EMPLOYMENT AGREEMENT
By and Between
COVOL TECHNOLOGIES, INC.
And
Xxxxxxx X. Xxxxxxx
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 Xxxxxxx X.
Xxxxxxx ("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:
1. Employee is Vice President of Operations. Employee came into
the employment of the Company on August 17, 1998.
2. 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 "Vice President of Operations"
for the Period of Employment specified in Paragraph 3. The
duties of the position are generally described as to develop,
manage, and have accountability for the operations of the
Company. This includes synfuel operations, wash plants, and
may include future metals business operations and identifying,
acquiring and operating power generating facilities. Employee
will be responsible for the day to day and long term business
decisions including, but not limited to, operations,
maintenance, planning, economic, and human resource matters.
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 Senior Vice
President Engineered Synfuel or another senior officer
designated by the President.
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 minimum base salary of $80,000 for
the first year. In addition, the Employee shall be paid a lump
sum on or before January 31, 1999 of an amount that makes
Employee's past salary equal to the $80,000 annual rate from
August 17, 1998 up to the beginning of the Period of
Employment. Employee shall be paid a minimum base salary of
$100,000 for the second year, and a minimum base salary of
$120,000 for the third year during the Period of Employment.
Base salary shall be paid in equal semi-monthly installments
during the Period of Employment. Employee recognizes Company's
current financial state, and as such, accepts these minimum
base salary values. Company recognizes Employee's request for
$120,000 base salary from the beginning of this employment
contract and will endeavor to meet this request at the
earliest opportunity based upon Company's sole determination
of Company's financial status.
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.
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(1) 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 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.
(4) Stock Options Granted. As of the Effective Date, the
Company has granted Employee Stock Options to acquire
50,000 shares of Company common stock at a strike
price of [just higher than 12/29 closing bid] vesting
an equal amount each month during the Period of
Employment and otherwise subject to this Paragraph 7.
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.
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(1) 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. 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.
(1) 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.
(2) 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.
(3) Retirement Plan. The Employee shall participate in
the Company's Retirement Plans in accordance with the
terms and provisions and 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.
(4) 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 beginning on the Effective Date with an
appropriate annual inflation adjustment each January
during the Employment Period.
(1) Disability Insurance. The Company shall reimburse the
Employee for any 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.
(2) Other Miscellaneous Benefits. The Company shall pay
or reimburse Employee for the following miscellaneous
benefits:
(1) Annual dues for association membership for relevant
professional groups.
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(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.
(1) 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 this
Agreement, for the Period of Employment in Paragraph
3 above, 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 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.
(1) 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:
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(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 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 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.
(iii) Termination pursuant to this Paragraph 10
shall be effective as of the effective date
of the notice by the Board of Directors,
Chief Executive Officer, or President or 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:
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(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 4 above;
(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 7(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 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.
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(1) 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.
(2) 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.
(1) 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.
(2) 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. Except for termination (1) for Cause under
Paragraph 10(a)(ii) above or (2) upon 30 days notice at the
end of the three year Period of Employment under Paragraph 3
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.
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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 or CEO
(b) If to Employee:
Xxxxxxx X. Xxxxxxx
000 Xxxxx Xxxxx Xxxx
Xxxxxx, 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.
Effective the first day of January, 1999.
Covol Technologies, Inc.: Employee
/s/ Xxxxx X. Xxxx /s/ Xxxxxxx X. Xxxxxxx
----------------- ----------------------
By: Xxxxx X. Xxxx Xxxxxxx X. Xxxxxxx
Title: President
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