EMPLOYMENT AGREEMENT
By and Between
COVOL TECHNOLOGIES, INC.
And
XXXXX X. XXXX
Dated as of April 21, 1998
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("this Agreement") is made and entered into
as of the 21st day of April, 1998 (the "Effective Date") by and between COVOL
TECHNOLOGIES, INC. a Delaware Corporation (the "Company"), and Xxxxx X. Xxxx
("Employee"). The Company and Employee are sometimes later in this Agreement
collectively referred to as the "Parties."
RECITALS
This Agreement is entered into with reference to the following facts,
definitions, and objectives:
A. Employee is a certified public accountant and immediately prior to
Effective date, was employed by Covol Technologies, Inc., as Executive Vice
President and Chief Financial Officer.
B. Employee's services are deemed to be of value to the Company and it
is recognized that inducements must be offered to Employee in order that the
company may retain Employee's services.
NOW THEREFORE, in consideration of this Agreement and of the covenants
and conditions contained in this Agreement, the Parties agree as follows:
1. Employment and Positions.
(a) Positions. The Company employs Employee and
Employee accepts employment by the Company as Chief Executive Officer and
President of the Company for the Period of Employment specified in Paragraph 3
("Period of Employment").
2. Services to be Rendered. The Employee shall, during the Period of
Employment, serve the Company in the positions set forth in Paragraph 1
("Employment and Positions") diligently, competently, and in conformance with
the corporate policies of the Company. Employee shall be free to conduct
personal business and investment activities that do not conflict or interfere
with the performance of his duties under this Agreement. Employee shall have the
responsibility to always act in the best interest of the Company and recognizes
opportunities, ideas, and intellectual property relating to the business of the
Company that are developed as an officer or employee of Covol Technologies, Inc.
remain the property of Company.
In fulfilling his duties and responsibilities under this Agreement,
Employee shall report to the Board of Directors and shareholders of the Company.
3. Period of Employment. Employee's employment by the Company pursuant
to this Agreement shall, unless sooner terminated, begin as of the 21st day of
April, 1998 (the "Effective Date") and continue for a period of five (5) years
from the Effective Date ("Period of Employment").
4. Base Salary. At the commencement of the Period of Employment,
Employee shall be paid a yearly base salary of an amount determined by the Board
of Directors consistent with an annual compensation review of comparable
positions of public companies. Base salary shall be paid in semi monthly
installments during the Period of Employment.
5. Incentive Bonus. The Board of Directors and Management will
determine any incentive bonus guidelines during the Period of Employment;
Employee shall be entitled to receive a bonus pursuant to the Company's bonus
plan, if any, as in effect from time to time. It is recognized that bonus plans
are dependent upon the Corporation income performance and general performance
evaluations.
6. Expense Reimbursement. The Employee shall be entitled to prompt
reimbursement for reasonable expense incurred by the Employee in performing
services for the Company. Employee shall be required to provide proof and
documentation of such expenditures as required by the Company.
7. Grant of Options. The Company shall grant to the Employee, in
accordance with the terms and the Stock Option Agreement attached hereto as
Exhibit A, the right and option to purchase shares of the Company's Common
Stock.
(a) Stock Options Pursuant to Stock Option Plan. The Stock
Option ("Stock Option") shall be issued pursuant and subject to the provisions
of the Company Employee Stock Option Plan (the "Stock Option Plan").
(b) Purchase Price. The purchase price per share for the
shares subject to the Stock Option will be $12 31/32 per share.
(c) Number of Shares. The Stock Options will be for 250,000
shares of the Company's Common Stock (the "Optioned Shares").
(d) Exercise Periods. The Optioned Shares will vest and be
exercisable on the beginning of each month on a pro rata basis during the next
five (5) years. Once vested, the Optioned Shares may be exercised in whole or in
part at any time, subject to the limitations within which the exercise of the
Options must occur. The Optioned Shares must be exercised in their entirety
prior to April 21, 2008, also known as the expiration date.
(e) Vesting of Options in Event of Full and Complete
Disability or Death. In the event of disability or death of the employee any
unvested Stock Options shall vest effective as of the date of the full and
complete disability or the death of Employee. In the event of Employee's full
and complete disability or death, the Employee, heirs or estate of Employee, as
the case may be, may exercise any unexecuted options at any time subject to the
time limitations within which exercise of option must occur.
(f) Vesting of Options in Event of Ownership Change. In the
event a third party purchases a controlling interest of the total outstanding
shares of the Company, or substantially all of the assets of the Company, all
non-vested Stock Options shall vest as of the date immediately prior to such
stock or asset purchase. The intent of this section is to allow the Employee to
vote the shares represented by the Stock Options and the Employee's discretion
exercise any unexecuted options.
(g) Additional Stock Options. Employee shall also be eligible
to receive additional stock options during he Period of Employment pursuant to a
stock options bonus plan as may from time to time be in effect.
8. Other Benefits. In addition to the benefits previously set forth in
this Agreement, Employee shall, during the Period of Employment, be entitled to
the benefits described below, and as concerns all such benefit programs where
years of service are a factor, to the extent permitted by law, Employee shall be
given credit for his years of service with Covol Technologies, Inc. prior to the
implementation of any benefit program.
(a) Vacation. During the Period of Employment, Employee shall
be entitled to not less than six (6) weeks of paid vacation during each calendar
year occurring during the Period of Employment. The vacation may be carried over
from year to year. At the end of the term of this Agreement, the Employee shall
be entitled to be paid for the pro rated portion of the accrued salary
attributable to unused vacation.
(b) Insurance. Participation in the group insurance program
of the company as concerns life, disability, medical and dental insurance
currently available to other employee's as the same may be implemented, changed
modified or terminated for all participants from time to time. Employee shall be
required to pay that portion of the premiums for coverage under such insurance
that is payable by other employee's of the Company for their insurance coverage.
(c) Retirement Plan. The Employee shall participate in the
Company's Retirement Plans in accordance with the terms and provisions and
applicable law as the same may be implemented, changed, amended, or terminated
from time to time. Employee shall become eligible to participate in the
Company's Retirement Plans at date of hire or as the effective date of the
implementation of such plans, whichever is later.
(e) Automobile Allowance. The Company will provide the
Employee a monthly automobile allowance. This allowance is to compensate the
Employee for the us of his personal automobile in the amount of $550.00 per
month during the Employment Period.
(f) Dental Expense. The Company will provide the Employee
with an annual dental allowance of $4,500 or provide comparable coverage.
(g) Other Miscellaneous Benefits. The Company shall pay or
reimburse Employee for the following miscellaneous benefits:
(i) Annual dues for association membership for
relevant professional groups.
(ii) Subscription and purchase of books, journals,
publications which relate to job duties and responsibilities.
9. Terms of Employment
(a) Term. The Company hereby agrees to continue the Employee
in its employ, an the Employee hereby agrees to remain in the employ of the
Company, in accordance with the terms and provisions of paragraph 3 of this
Agreement, for the Period of Employment, thus terminating on the fifth
anniversary of the Effective Date of this Agreement, upon thirty (30) days prior
written notice from the Company to the Employee. If such written notice of
termination is not given, then the Employee's employment under this Agreement
shall continue under the terms of this Agreement, until the Employee is
terminated by the Company upon thirty (30) days prior written notice.
(b) During the Period of Employment.
(i) The Employee's position, authority, duties and
responsibilities shall be commensurate in all material respects with those held,
exercised and assigned at any time during the ninety (90) day period immediately
preceding the Effective Date or at any office which is the headquarters of the
Company.
(ii) The Employee's services shall be performed at
the location where the Employee was employed immediately preceding the Effective
Date or at any office which is the headquarters of the Company.
10. Termination of Agreement.
(a) Termination of Employment by Employer. Anything in this
Agreement to the contrary notwithstanding, the Company shall have the following
rights with respect to termination of Employee's employment.
(i) Disability. The Company may terminate
Employee's employment under this Agreement if Employee shall become unable to
fulfill his duties under this Agreement, as measured by the Company's usual
business activities, by reason of any medically determinable physical and/or
mental disability.
(ii) Cause. Employee's employment may be
terminated for Cause. For purpose of the Agreement, "Cause" shall mean and refer
to a determination made in good faith by the Company's Board of Directors that:
(1) Employee has been convicted
of or has entered a plea of guilty or nolo contendere to a felony or to any
other crime, which other crime is punishable by incarceration for a period of
one (1) year or longer, or which is a crime involving moral turpitude;
(2) there has been a theft,
embezzlement, or other criminal misappropriation of funds by Employee, whether
from Company or any other person;
(3) Employee has willfully
failed or refused to follow reasonable written policies or directives
established by the Board of Directors of the Company, or Employee has willfully
failed to attend to material duties or obligations of Employee's office (other
than any such failure resulting from Employee's incapacity due to physical or
mental illness, which is a cause or manifestation of Employee's disability),
which failure or refusal continues for thirty (30) days following delivery of a
written demand from the Company's Board of Directors for policies or directives
or to perform such duties.
(iii) Termination pursuant to this Paragraph 9 shall
be effective as of the effective date of the notice by the Board of Directors to
Employee that it has made the required determination, or at such other
subsequent date, if any specified in such notice.
(iv) Death. If the Employee dies during the term of
this Agreement, his personal representative or designated survivor shall be
entitled to receive all the salary and benefits provided hereunder for the
remaining term of this Agreement.
(b) Termination by Employee.
(i) With Good Reason. Employee shall have the
right to terminate his employment under this Agreement at any time for Good
Reason, provided Employee has delivered written notice to the Company which
briefly describes the facts underlying Employee's belief that "Good Reason"
exist and the Company has failed to cure such situation within thirty (30) days
after effective date of such notice. For purposes of the Agreement, "Good
Reason" shall mean and consist of:
(1) a material breach by the Company of
its obligations under this Agreement;
(2) the assignment to Employee of duties
that are materially inconsistent with, or that constitute a material alteration
in the status of his responsibilities set forth in this Agreement, as an
employee of the Company;
(3) a reduction by the Company of
Employee's Base Salary below the Base Salary set forth in Paragraph 5 ("Base
Salary");
(4) without Employee's prior written
consent, the transfer or relocation of Employee's place of employment to any
place other than the Salt Lake City/Provo metropolitan area, except for
reasonable travel on the business of the Company; or
(5) upon the consummation of a sale of
all or substantially all of the assets of the Company not in the usual or
regular course of the business of the Company in which sale the acquiring
company did not assume all of the obligations of the Company under this
Agreement.
11. Confidential Information. The Employee shall hold in a fiduciary
for the benefit of the Company all secret or confidential information, knowledge
or data relating to the Company or any of its affiliated companies and their
respective businesses, which have been obtained by the Employee during the
Employee's employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Employee or representatives of the Employee in violation of this Agreement).
After termination of the Employee's employment with the Company, the Employee
shall not, without prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by the
Company. In no event shall an asserted violation of the provisions of this
Section constitute a basis for deferring or withholding any amounts otherwise
payable to the Employee under the provisions of this Agreement.
12. Inventions.
(a) Assignment. Without further consideration, the Employee
shall fully and promptly report to the Company all ideas, concepts, inventions,
discoveries, formulas, and designs conceived or produced by the Employee at any
time during the Period of Employment relating to the Company's trade or
business, whether alone or with others and whether patentable or unpatentable
(collectively, "Inventions" pertaining directly or indirectly to the business of
the company as conducted by the Employee at any time during the Employment
Period) and shall assign and hereby does assign to the Company or its nominee
the Employee's entire right, title and interest in and to all such Inventions.
(b) Cooperation. The Employee shall take all reasonable action
requested by the Company to protect or obtain title to any and all United States
and/or foreign patents on any such Inventions, including execution and delivery
of all applications, assignments and other documents deemed necessary or
desirable by the Company, provided the Company shall reimburse the Employee for
all expenses incurred by the Employee in connection with such execution and
delivery.
13. Non-Competition after Termination.
(a) Acknowledgment. The Employee acknowledges that his
services and responsibilities are of a particular significance to the Company
and that his position with the Company does and will continue to give him an
intimate knowledge of its business. Because of this, it is important to the
Company that the Employee be restricted from competing with the Company in the
event of the termination of his employment.
(b) Agreement. The Employee agrees that, in addition to any
other limitations, for a period of two (2) years after the termination of his
employment under this Agreement, the Employee will not directly or indirectly
compete with the Company or its business.
14. Severance Pay. If the Employee does not continue in the employ of
the Company after the termination of this Agreement, whether or not the Employee
is offered continued employment by the Company, Company shall pay to Employee,
no later than two months after termination, the sum of one year's annual base
wages. The Employee shall not be required to mitigate the amount of the payment
provided for in this section by seeking other employment or otherwise; nor shall
the amount of the payment be reduced by any compensation earned by the Employee
as the result of employment by another employer after termination or otherwise.
15. Indemnification. The Company shall release, indemnify and hold
harmless the Employee against and from any and all loss, claims actions or
suits, including costs and attorney's fees, both at trial and on appeal,
resulting from, or arising out of or in any way connected with the Employees
acts as an employee of the Company.
16. Miscellaneous. Any notice or other communications required or
permitted to be given to the parties hereto shall be deemed to have been given
when received, addressed as follows (or at such other address as the party
addressed may have substituted by notice pursuant to this Section):
(a) If to the Company:
0000 Xxxxx Xxxxxxxx Xxxx
Xxxx, Xxxx
Attention: President and CEO
(b) If to Employee:
Xxxxx X. Xxxx
0000 Xxxx 00000 Xxxxx
Xxxxxxxx, XX 00000
17. Governing Law. This Agreement shall in all respects be interpreted,
construed and governed by and in accordance with the laws of the State of Utah.
IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate as of the date written above.
COVOL TECHNOLOGIES, INC.: EMPLOYEE:
By: Xxxxxxx X. Xxxxxx Xxxxx X. Xxxx
------------------------- ----------------------
Title: Chairman of the Board
