consecutive one hundred and eighty (180) day period as a result of incapacity due to mental or physical illness as determined by a physician selected by Company and acceptable to Executive. If Company determines in good faith that Executive’s Disability has occurred during the Employment Term, it may give Executive written notice in accordance with Section 6.3 of this Agreement of its intention to terminate Executive’s employment. In such event, Executive’s employment shall terminate effective on the thirtieth (30th) day after Executive’s receipt of such notice, unless, within the thirty (30) days after such receipt, Executive shall have been cleared by the physician to return to work and has returned to full-time performance of his duties.

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 Delaware 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 Delaware.  Venue for any action brought hereunder shall be exclusively in Harris County, Texas and the parties hereto waive any claim that such forum is inconvenient.

10.    PREVAILING PARTY.  In the event that Executive or Company elects to incur legal expenses to enforce or interpret any provision of this Agreement, the prevailing party, as determined by a mediator, arbitrator or court of competent jurisdiction, as applicable, shall be entitled to receive such reasonable legal expenses including, without limitation, attorney’s fees, costs and necessary disbursements, in addition to any other relief to which such party shall be entitled.

11.    INDEMNIFICATION.  The Company shall indemnify the Executive against all lawsuits, losses, claims, expenses or other liabilities of any nature by reason of the fact that he (a) is or was an officer, director, employee or agent of the Company or any of its subsidiaries or affiliates, or (b) while he is or was a director, officer, employee or agent of the Company or any of its subsidiaries or affiliates, or (c) is or was servicing at the request of the Company as a director, officer, partner, venture, proprietor, trustee, employee, agent or similar functionary of another corporation, partnership, joint venture, tryst, employee benefit plan or other entity.

12.    NON-BINDING MEDIATION.  In the event of a dispute under this Agreement, each party agrees to submit to non-binding mediation prior to the commencement of any legal or administrative proceeding against each other for any alleged violation of the Agreement.  If the parties are unable to agree upon an individual to serve as mediator, they shall each select an attorney or other individual recognized as an approved mediator, and those two individuals selected shall jointly agree upon the selection of a third individual who shall alone serve as mediator. If such parties are also unable to agree upon an individual to serve as mediator, the requirement of each party to submit to non-binding mediation under this Agreement shall be waived and the provisions contained under Section 13 shall apply.

13.    ARBITRATION.  In the event that the parties are unable to resolve any dispute hereunder in accordance with the non-binding mediation terms of Section 12, each party agrees to submit itself to binding statutory arbitration. Such dispute shall be submitted to arbitration in the city of Houston, County of Harris, 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.

14.    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.  For purposes of clarity, this Agreement shall replace and supersede the Prior Agreement.  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.

15.    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 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 the Chief Executive Officer, c/o Lapolla Industries, Inc., 15402 Vantage Parkway 

East, Suite 322, Houston, Texas 77032, 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.

16.    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.

17.    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.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

LAPOLLA INDUSTRIES, INC.                    EXECUTIVE

By:/s/  Douglas J. Kramer                        By: /s/  Michael T. Adams
Douglas J. Kramer                        Name: Michael T. Adams
Title: Chief Executive Officer                

Witness: /s/ Harvey L. Schnitzer                    Witness: /s/ Joshua Glasgow

EXHIBIT A

RELEASE

(a)    Michael T. Adams (the “Releasor”), for and in consideration of benefits provided pursuant to the Executive Employment Agreement (the “Agreement”), dated as of April 6, 2017 and effective April 6, 2017, by and between the Releasor and Lapolla Industries, Inc. (the “Company”), does for himself and his heirs, executors, administrators, successors and assigns, hereby now and forever, voluntarily, knowingly and willingly release and discharge the Company and its parents, subsidiaries and affiliates (collectively, the “Company Group”), together with their respective present and former partners, officers, directors, employees and agents, and each of their predecessors, heirs, executors, administrators, successors and assigns (but as to any partner, officer, director, employee or agent, only in connection with, or in relationship to, his or its capacity as a partner, officer, director, employee or agent of the Company and its subsidiaries or affiliates and not in connection with, or in relationship to, his or its personal capacity unrelated to the Company or its subsidiaries or affiliates) (collectively, the “Company Releasees”) from any and all charges, complaints, claims, promises, agreements, controversies, causes of action and demands of any nature whatsoever, known or unknown, suspected or unsuspected, which against the Company Releasees, jointly or severally, Releasor or Releasor’s heirs, executors, administrators, successors or assigns ever had or now have by reason of any matter, cause or thing whatsoever arising from the beginning of time to the time Releasor executes this release arising out of or relating in any way to Releasor’s employment relationship with the Company, including but not limited to, any rights or claims arising under any statute or regulation, including the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act of 1990, or the Family and Medical Leave Act of 1993, each as amended, or any other federal, state or local law, regulation, ordinance or common law, or under any policy, agreement, understanding or promise, written or oral, formal or informal, between any Company Releasee and Releasor.  Releasor shall not seek or be entitled to any recovery, in any action or proceeding that may be commenced on Releasor’s behalf in any way arising out of or relating to the matters released under this Release. Notwithstanding the foregoing, nothing herein shall release any Company Releasee from any claim or damages based on (i) the Releasor’s rights under the Agreement, (ii) any right or claim that arises after the date the Releasor executes this release, (iii) the Releasor’s eligibility for indemnification in accordance with applicable laws or the certificate of incorporation or by-laws of the Company (or any affiliate or subsidiary) or any applicable insurance policy, with respect to any liability the Releasor incurs or incurred as an officer or employee of the Company or any affiliate or subsidiary (including as a trustee or officer of any employee benefit plan) or (iv) any right the Releasor may have to obtain contribution as permitted by law in the event of entry of judgment against the Releasor as a result of any act or failure to act for which the Releasor and the Company or any affiliate or subsidiary are held jointly liable.

(b)    Nothing in this release of claims prevents Executive from filing a charge or complaint with, or participating in an investigation or proceeding conducted by, the U.S. Equal Employment Opportunity Commission (EEOC), the National Labor Relations Board (NLRB) or any other federal, state or local agency charged with the enforcement of any laws.  By signing this Release, however, Executive is waiving rights to monetary damages or other individual relief based on claims asserted in such a charge or complaint, except where such a waiver of monetary damages or other individual relief is prohibited.

(c)    The Releasor has been advised to consult with an attorney of the Releasor’s choice prior to signing this release, has done so and enters into this release freely and voluntarily.

(d)    The Releasor has had in excess of twenty-one (21) calendar days to consider the terms of this release.  Once the Releasor has signed this release, the Releasor has seven (7) additional days to revoke the Releasor’s consent and may do so by writing to the Company.  The eighth day after the Releasor shall have executed this release shall be referred to herein as the Revocation Date.

(e)    In the event that any one or more of the provisions of this release shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remainder of this release shall not in any way be affected or impaired thereby.

The law of the State of Delaware shall govern this release without reference to its choice of law rules.

LAPOLLA INDUSTRIES, INC.

By:  _______________________        
Name:    Douglas J. Kramer
Title:    Chief Executive Officer

MICHAEL T. ADAMS

By:  _______________________
Name:    Michael T. AdamsEXHIBIT 10.7

 

GEMMA POWER SYSTEMS, LLC

 

DEFERRED COMPENSATION PLAN

 

EFFECTIVE APRIL 6, 2017

 

 

Section 1.                                          Purpose.

 

Gemma Power Systems, LLC (the “Employer”) is establishing the Gemma Power Systems, LLC Deferred Compensation Plan (the “Plan”) effective as of April 6, 2017 (the “Effective Date”).  The Plan is intended to be a nonqualified deferred compensation plan and to be an unfunded plan maintained primarily for the purpose of providing deferred compensation benefits for a select group of management or highly compensated employees under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  The Plan is intended to be exempt from the provisions of Code Section 409A to the maximum extent possible.  Notwithstanding any other provision of this Plan, this Plan shall be interpreted, operated and administered in a manner consistent with these intentions.

 

Section 2.                                          Definitions

 

As used in the Plan, including this Section 2, unless otherwise indicated by the context:

 

2.1                               “Approved Leave of Absence” shall mean any absence authorized by the Employer under the Employer’s standard personnel practices and provided that the Employee returns within the period of approved absence.  An absence due to service in the armed forces of the United States shall be considered an Approved Leave of Absence to the extent required under Section 414(u) of the Code.

 

2.2                               “Award Date” shall mean the date during a Plan Year when an Eligible Employee is deemed to be credited with Deferred Compensation for such year.

 

2.3                               “Beneficiary” or “Beneficiaries” shall mean the person or persons entitled to any survivor benefits payable under the Plan, as provided in Section 6.

 

2.4                               “Cause” shall mean the occurrence of one of the following events with respect to an Eligible Employee:

 

(a)                                 Conviction or plea of nolo contendere to (a) a felony or (b) a misdemeanor involving moral turpitude;

 

(b)                                 The Eligible Employee materially breaches any provision of his or her stated duties or employment agreement, or intentionally fails to comply in any material respect with the Employer’s reasonable instructions, which instructions are consistent with the scope of his or her agreement or stated duties, and such breach or failure is not cured by the Eligible Employee within ten (10) days following written notice of such breach or failure from the Employer, provided that, if the Eligible Employee’s breach cannot be cured within such ten (10) day period but is capable of being cured, the Eligible Employee shall have a reasonable time in which to cure his or her breach so long as (x) he or she has commenced such cure, and (y) he or she proceeds diligently to effectuate such cure; or

 

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(c)                                  Fraud, misappropriation, embezzlement or other act of material misconduct involving the assets, personnel or business of the Employer, or that would adversely affect the reputation of the Employer.

 

2.5                               “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

2.6                               “Committee” shall mean an administrative committee appointed by the Chief Executive Officer of the Employer.

 

2.7                               “Deferred Compensation Account” shall mean the separate bookkeeping account maintained with respect to each Eligible Employee under the Plan to credit the amount of the Eligible Employee’s Deferred Compensation Contributions for a Plan Year.  Each Eligible Employee’s Deferred Compensation Contributions shall be credited to a separate Deferred Compensation Account each year.  Such account shall not be adjusted for any earnings or losses.

 

2.8                               “Deferred Compensation Contribution” shall mean the annual amount, if any, deemed credited to an Eligible Employee’s Deferred Compensation Account each Plan Year in accordance with Section 3.1 hereof.

 

2.9                               “Disability” or “Disabled” shall mean the determination under the Employer’s long-term disability policy that the Eligible Employee is disabled in accordance with the terms of that policy.

 

2.10                        “Effective Date” shall be April 6, 2017.

 

2.11                        “Eligible Employee” shall mean the employees of the Employer selected by the Chief Executive Officer of the Employer from time to time to be eligible to participate in the Plan, provided that the individual must be a highly compensated or management employee of the Employer within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.

 

2.12                        “Employer” shall mean Gemma Power Systems, LLC and its subsidiaries and affiliates.

 

2.13                        “Plan” shall mean the Gemma Power Systems, LLC Deferred Compensation Plan, as amended from time to time.

 

2.14                        “Plan Year” shall mean the twelve-month period ending on January 31 of each calendar year.

 

Section 3.                                          Plan Benefit.

 

3.1                               Deferred Compensation Contributions.  Deferred Compensation Contributions for each Plan Year, if any, for an Eligible Employee shall be deemed to be credited to the Deferred Compensation Account of such Eligible Employee on the Award Date.

 

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Section 4.                                          Vesting.

 

4.1                               Timing of Vesting. Each Eligible Employee’s Deferred Compensation Account for a Plan Year will vest as follows if such Eligible Employee has been continuously employed by the Employer on such date:

 

50% on the fifth anniversary of the Award Date that the amount is deemed to be credited to the Eligible Employee’s Deferred Compensation Account; 25% on the sixth anniversary of the Award Date that the amount is deemed to be credited to the Eligible Employee’s Deferred Compensation Account; and 25% on the seventh anniversary of the Award Date that the amount is deemed to be credited to the Eligible Employee’s Deferred Compensation Account

 

Notwithstanding the foregoing, upon an Eligible Employee’s Disability or death, except by suicide, such Eligible Employee’s Deferred Compensation Account(s) shall be fully vested.

 

Notwithstanding the foregoing, if an Eligible Employee is terminated from employment for Cause then any amounts not yet distributed to the Eligible Employee, whether or not vested, shall be forfeited.

 

For purposes of this Section, an Eligible Employee shall be considered to be continuously employed during any period of an Approved Leave of Absence.

 

Section 5.                                          Form and Commencement of Payment of Payment of Benefit.

 

5.1                               Form and Timing. The vested amounts in an Eligible Employee’s Deferred Compensation Account shall be paid in cash within two and one-half months after the end of the Plan Year in which such vesting occurs subject to applicable tax withholding.  Notwithstanding the foregoing, upon the vesting of amounts in an Eligible Employee’s Deferred Compensation Account, as soon as practicable after the vesting of such account, the Eligible Employee shall be entitled to receive an amount equal to [25%] of such vested account balance to enable the Eligible Employee to pay applicable employment taxes related to such vesting.

 

5.2                               Death.  In the event that an Eligible Employee dies while employed by the Employer, the Deferred Compensation Account(s) shall be paid to the Eligible Employee’s Beneficiary.

 

5.3                               Claims Procedure.

 

5.3.1                                 An Eligible Employee in the Plan will automatically receive the benefits to which he/she is entitled under the Plan.  If an Eligible Employee feels he or she has not been provided with all benefits to which he or she is entitled under the Plan, he or she may file a written claim with the Committee with respect to his or her rights to receive benefits from the Plan.

 

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5.3.2                                 The Eligible Employee will be notified of the acceptance or denial of the claim for benefits within ninety (90) days from the date the Committee receives the application.  In some cases, the request may take more time to review and an additional processing period of up to ninety (90) days may be required.  If that happens, the Eligible Employee will receive a written notice of that fact, which will also indicate the special circumstances requiring the extension of time and the date by which the Committee expects that a determination will be made with respect to the claim.  If the extension is required due to the failure to submit information necessary to decide the claim, the period for making the determination will be tolled from the date on which the extension notice is sent to the Eligible Employee until the date on which the Eligible Employee responds to the Plan’s request for information.

 

5.3.3                                 If a claim is denied in whole or in part, or any adverse benefit determination is made with respect to a claim, the Eligible Employee will be provided with a written notice setting forth the reason for the determination, along with specific references to Plan provisions on which the determination is based.  This notice also will explain what additional information is needed to evaluate the claim (and why such information is necessary), together with an explanation of the Plan’s claims review procedure and the time limits applicable to such procedure, as well as a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review.

 

5.3.4                                 If the claim has been denied, the Eligible Employee may request that the Committee review the denial.  The Eligible Employee’s request must be in writing and must be made within sixty (60) days after written notification of denial.  In connection with this request, the Eligible Employee (or his/her duly authorized representative) may:

 

A.                                    Be provided, upon written request and free of charge, with reasonable access to (and copies of) all documents, records, and other information relevant to the claim;

 

B.                                    Submit to the Committee written comments, documents, records, and other information related to the claim; and

 

C.                                    Request in the timely application for review a conference with the reviewer to be held at the offices of the Employer at a mutually agreeable date and time (but not later than 60 days after receipt of the request for review).

 

5.3.5                                 The review by the Committee will take into account all comments, documents, records, and other information claimant submits relating to the claim.  The Committee will make a final written decision on a claim review, in most cases within sixty (60) days after receipt of a request for a review.  In some cases, the claim may take more time to review, and an additional processing period of up to sixty (60) days may be required.  If that happens, the Eligible Employee will 

 

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receive a  written notice of that fact, which will also indicate the special circumstances requiring the extension of time and the date by which the Committee expects to make a determination with respect to the claim.  If the extension is required due to the failure to submit information necessary to decide the claim, the period for making the determination will be tolled from the date on which the extension notice is sent to the Eligible Employee until the date on which the Eligible Employee responds to the Plan’s request for information.

 

5.3.6                                 The Committee’s decision on the claim for review will be communicated in writing.  If an adverse benefit determination is made with respect to the claim, the notice will include (i) the specific reason(s) for any adverse benefit determination, with references to the specific Plan provisions on which the determination is based; (ii) a statement that the Eligible Employee is entitled to receive, upon request and free of charge, reasonable access to (and copies of) all documents, records and other information relevant to the claim; and (iii) a statement of the Eligible Employee’s right to bring a civil action under Section 502(a) of ERISA.

 

5.3.7                                 The decision of the Committee (or its designee) is final and binding on all parties.

 

5.3.8                                 These procedures must be exhausted before the Eligible Employee may bring a legal action seeking payment of benefits.  The Eligible Employee may not bring a legal action seeking payment of benefits more than one year after receiving written notice of the decision of the claim for review, except as required by law.

 

5.4                               Payment of Taxes.  To the extent required by law, the Employer shall withhold Federal, state and local taxes (including but not limited to income taxes and to employment taxes under the Federal Insurance Contributions Act) with respect to any amounts that are distributed from the Plan to an Eligible Employee or to a Beneficiary.

 

Section 6.                                          Beneficiary Designation.

 

6.1                               Beneficiary Designation.  The Eligible Employee shall have the sole right, at any time, to designate any person, persons or trust(s) as his or her primary or contingent Beneficiary or Beneficiaries to whom payment under Section 5.2 shall be made in the event of his or her death.  Any Beneficiary designation may be changed by the Eligible Employee by the filing of a new Beneficiary designation form with the Committee, which filing will cancel all Beneficiary designations previously filed.  Any Beneficiary designation shall be made in a written instrument provided for such purpose by the Committee. All Beneficiary designations must be filed with the Committee and shall be effective only when received in writing by the Committee.  If the Eligible Employee fails to designate a Beneficiary, or if all designated Beneficiaries predecease the Eligible Employee, then the Eligible Employee’s designated Beneficiary shall be deemed to be the Eligible Employee’s surviving spouse, and 

 

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if there is no surviving spouse, the designated Beneficiary shall be deemed to be the Eligible Employee’s estate.

 

Section 7.                                          Administration.

 

7.1                               Committee.  The Committee (a) shall have complete discretion to supervise the administration and operation of the Plan and to adopt rules and procedures governing the Plan from time to time, and (b) authority to interpret the Plan, and to determine the nature and amount of benefits.  The Committee may appoint one or more individuals, who may be an employee of the Employer, to be the Committee’s agent with respect to the administration and operation of the Plan.  In addition, the Committee may, from time to time, employ other agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with counsel who may be counsel to the Employer.  Any person, entity, or committee to whom the Committee delegates duties or responsibilities pursuant to the Plan shall be conclusive and binding upon all persons having or claiming to have any interest or right under the Plan, including the Eligible Employee.  Any construction or interpretation of the Plan and any determination of fact in administering the Plan made in good faith by the Committee shall be final and conclusive for all Plan purposes.

 

7.2                               Binding Effect of Decisions.  Notwithstanding anything in the Plan to the contrary, the Committee shall have discretionary and final authority to make all determinations and take all other actions necessary or desirable for the Plan’s administration, including, without limitation, (a) determine all questions concerning eligibility, elections, contributions and benefits under the Plan, (b) construe all terms of the Plan, including any uncertain terms, (c) interpret Plan terms to reflect the Employer’s intent and (d) determine all questions concerning Plan administration.  All decisions of the Committee on any question concerning the interpretation and administration of the Plan shall be final, conclusive and binding upon all parties, and such determinations and decisions shall not be reviewable.  Any determination made by the Committee shall be given deference in the event it is subject to judicial review and shall not be overturned unless it is arbitrary and capricious.

 

7.3                               Indemnification of Committee.  The Employer shall indemnify and hold harmless the members of the Committee and their duly appointed agents (to the extent that such agents are employees of the Employer) against any and all claims, loss, damage, expense or liability (including reasonable attorney fees) arising from any action or failure to act with respect to the Plan, except in the case of gross negligence or willful misconduct by any such member or agent of the Committee.

 

Section 8.                                          Amendment and Termination of Plan.

 

8.1                               Amendment.  The Employer may at any time amend, suspend or reinstate any or all of the provisions of the Plan, except that no such amendment. suspension or reinstatement may adversely affect the Eligible Employee’s benefit under the Plan as it existed as of the day before the effective date of such amendment, suspension or reinstatement, without the Eligible Employee’s prior written consent.  Written notice of any amendment or other action with respect to the Plan shall be given to the Eligible Employee.  

 

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No oral representation concerning the interpretation or effect of the Plan document shall be effective to amend the Plan.

 

8.2                               Termination.  The Employer in its sole discretion may terminate this Plan at any time and for any reason whatsoever. Upon termination of the Plan, the Committee shall take those actions necessary to administer the Eligible Employee’s benefit accrued under the Plan through the day before the effective date of such termination; provided, however, that termination of the Plan shall not adversely affect the value of the Eligible Employee’s benefit, as it existed as of the day before the effective date of such termination, or the timing or method of distribution of the Eligible Employee’s benefit, without the Eligible Employee’s prior written consent. Notwithstanding the foregoing, the termination of the Plan shall not give rise to accelerated or automatic vesting of the Eligible Employee’s benefit.

 

Section 9.                                          Miscellaneous.

 

9.1                               Funding.  The Eligible Employee, his or her Beneficiaries, and their respective heirs, successors and assigns, shall have no secured interest in or claim against any property or assets of the Employer by virtue of this Plan. Any funds invested under the Plan shall continue to be part of the general assets of the Employer for all purposes. The Employer’s obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Employer to pay money in the future.  Notwithstanding the foregoing, the Employer may create a “rabbi trust” to hold funds to be used in payment of the obligations of the Employer under the Plan, which trust shall be funded only in the sole discretion of the Employer.  Nothing contained in the Plan shall constitute a guaranty by the Employer or any other person or entity that the assets of the Employer will be sufficient to pay the value of the benefit under the Plan.

 

9.2                               Non-assignability.  No right or interest under the Plan of the Eligible Employee or his or her Beneficiary (or any person claiming through or under any of them) shall be assignable or transferable in any manner or be subject to alienation, anticipation, sale, pledge, encumbrance or other legal process or in any manner be liable for or subject to the debts or liabilities of any Eligible Employee or Beneficiary. If the Eligible Employee or Beneficiary shall attempt to or shall transfer, assign, alienate, anticipate, sell, pledge or otherwise encumber his or her benefits hereunder or any part thereof, or if by reason of his or her bankruptcy or other event happening at any time such benefits would devolve upon anyone else or would not be enjoyed by him or her, then the Committee, in its discretion, may terminate his or her interest in any such benefit to the extent the Committee considers necessary or advisable to prevent or limit the effects of such occurrence.

 

9.3                               Independence of Benefits.  Except as otherwise provided herein or pursuant to the terms of any separate agreement with an employee, the benefits payable under the Plan shall be independent of, and in addition to, any other benefits or compensation, whether by salary, or bonus or otherwise, payable under any employment agreements that now exist or may hereafter exist from time to time between the Employer and any employee. The Plan does not in any way affect or reduce the existing and future compensation and other benefits 

 

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of any employee.  No amount payable hereunder shall be considered compensation for purposes of any employee benefit plan maintained by the Employer.

 

9.4                               Compliance with 409A.  The Employer makes no guarantee with respect to the tax treatment of payments hereunder and the Committee shall not be responsible in any event with regard to non-compliance with Section 409A of the Code.  The Eligible Employee (or Beneficiary) shall be solely responsible and liable for the satisfaction of all taxes, penalties and interest that may be imposed on Eligible Employees (or Beneficiary) or their Deferred Compensation Accounts in connection with this Plan (including any taxes, penalties and interest under Section 409A), and the Employer shall not have any obligation to indemnify or otherwise hold the Eligible Employee (or any Beneficiary or personal representative) harmless from any or all of such taxes, penalties or interest. It is intended that all amounts payable hereunder shall satisfy the short-term deferral exception in Treas. Reg. § 1.409A-1(b)(4). The Committee reserves the right to amend the provisions of this Plan at any time in order to avoid the imposition of additional tax under Code Sections 409A on any payments or credits to any account to be made hereunder.

 

9.5                               Delay in Payment.  If the Employer reasonably anticipates that any payment scheduled to be made hereunder would violate any law or jeopardize the ability of the Employer to continue as a going concern if paid as scheduled, then the Employer may defer that payment.  In addition, the Employer may, in its discretion, delay a payment upon such other events and conditions as the IRS may prescribe or may delay payments as required by federal or state law.  The amounts so deferred shall be distributed to the Eligible Employee or Beneficiary (in the event of the Eligible Employee’s death) at the earliest possible date on which the Employer reasonably anticipates that such violation or material harm would be avoided or as otherwise prescribed by the Internal Revenue Service.

 

9.6                               Captions.  The captions contained herein are for convenience only and shall not control or affect the meaning or construction hereof.

 

9.7                               Governing Law.  Except to the extent preempted by federal law, the provisions of the Plan shall be construed and interpreted according to the laws of the State of Connecticut (other than those conflict of law rules that could lead to the application of another state’s laws).

 

9.8                               Successors.  The provisions and liabilities of the Plan shall bind and inure to the benefit of the Employer and its respective successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise, acquire all or substantially all of the business and assets of the applicable entity and successors of any such company or other business entity.

 

9.9                               No Implied Rights.  Nothing contained herein shall be construed to confer upon the Eligible Employee the right to continue to serve as an employee of the Employer or in any other capacity. In addition, nothing contained herein shall be construed to limit either 

 

8

 

the right of the Employer to terminate the employment of the Eligible Employee, or the right of the Eligible Employee to terminate employment.

 

9.10                        Severability.  If a court of competent jurisdiction holds any provision of the Plan to be invalid or unenforceable, the remaining provisions of the Plan shall continue to be fully effective.

 

IN WITNESS WHEREOF, the Gemma Power Systems, LLC Deferred Compensation Plan is executed by its respective duly authorized representative, effective as of April 6, 2017.

 

	
 
    	
GEMMA   POWER SYSTEMS, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   William F. Griffin. Jr.
    
	
 
    	
Title:
    	
CEO
    

 

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