EMPLOYMENT AGREEMENT
By and Between
COVOL TECHNOLOGIES, INC.
And
Xxxxxx X. Xxxxx
Effective as of
January 1, 1999
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this Agreement") is effective as of the
first day of January, 1999 (the "Effective Date") by and between COVOL
TECHNOLOGIES, INC. a Delaware Corporation (the "Company"), and Xxxxxx X. Xxxxx
("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 Senior Vice President of Engineering and
Development and immediately prior to Effective Date, was
employed by the Company as a Vice President.
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. The Company employs Employee and
Employee accepts employment by the Company as an officer of
the Company with the title of "Senior Vice President of
Engineering and Development" for the Period of Employment
specified in Paragraph 3 ("Period of Employment"). Such
position and title including related duties and
responsibilities may be changed during the term of this
contract provided that such Employee continues as an officer
and provided further that compensation for services are not
reduced due to such title and/or position change.
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 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 President of the
Company.
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3. Period of Employment. Employee's employment by the Company
pursuant to this Agreement shall, unless sooner terminated,
begin as of the Effective Date and continue for a period of
three (3) years from the Effective Date ("Period of
Employment").
4. Base Salary. At the commencement of the Period of Employment,
Employee shall be paid a base salary of $100,000 for the first
year, $130,000 for the second year, and $135,000 for the third
year, during the Period of Employment. Base salary shall be
paid in equal semi monthly installments during the Period of
Employment.
5. Incentive Bonus. During the Period of Employment, the 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 a bonus plan, if any, is established at the
discretion of the Company and may be subject to variables and
conditions including income performance and general
performance evaluations.
6. Expense Reimbursement. The Employee shall be entitled to
prompt reimbursement for reasonable expenses 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 may grant from time to time to
the Employee, in accordance with the terms of a stock option
agreement, the right and option to purchase shares of the
Company's Common Stock .
(a) Stock Options Pursuant to Stock Option Plan. Any
Stock Options ("Stock Option") issued shall be issued
pursuant and subject to the provisions of the Company
Employee Stock Option Plan (the "Stock Option Plan")
or as approved by the Board of Directors. Number of
options, purchase price, exercise periods and vesting
requirements shall be included in the stock option
document.
(b) Vesting of Options in Event of Full and Complete
Disability or Death. In the event of the full and
complete disability or the 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.
(c) Vesting of Options in Event of Ownership Change. In
the event of a
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change in control, all non-vested Stock Options shall
vest immediately prior to such change in control. A
change in control shall be deemed to have taken place
if, as the result of a tender offer, merger,
consolidation, sale of substantially all assets, a
third party purchase of a controlling interest of the
total outstanding shares of the Company, contested
election, or any combination of the foregoing
transactions, the persons who were directors of the
Company immediately before the transaction shall
cease to constitute a majority of the board of
directors of the Company or any successor to the
Company. The intent of this section is to allow the
Employee to exercise any unexecuted options at the
Employees discretion.
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 four (4) weeks of
paid vacation during each calendar year occurring
during the Period of Employment. Any unused vacation
will, at the Company's option, be paid for by the
Company at the end of each calendar year, or will
carry forward from year to year until taken by the
Employee or paid the Employee by the Company. Upon
termination of Employee's employment under this
Agreement, Employee shall be paid for any unused
vacation in the year in which the termination
occurred, proportionate to the amount of time
employed that year.
(b) Sick Leave. Leave time will be granted to the
Employee that is reasonable under the circumstances
and that is consistent with the Company's policies
and procedures, as the same may be changed, modified
or terminated for all participants from time to time.
(c) 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 employees of the
Company for their insurance coverage.
(d) Retirement Plan. The Employee shall participate in
the Company's Retirement Plans in accordance with the
terms and provisions and
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applicable laws 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 of
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 use
of his personal automobile in the amount of $550.00
per month during the Employment Period.
(f) Disability Insurance. The Company shall reimburse the
Employee for disability insurance that is currently
being paid by the Employee until such time that the
Company implements a disability insurance program for
which the employee would be covered.
(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, and publications which relate to
job duties and responsibilities.
Employee shall obtain authorization for payment or
purchases referred to in (i) and (ii) above from the
chief financial officer of the Company before
incurring such costs.
9, Terms of Employment.
(a) Term. The Company hereby agrees to continue the
Employee in its employ, and 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 third 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. The Employee's
services shall be performed at the location where the
Employee was employed immediately
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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; or
(2) there has been a theft,
embezzlement, or other criminal
misappropriation of funds by
Employee, whether from Company or
any other person; or
(3) Employee has willfully failed or to
follow reasonable written policies
or directives established by the
Board of Directors or the Chief
Executive Officer 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 Chief Executive Officer
for performance to Employee
identifying the manner in which
Employee has failed to follow such
policies or directives or to perform
such duties.
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(iii) Termination pursuant to this Paragraph 10
shall be effective as of the effective date
of the notice by the Board of Directors or
Chief Executive Officer to Employee that it
has made the required determination, or at
such other subsequent date, if any specified
in such notice.
(iv) Death. If Employee dies during the Period of
Employment, Employee's employment shall be
terminated effective as of the end of the
calendar month during which Employee died.
(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" exists 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
Paragraph 1 of 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 a change of control as defined in Paragraph
6(c) above.
11. Confidential Information. The Employee shall hold in a
fiduciary capacity 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 has been obtained by the Employee
during the Employee's
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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, writings, concepts, inventions,
discoveries, formulas, designs, and know-how
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 or not patentable or subject to
copy or service rights or trademark (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
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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. Except for termination for Cause under
Paragraph 10(a)(ii) above, 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 thirty (30) days, 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. Subject to the Company's Certificate of
Incorporation, as amended, 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 Employee's
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 00000
Attention: President and CEO
(b) If to Employee:
Xxxxxx X. Xxxxx
0000 Xxxxx 000 Xxxx
Xxxx, Xxxx 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.
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Effective the first day of January, 1999.
Covol Technologies, Inc.: Employee
-------------------- -------------------
By: Xxxxxx X. Xxxxx
Title: Date:
Date:
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