EMPLOYMENT AGREEMENT
By and Between
COVOL TECHNOLOGIES, INC.
And
XXXX X. XXXXXX
Effective as of April 20, 1999
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this Agreement") is made and entered into as
of May 18, 1999, and effective as of April 20, 1999 (the "Effective
Date") by and between Covol Technologies, Inc., a Delaware Corporation
(the "Company"), and Xxxx X. Xxxxxx ("Executive"). The Company and
Executive are sometimes later in this Agreement collectively referred
to as the "Parties."
1. Employment and Position. The Company employs Executive and
Executive accepts employment by the Company as Chief Executive Officer
of the Company for the Period of Employment specified in Paragraph 3
("Period of Employment").
2. Services to be Rendered. The Executive shall, during the
Period of Employment, serve the Company in the position set forth in
Paragraph 1 diligently, competently, and in conformance with the
corporate policies of the Company. Executive shall provide leadership
in areas of financial planning and performance, long range corporate
planning, legal and regulatory compliance, operations planning and
implementation, and new business planning and implementation. Executive
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. Executive 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 while an officer or employee of the Company
or any of its affiliates, remain the property of Company.
In fulfilling his duties and responsibilities under
this Agreement, Executive shall report to the Board of Directors and
shareholders of the Company.
3. Period of Employment. Executive'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. Executive shall be paid an annual base salary
of an amount determined by the Board of Directors. Base salary shall be
paid in semi monthly installments during the Period of Employment.
Effective as of the Effective Date, Executive shall be paid a gross
salary of $15,000 per month until such base salary is adjusted by the
Board of Directors.
5. Incentive Bonus. The Board of Directors will determine any
incentive bonus guidelines during the Period of Employment. Bonus plans
are intended to establish linkage between Executive's compensation and
the Company's performance.
6. Performance Criteria. Executive's performance will be
measured according to achievement based on progress towards the
Company's strategic business plan, financial results, compliance with
law and regulation, organizational development, and other factors which
provide impact to the Company.
7. Expense Reimbursement. The Executive shall be entitled to
prompt
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reimbursement for reasonable expenses incurred by the Executive in
performing services for the Company. Executive shall be required to
provide documentation of such expenditures.
8. Grant of Options. The Company shall grant to the Executive,
in accordance with the terms of 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 Executive Stock Option Plan.
(b) Purchase Price. The purchase price per share for
the shares subject to the Stock Option will be $4.125, the closing
share price on May 18, 1999.
(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 12 month anniversary of the
Effective Date on a one-third per anniversary basis for the three (3)
anniversaries following the Effective Date, provided that vesting will
continue so long as the Executive is still in the employ of the
Company. 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 20, 2009, also known as the
expiration date.
(e) Vesting of Options in Event of Full and Complete
Disability or Death. In the event of full disability or death of the
Executive any unvested Stock Options shall vest effective as of the
date of the full and complete disability or the death of Executive. In
the event of Executive's full and complete disability or death, the
Executive, heirs or estate of Executive, 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, if Executive is not retained as an officer, 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 Executive to vote the shares represented by the Stock Options and
at the Executive's discretion exercise any unexecuted options.
(g) Additional Stock Options. Executive shall also be
eligible to receive additional stock options during the Period of
Employment pursuant to a stock options plan as may from time to time be
in effect and as approved by the Board of Directors.
9. Other Benefits. In addition to the benefits previously
set forth in this Agreement, Executive shall, during the Period of
Employment, be entitled to the benefits
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described below or as may be implemented by the Company, and as
concerns all such benefit programs where years of service are a factor,
to the extent permitted by law, Executive 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,
Executive 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) Sick Leave. Leave time will be granted to the
Executive 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
or other insurance currently available to other Executive's as the same
may be implemented, changed, modified or terminated for all
participants from time to time. Executive shall be required to pay that
portion of the premiums for coverage under such insurance that is
payable by other Executive's of the Company for their insurance
coverage.
(d) Retirement Plan. The Executive shall participate
in the Company's Retirement Plans in accordance with the terms and
provision and applicable law as the same may be implemented, changed,
amended, or terminated from time to time. Executive 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 Executive a monthly automobile allowance. This allowance is to
compensate the Executive for the use of his personal automobile in the
amount of $550.00 per month during the Employment Period.
(f) Other Miscellaneous Benefits. The Company shall
pay or reimburse Executive 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.
10. Term of Employment.
(a) Term. The Company hereby agrees to continue the
Executive in its employ, and the Executive 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
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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 Executive. If such written notice of termination is
not given, then the Executive's employment under this Agreement shall
continue under the terms of this Agreement, until the Executive is
terminated by the Company upon thirty (30) days prior written notice.
(b) During the Period of Employment .
(i) The Executive's position, authority,
duties and responsibilities shall be commensurate in all material
respects with those held, exercised and assigned at the time of the
Effective Date.
(ii) The Executive's services shall be
performed at the location which is the headquarters of the Company.
11. 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 Executive's
employment.
(i) At Will. The Company may terminate
Executive's employment under this Agreement upon the determination of
the Board of Directors.
(ii) Disability. The Company may terminate
Executive's employment under this Agreement if Executive 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.
(iii) Cause. Executive'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) Executive 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 Executive,
whether from Company or any other person;
(3) Executive has failed or
refused to follow reasonable written policies or directives established
by the Board of Directors of the Company, or Executive has failed to
attend to material duties or obligations of Executive's office (other
than any such failure resulting from Executive's incapacity due to
physical or mental illness, which is a cause or manifestation of
Executive's disability), which failure or refusal continues for thirty
(30) days
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following delivery of a written demand from the Company's Board of
Directors for performance to Executive identifying the manner in which
Executive has failed to follow such policies or directives or to
perform such duties.
(iv) Termination pursuant to this
Paragraph 10 shall be effective as of the effective date of the notice
by the Board of Directors to Executive that it has made the required
determination, or at such other subsequent date, if any specified in
such notice.
(v) Death. If the Employee dies during
the term of this Agreement, his personal representative or designated
survivor shall be entitled to receive all of the salary and benefits
provided hereunder for the remaining term of this Agreement.
(b) Termination by Executive.
(i) With Good Reason. Executive shall
have the right to terminate his employment under this Agreement at any
time for Good Reason, provided Executive has delivered written notice
to the Company which briefly describes the facts underlying Executive'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 Executive
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 Executive of the Company;
(3) a non-voluntary reduction
by the Company of Executive's Base Salary below the Base Salary set
forth in Paragraph 4;
(4) without Executive's consent,
the transfer or relocation of Executive'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.
12. Confidential Information. The Executive 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
have been obtained by the Executive during the Executive'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 Executive or
representatives of the Executive in violation of this Agreement). For a
period
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of five years after termination of the Executive's employment with the
Company, the Executive 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 Executive under the provisions of this Agreement.
13. Inventions.
(a) Assignment. Without further consideration, the
Executive shall fully and promptly report to the Company all ideas,
concepts, inventions, discoveries, formulas, and designs conceived or
produced by the Executive 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 Executive at any time during the Employment
Period) and shall assign and hereby does assign to the Company or its
nominee the Executive's entire right, title and interest in and to all
such Inventions.
(b) Cooperation. The Executive 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 Executive for all
expenses incurred by the Executive in connection with such execution
and delivery.
14.Non-Competition after Termination.
(a) Acknowledgment. The Executive 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 Executive be restricted
from competing with the Company in the event of the termination of his
employment.
(b) Agreement. The Executive 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 Executive will
not directly or indirectly compete with the Company or its business.
15. Severance Pay. Except in the case of (1) termination for
Cause under Paragraph 11(a)(iii) above or (2) upon 30 days notice at
the end of the Period of Employment under Paragraph 9(a) above, if the
Executive does not continue in the employ of the Company after the
termination of this Agreement, whether or not the Executive is offered
continued employment by the Company, Company shall pay to Executive, no
later than two months after termination, the sum of one year's annual
base salary and options will continue to vest as per the schedule set
forth in paragraph 7(d) above. The Executive 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
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amount of the payment be reduced by any compensation earned by the
Executive as the result of employment by another employer after
termination or otherwise.
16. Indemnification. Subject to the Company's Certificate of
Incorporation, Articles, and By-Laws, as from time to time amended, the
Company shall release, indemnify and hold harmless the Executive
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 Executive's acts as
an Executive of the Company. The Company shall keep in effect directors
and officers liability insurance comparable to the policy in effect as
of the Effective Date.
17. 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: Compensation Committee Chairman
(b) If to Executive:
Xxxx X. Xxxxxx
0000 Xxxx Xxxxxx Xxxx Xxxxx
Xxxxxx, Xxxx 00000
18. 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.: Executive:
By: /s/ Xxxxxxx Xxxxxx /s/ Xxxx X. Xxxxxx
Name: Xxxxxxx Xxxxxx Xxxx X. Xxxxxx
Title: Compensation Committee / Director
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