SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant | |
Check the appropriate box:
|X| Preliminary Proxy Statement | | Confidential, for Use of the
| | Definitive Proxy Statement Commission Only (as permitted
| | Definitive Additional Materials by Rule 14a-6(e)(2))
| | Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
COVOL TECHNOLOGIES, INC.
- - -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
| | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- - -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
- - ------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - -------------------------------------------------------------------------------
(5) Total fee paid:
- - -------------------------------------------------------------------------------
| | Fee paid previously with preliminary materials.
- - -------------------------------------------------------------------------------
| | Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- - -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - ------------------------------------------------------------------------------
(3) Filing Party:
- - ------------------------------------------------------------------------------
(4) Date Filed:
<PAGE>
COVOL TECHNOLOGIES, INC.
3280 North Frontage Road
Lehi, Utah 84043
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, JUNE 25, 1997
--------------------
To the Stockholders of Covol Technologies, Inc.:
The 1997 Annual Meeting of Stockholders (the "Meeting") of Covol
Technologies, Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, June 25, 1997, starting at 1:00 p.m., (Mountain Standard Time), at
the Little America Hotel and Towers, 500 South Main Street, Salt Lake City, Utah
84101, for the following purposes:
1. To elect all directors of the Company to serve until the next annual
meeting of stockholders in 1998 (or the expiration of their respective terms if
classification of the Board is approved) or until their successors are duly
elected and qualified;
2. To approve a proposal to amend the Company's Certificate of
Incorporation to create a new class of preferred stock, $.001 par value, with an
authorized number of shares equal to 10,000,000;
3. To approve a proposal to amend the Company's Bylaws to provide for
(a) a classified Board of Directors (the "Board"), (b) the minimum and maximum
number of directors on the Board, (c) the removal of directors with the vote or
written consent of stockholders representing not less than two-thirds of the
issued and outstanding stock entitled to vote and (d) increases to the size of
the Board with the vote or written consent of stockholders representing not
less than two-thirds of the issued and outstanding stock entitled to vote;
4. To ratify the selection by the Board of Coopers & Lybrand L.L.P. as
independent auditors of the Company for the fiscal year ended September 30,
1997; and
5. To transact such other business as may properly come before the
Meeting and any and all adjournments or postponements thereof.
The Board has fixed the close of business on Thursday, May 22, 1997, as
the record date for determining the stockholders entitled to notice of, and to
vote at, the Meeting. A complete list of stockholders entitled to vote at the
Meeting will be available, upon written demand, for examination during normal
business hours by any stockholder of the Company, for any purpose germane to the
Meeting, for a period of ten (10) days prior to the Meeting at the Company's
offices located at the address set forth above. Only stockholders of record as
of the record date are entitled to notice of, and to vote at, the Meeting and
any adjournments or postponements thereof. A copy of the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1996, a Proxy Statement and
a proxy card accompany this notice. These materials are first being sent to
stockholders on or about June 2, 1997.
Stockholders are cordially invited to attend the Meeting in person.
However, to assure your representation at the Meeting, please complete and sign
the enclosed proxy card and return it promptly. If you choose, you may still
vote in person at the Meeting even though you previously submitted a proxy card.
By Order of the Board of Directors,
ASAEL T. SORENSEN
Secretary
Lehi, Utah
June 2, 1997
<PAGE>
Your vote is important.
You are urged to date, sign and promptly return your proxy card so that your
shares may be voted in accordance with your wishes and that the presence of a
quorum may be assured. The prompt return of your signed proxy card, regardless
of the number of shares you hold, will aid the Company in reducing the expenses
of additional proxy solicitations. The giving of your proxy does not affect your
right to vote in person if you attend the meeting or your right to resubmit
later dated proxy cards.
4
<PAGE>
COVOL TECHNOLOGIES, INC.
3280 North Frontage Road
Lehi, Utah 84043
--------------------
PROXY STATEMENT
Annual Meeting of Stockholders
To Be Held on Wednesday, June 25, 1997
--------------------
GENERAL INFORMATION
This Proxy Statement and the accompanying proxy card are being
furnished to the stockholders of record of Covol Technologies, Inc. (the
"Company"), in connection with the solicitation of proxies by and on behalf of
the Board of Directors of the Company (the "Board") for use at the Company's
1997 Annual Meeting of Stockholders (together with any and all adjournments or
postponements thereof, the "Meeting") which is scheduled to be held on
Wednesday, June 25, 1997, starting at 1:00 p.m. (Mountain Standard Time), at the
Little America Hotel and Towers, 500 South Main Street, Salt Lake City, Utah
84101, for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders (the "Notice"). This Proxy Statement, the Notice, the Company's
Annual Report on Form 10-K (the "Annual Report") for the fiscal year ended
September 30, 1996 ("Fiscal 1996") and the enclosed proxy card, are first being
mailed to stockholders on or about June 2, 1997. The Annual Report is not to be
considered a part of the Company's proxy solicitation materials.
PURPOSE OF ANNUAL MEETING
At the Meeting, stockholders will be asked: (i) to elect six directors
of the Company to serve until the next annual meeting of stockholders in 1998
(or the expiration of their respective terms if classification of the Board is
approved) or until their successors are duly elected and qualified; (ii) to
approve a proposal to amend the Company's Certificate of Incorporation to create
a new class of preferred stock, $.001 par value, with an authorized number of
shares equal to 10,000,000; (iii) to approve a proposal to amend the Company's
Bylaws to provide for (a) a classified Board, (b) the minimum and maximum number
of directors on the Board, (c) the removal of directors with the vote or written
consent of stockholders representing not less than two-thirds of the issued and
outstanding stock entitled to vote and (d) increases to the size of the Board
with the vote or written consent of stockholders representing not less than
two-thirds of the issued and outstanding stock entitled to vote; (iv) to ratify
the selection by the Board of Coopers & Lybrand L.L.P. as independent auditors
of the Company for the year ending September 30, 1997 ("Fiscal 1997"); and (v)
to transact such other business as may properly come before the Meeting or any
adjournment or postponements thereof. If a quorum exists, directors are elected
by a plurality of the votes of the shares of Company common stock (the "Common
Stock") present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. If a quorum exists, action on items (ii),
(iii) and (iv) above will be approved by affirmative vote of the holders of a
majority of the shares of the Common Stock present or represented by proxy at
the Meeting and entitled to vote on such matters. The Board recommends a vote
"FOR" (i) the election of the six nominees for directors of the Company listed
below, (ii) the amendment to the Company's Certificate of Incorporation creating
a new class of preferred stock, $.001 par value, with an authorized number of
shares equal to 10,000,000; (iii) the amendment to the Company's Bylaws to
provide for (a) a classified Board, (b) the minimum and maximum number of
directors on the Board, (c) the removal of directors with the vote or written
consent of stockholders representing not less than two-thirds of the issued and
1
<PAGE>
outstanding stock entitled to vote and (d) increases to the size of the Board
with the vote or written consent of stockholders representing not less than
two-thirds of the issued and outstanding stock entitled to vote; and (iv) the
ratification of Cooper & Lybrand L.L.P. as independent auditors of the Company
for Fiscal 1997. The Board knows of no other matters which are likely to be
brought before the Meeting. If any other matters properly come before the
Meeting, however, the persons named in the enclosed proxy, or their duly
constituted substitutes acting at the Meeting, will be authorized to vote or
otherwise act thereon in accordance with their judgment on such matters. If the
enclosed proxy is properly executed and returned prior to voting at the Meeting,
the shares represented thereby will be voted in accordance with the instructions
marked thereon. In the absence of instructions, executed proxies will be voted
"FOR" the items listed in the Notice.
QUORUM AND VOTING RIGHTS
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock is necessary to constitute a quorum at
the Meeting. Only stockholders of record at the close of business on Thursday,
May 22, 1997 (the "Record Date"), will be entitled to notice of, and to vote at,
the Meeting. As of the Record Date, there were 8,185,508 shares of Common Stock
outstanding and entitled to vote at the Meeting. Holders of Common Stock as of
the Record Date are entitled to one vote for each share held. Holders of Common
Stock are not entitled to cumulative voting rights.
All shares of Common Stock represented by properly executed proxies
will, unless such proxies have previously been revoked, be voted in accordance
with the instructions indicated in such proxies. If no such instructions are
indicated, such shares will be voted in favor of (i.e., "FOR") the items listed
in the Notice. Abstentions will be counted as shares present for quorum
purposes, but otherwise will count as a vote against the applicable proposal.
Broker non-votes will be counted as shares present for quorum purposes, but
otherwise will not count for any purpose in determining whether a proposal has
been approved.
Any stockholder executing a proxy has the power to revoke such proxy at
any time prior to its exercise. A proxy may be revoked prior to exercise by (i)
filing with the Company a written revocation of the proxy, (ii) appearing at the
Meeting and casting a vote contrary to that indicated on the proxy or (iii)
submitting a duly executed proxy bearing a later date.
The cost of preparing, printing, assembling and mailing this Proxy
Statement and other material furnished to stockholders in connection with the
solicitation of proxies will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, officers, directors and employees
of the Company may solicit proxies by written communication, telephone,
telegraph or personal call. Such persons are to receive no special compensation
for any solicitation activities. The Company will reimburse banks, brokers and
other persons holding Common Stock in their names, or those of their nominees,
for their expenses in forwarding proxy solicitation materials to beneficial
owners of Common Stock.
2
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS, NOMINEES
AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of May 22, 1997,
regarding the beneficial ownership of all of the Company's outstanding Common
Stock by (i) each person (or group of affiliated persons) known by the Company
to be the beneficial owner of more than 5% of the outstanding shares of Common
Stock, (ii) each director and nominee for director of the Company, (iii) each
executive officer of the Company and (iv) all directors and executive officers
of the Company as a group. As of May 22, 1997, there were 8,185,508 shares of
Common Stock outstanding. As of that date, there were outstanding options and
warrants to acquire an additional 2,415,617 shares of Common Stock from the
Company, of which 1,691,317 were vested.
===============================================================================
Name and Address of Amount and Nature of
Beneficial Owner (1) Beneficial Ownership (2) Percent of Class
- - ------------------------------------------------------------------------
Raymond J. Weller 297,365(3) 3.62%
- - ------------------------------------------------------------------------
Brent M. Cook 100,000(4) 1.20
- - ------------------------------------------------------------------------
Stanley M. Kimball 13,750(5) **
- - ------------------------------------------------------------------------
Alan Ayers 43,500(6) **
- - ------------------------------------------------------------------------
Russell G. Madsen 535,642(7) 6.31
- - ------------------------------------------------------------------------
George W. Ford 181,696(8) 2.21
- - ------------------------------------------------------------------------
Steven Brown 144,400(9) 1.76
- - ------------------------------------------------------------------------
Max E. Sorenson 25,000(10) **
- - ------------------------------------------------------------------------
Robert K. Eggert 20,000(11) **
- - ------------------------------------------------------------------------
Asael T. Sorensen, Jr. 86,924(12) 1.05
- - ------------------------------------------------------------------------
DeLance M. Squire 2,500(13) **
- - ------------------------------------------------------------------------
Vern T. May 2,500(14) **
- - ------------------------------------------------------------------------
Joe K. Johnson 570,846(15) 6.62
- - ------------------------------------------------------------------------
PacifiCorp Financial Services, Inc. 714,286(16) 8.72
775 NE Multnomah
Suite 775
Portland, Oregon 97232
- - -----------------------------------------------------------------------
All directors and executive 2,024,123 24.27
officer as a group (13 persons)
=======================================================================
* No longer affiliated with the Company.
** Less than 1%.
3
<PAGE>
(1) Unless otherwise indicated, the address of each person named in the
table is c/o the Company, 3280 North Frontage Road, Lehi, Utah 84043.
(2) Unless otherwise indicated, the persons named in this table have sole
voting and investment power with respect to all shares of Common Stock
reflected as beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person
within sixty (60) days from the Record Date upon the exercise of
options. The record ownership of each beneficial owner is determined by
assuming that options that are held by such person and that are
exercisable within sixty (60) days from the Record Date have been
exercised. The total outstanding shares used to calculate each
beneficial owner's percentage includes such options.
(3) Consists of 287,365 shares owned by Mr. Weller and options to purchase
10,000 shares held by Mr. Weller which are currently exercisable.
(4) Consists of options to purchase 100,000 shares.
(5) Consists of 1,250 shares owned by Mr. Kimball, and options to purchase
12,500 shares held by Mr. Kimball which are currently exercisable.
(6) Consists of 30,000 shares owned by Mr. Ayers, 1,700 shares owned by Mr.
Ayers' individual retirement account, 800 shares owned by Mr. Ayers'
spouse and options to purchase 11,000 shares held by Mr. Ayers which
are currently exercisable.
(7) Consists of 321 shares owned by Mr. Madsen's spouse, 14,789 shares
owned by Mr. Madsen and his spouse, 363,334 shares owned by Mr. Madsen,
139,698 shares owned by Mr. Madsen in a personal securities account,
and options to purchase 17,500 shares held by Mr. Madsen which are
currently exercisable.
(8) Consists of 176,696 shares owned by Mr. Ford and options to purchase
5,000 shares held by Mr. Ford which are currently exercisable.
(9) Consists of 131,900 shares owned by Mr. Brown and options to purchase
12,500 shares held by Mr. Brown which are currently exercisable.
(10) Consists of options to purchase 25,000 shares held by Mr. Sorenson
which are currently exercisable.
(11) Consists of options to purchase 20,000 shares held by Mr. Eggett which
are currently exercisable.
(12) Consists of 70,924 shares owned by the Sorensen Family Trust, 1,000
shares owned by Mr. Sorensen and his spouse, and options to purchase
15,000 shares held by Mr. Sorensen which are currently exercisable.
(13) Consists of options to purchase 2,500 shares held by Mr. Squire which
are currently exercisable.
(14) Consists of options to purchase 2,500 shares held by Mr. May which are
currently exercisable.
(15) Consists of 136,547 shares owned by Mr. Johnson, warrants to purchase
431,799 shares held by Mr. Johnson which are currently exercisable, and
options to purchase 2,500 shares held by Mr. Johnson which are
currently exercisable.
4
<PAGE>
(16) In accordance with the terms of the Convertible Loan and Security
Agreement (the "Loan Agreement"), dated March 20, 1997, the Company may
borrow up to $5,000,000 from PacifiCorp Financial Services, Inc.
("PacifiCorp"). As of May 15, 1997, the Company has drawn $1,014,723
under the Loan Agreement. If the Company draws the entire amount of the
loan, and if PacifiCorp converts the entire principal amount of the
loan, PacifiCorp would be the beneficial owner of 714,286 shares of
common stock.
5
<PAGE>
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
Nominees for Election as Directors
At the Meeting, the stockholders will elect all directors to hold
office until the annual meeting of stockholders in 1998 (or the expiration of
their respective terms if classification of the Board is approved) or until
their respective successors are duly elected and qualified. The Board currently
consists of six members: Raymond J. Weller, Brent M. Cook, Stanley M. Kimball,
DeLance M. Squire, Vern T. May, and Joe K. Johnson. The Board proposes that the
six individuals listed below as nominees be elected as directors of the Company.
Each nominee has consented to serve if elected to the Board. In the event that
any nominee is unable to serve as a director at the time of the Meeting (which
is not expected), proxies with respect to which no contrary direction is made
will be voted "FOR" such substitute nominee as shall be designated by the Board
to fill the vacancy.
The names of the nominees, together with certain information about them
are set forth below:
<TABLE>
<CAPTION>
=============================================================================================================================
Name Age Position(s) with the Company Director Since
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Raymond J. Weller 50 Chairman of the Board 1991
- - -----------------------------------------------------------------------------------------------------------------------------
Brent M. Cook 36 Director, President and Chief Executive Officer 1996
- - -----------------------------------------------------------------------------------------------------------------------------
Stanley M. Kimball 43 Director and Chief Financial Officer 1997
- - -----------------------------------------------------------------------------------------------------------------------------
DeLance M. Squire 77 Director 1996
- - -----------------------------------------------------------------------------------------------------------------------------
Vern T. May 56 Director 1997
- - -----------------------------------------------------------------------------------------------------------------------------
Joe K. Johnson 37 Director 1997
=============================================================================================================================
</TABLE>
Principal Occupations and Directorships Held by Nominees for Director
Raymond J. Weller has served as a Director of the Company since July 1991 and
was elected Chairman of the Board in January 1997. Since 1991, Mr. Weller has
been Vice President of HMO Benefits of Utah, a Utah based insurance brokerage
firm. From 1985 to 1991, Mr. Weller was an agent with the insurance brokerage of
Galbraith, Benson, and McKay. If classification of the Board is approved, Mr.
Weller would be a Class II director.
Brent M. Cook has served as President and Chief Executive Officer since October
1996, Chief Financial Officer from June 1996 until December 1996 and Director
since June 1996. Mr. Cook is a Certified Public Accountant. Prior to joining the
Company, Mr. Cook was Director of Strategic Accounts-Utah Operations, for
PacifiCorp, Inc. His responsibilities included the management of revenues of
approximately $128 million per year, and seeking out and evaluating strategic
growth opportunities for PacifiCorp, including joint ventures and other
transactions. Mr. Cook spent more than 12 years with PacifiCorp. Although
PacifiCorp is not affiliated with the Company, it is a creditor of the Company
and its affiliate, Birmingham Syn Fuel, LLC, an Oregon limited liability
company, has entered into a purchase agreement with an affiliate of the Company
for the purchase of a coal briquetting plant to be located in Birmingham,
Alabama. If classification of the Board is approved, Mr. Cook would be a Class
III director.
6
<PAGE>
Stanley M. Kimball has served as Chief Financial Officer and Director since
January 1, 1997. Prior to joining the Company, Mr. Kimball was employed by
Huntsman Corporation ("HC"). From 1989 to early 1995, Mr. Kimball served as the
Director of Tax for Huntsman Chemical Corporation ("HCC"). In May 1995, Mr.
Kimball was appointed as an officer of HCC, serving as Vice President, Tax. In
July 1995, Mr. Kimball was appointed as Vice President, Administration for HC.
In this position, he had numerous responsibilities, both for HC and for Mr. Jon
M. Huntsman personally, which included financial accounting, tax and estate
planning, and cash and investment management. In this position, Mr. Kimball also
served as Mr. Huntsman's Chief of Staff. In 1980, Mr. Kimball received a Masters
of Accountancy, with emphasis in taxation, from Brigham Young University and is
a Certified Public Accountant. Between 1980 and 1989, he was employed by Arthur
Andersen & Co., and was serving as a Senior Tax Manager prior to his employment
with HCC. If classification of the Board is approved, Mr. Kimball would be a
Class III director.
DeLance M. Squire has served as a Director of the Company since December 13,
1996. Mr. Squire was the founder of Squire & Co., Orem, Utah and retired in
1986. Since 1986, Mr. Squire has been the Executive Director for the Commission
for Economic Development, Orem, Utah. Mr. Squire was previously the mayor of the
City of Orem, Utah. In addition, Mr. Squire is a member of the Impact Fees
Committee and the Strategic Plan Committee to the City of Orem. He also serves
as a member of the board of trustees for Mountain View Hospital, Payson, Utah.
Mr. Squire received his B.S. degree in Accounting from Brigham Young University
in 1947 and became a Certified Public Accountant in 1950. If classification of
the Board is approved, Mr. Squire would be a Class II director.
Vern T. May has served as a Director of the Company since February 1997. Mr. May
was employed by Dow Chemical in various capacities from 1964 until his
retirement in 1995, including Technical Director of Organic Chemicals and
Ag/Pharma Process Research, Manager of Agricultural Chemicals Production and
Environmental Services, Director of Applied Science and Technology Laboratories,
and Director of Health and Environmental Sciences. At the time of his
retirement, Mr. May was chairman of the advisory board for the Center for Waste
Reduction Technologies, a member of the advisory board for the Advanced
Combustion Engineering Research Center at BYU, and a member of the board of the
California Engineering Foundation. Mr. May holds a BES degree in Chemical
Engineering from Brigham Young University. If classification of the Board is
approved, Mr. May would be a Class I director.
Joe K. Johnson has served as a Director of the Company since March 1997. Mr.
Johnson has worked in financial services since 1984, as president of Security
West Insurance, Inc., from 1984 to 1989, and as president of Aspen Financial
Inc. from 1989 to 1994. Mr. Johnson attended the University of Utah. If
classification of the Board is approved, Mr. Johnson would be a Class I
director.
Board Meetings
The Board held a total of nine (9) regular meetings during fiscal year
1996 and no special meetings during fiscal year 1996. All directors attended
over 75% of the aggregate number of the regular meetings of the Board.
Committees of the Board
The Board has not established an Audit Committee or a Compensation
Committee.
7
<PAGE>
Report of the Board of Directors on Executive Compensation
The Company does not have a Compensation Committee of the Board. The
Board is responsible for establishing and administering the compensation
policies applicable to the Company's officers and key personnel, including the
named executives. Due to past cash flow concerns of the Company, the Board has
not implemented changes in the Company's compensation structure which were
previously approved by the Board. Future compensation polices will be dependent
on the Company's cash flow.
There is no specific relationship of corporate performance to executive
compensation regarding the Chief Executive Officer's compensation. However, due
to prior cash flow concerns, the Chief Executive Officer has received stock
based compensation as a significant component of his compensation. The Company
will likely continue to use stock based compensation to more closely align the
interests of the Chief Executive Officer with the interests of the stockholders.
Comparisons of base salaries to the market should take into account the
development the Company has experienced in the past year, including the
contractual arrangements entered into by the Company for the building of
facilities and the licensing of its briquetting technology. Measurements of
corporate responsibility may, therefore, be less accessible to obvious
conclusions for comparison to executive compensation.
The Board continues to strive to ensure that the Company's compensation
plan attracts, retains and rewards both staff and management personnel while
continuing to operate in the best interests of the stockholders.
By the Board of Directors:
Raymond J. Weller
Brent M. Cook
Stanley M. Kimball
DeLance M. Squire
Vern T. May
Joe K. Johnson
Compensation of Directors
The Company's directors hold office until the next annual meeting of
stockholders (or the expiration of their respective terms if classification of
the Board is approved) or until their successors have been duly elected and
qualified. Except for the directors of the Company that are presently salaried
employees of the Company, the directors are not otherwise compensated as
directors. On occasion, the Board has granted stock options to directors of the
Company not otherwise employed by the Company. The Board may in the future
determine to pay directors' fees and reimburse directors for expenses related to
their activities. Directors receive reimbursement for out-of-pocket expenses.
8
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth (i) the names of the executive officers,
(ii) their ages as of the Record Date and (iii) the capacities in which they
serve the Company:
<TABLE>
<CAPTION>
=========================================================================================================================
Name Age Position(s) Officer Since
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brent M. Cook 36 President, Chief Executive 1996
Officer and Director
- - -------------------------------------------------------------------------------------------------------------------------
Stanley M. Kimball 43 Chief Financial Officer and 1997
Director
- - -------------------------------------------------------------------------------------------------------------------------
Alan D. Ayers 39 Chief Operating Officer 1996
- - -------------------------------------------------------------------------------------------------------------------------
Russell G. Madsen 50 Vice President-Operations 1992
- - -------------------------------------------------------------------------------------------------------------------------
George W. Ford 51 Vice President-Research and 1993
Development
- - -------------------------------------------------------------------------------------------------------------------------
Steven R. Brown 38 Vice President-Engineering and 1995
Construction
- - -------------------------------------------------------------------------------------------------------------------------
Max E. Sorenson 48 Vice President 1997
- - -------------------------------------------------------------------------------------------------------------------------
Robert E. Eggett 33 Treasurer 1997
- - -------------------------------------------------------------------------------------------------------------------------
Asael T. Sorensen, Jr. 42 General Counsel and Secretary 1995
=========================================================================================================================
</TABLE>
See "Proposal No. 1 -- Election of Directors - Nominees for Election as
Directors" above for a description of the background of Messrs. Cook and
Kimball.
Alan D. Ayers has served as Chief Operating Officer since June 1996. Mr. Ayers
served as a director from June 1996 until resigning from the Board in February
1997 in favor of establishing an outside Board. Mr. Ayers joined the Company in
August of 1995 as manager of the Company's investor relations department. From
1993 to 1995, Mr. Ayers was the General Manager for Taylor Maid Beauty Supply,
responsible for the operations of the regional supply company. From 1987 to
1993, he was Director of Operations for Knighton Optical, Inc.
Mr. Ayers received his M.B.A. from the University of Utah.
Russell G. Madsen has served as Vice President of Operations from August 1992
and a Director of the Company from August 1992 to November 1996. Mr. Madsen also
served as interim Chairman from November 1996 until resigning from the Board in
March 1997 in favor of establishing an outside Board. Mr. Madsen is responsible
for the Company's prototype briquetting plant in Price, Utah. Between 1981 and
1992, Mr. Madsen was employed as an accounting manager by Coastal States Energy,
a subsidiary of Coastal Corporation. From 1984 to 1991, Mr. Madsen also was a
Vice President and Director of Specialized Mining Services, Inc., a mine support
service company. Mr. Madsen graduated from Utah State University with a B.S.
degree in Agricultural Economics and a minor in Business Management.
George W. Ford has served as Vice President of Research and Development of the
Company since August 1993. Mr. Ford served as a Director from August 1993 until
resigning from the Board in February 1997 in favor of establishing an outside
9
<PAGE>
Board. From 1982 to 1993, Mr. Ford was employed at Ballard Medical Products,
Inc. in research and development, principally in the biomedical field. He holds
17 national and international patents covering a wide variety of technologies.
Mr. Ford has functioned as an independent consultant working on projects in
computer programming, medical product device design and process polymer
chemistry design for the energy industry. Mr. Ford is a member of the American
Association for the Advancement of Science, and the Iron and Steel Society.
Steven R. Brown has served as Vice President of Engineering and Construction of
the Company since February 1995. Mr. Brown served as a director from September
1995 until resigning from the Board in March 1997 in favor of establishing an
outside Board. Mr. Brown was responsible for the management of the Company's
prior construction subsidiary and the limestone quarry. He is currently
responsible for the design and construction of the Company's production
facilities. From 1993 to 1995, Mr. Brown was President of Construction
Management Service, Inc. Mr. Brown is a licensed professional engineer and a
licensed general contractor. Mr. Brown obtained a B.S. degree in Civil
Engineering and a Masters of Business Administration from Brigham Young
University.
Max E. Sorenson has served as Vice President of the Company since April 1997.
Prior to employment with the Company, Mr. Sorenson was Senior Vice President of
Engineering and Technology of Geneva Steel. Mr. Sorenson began his employment
with Geneva Steel in October 1989. During his employment with Geneva Steel, Mr.
Sorenson also served as Manager of Research and Development for Raw Materials
and Primary Processes; Chief Engineer of Coke, Iron and Steel and Vice President
of Engineering. Mr. Sorenson obtained a B.S. degree in Metallurgical Engineering
from the University of Utah in 1973 and a Masters of Science degree in
Industrial Management from Purdue University in 1978.
Robert K. Eggett joined the Company as Treasurer in February 1997. Prior to his
employment with the Company, Mr. Eggett was a Senior Manager of the State Tax
Consulting Group at Price Waterhouse, working exclusively with energy clients of
the firm in strategic tax analysis and planning, since April 1996. Previously,
Mr. Eggett worked for Deloitte Touche in strategic tax consulting, and as a tax
director for Huntsman Corporation. Mr. Eggett has been a certified public
accountant since 1988. Mr. Eggett received his B.S. degree in accounting from
Brigham Young University in 1987 and a Masters degree in accounting from Brigham
Young University in 1990, with an emphasis on tax.
Asael T. Sorensen, Jr. has served as the Company's General Counsel since
September 1995. From 1982 to 1995, Mr. Sorensen was an inhouse attorney for The
Church of Jesus Christ of Latter-Day Saints in Salt Lake City, Utah and
practiced law primarily in the area of contract negotiations and administration.
Since 1987, Mr. Sorensen has been a consultant with the American Management
Association, a business seminar and consulting non-profit organization
headquartered in New York. Mr. Sorensen graduated from Brigham Young University
with a joint Juris Doctor and Masters of Business Administration. He is admitted
to practice law in the State of Utah.
The Company's executive officers are elected annually by the Board of
Directors and serve at the discretion of the Board. Officers serve at the will
of the Board of Directors.
10
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company for
services rendered by Brent M. Cook, the Company's Chief Executive Officer and
President, Kenneth M. Young, the Company's prior Chairman of the Board, Chief
Executive Officer and President and each of the other executive officer whose
compensation exceeded $100,000 during the most recently completed fiscal year.
<TABLE>
<CAPTION>
===================================================================================================================================
Summary Compensation Table
Annual Compensation Long-Term Compensation
Other Annual Restricted All Other
Name and Fiscal Compensation Stock Stock Options Compensation
Principal Position Year Salary ($) Bonus ($) ($) Awards ($) (#) ($)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Brent M. Cook (1) 1996 $23,335 $60,000 $1,163,000(2) - 40,000(2) -
Executive Vice
President and CFO
- - -----------------------------------------------------------------------------------------------------------------------------------
Kenneth M. Young(3) 1996 $88,700 - - (3) - 84,500(4) -
CEO and Chairman of
the Board
------------------------------------------------------------------------------------------------------------
1995 $70,000 $36,812 - (4) - 306,250(5) -
------------------------------------------------------------------------------------------------------------
1994(6) $60,000 - - - - -
===================================================================================================================================
</TABLE>
(1) Mr. Cook entered into an employment agreement dated June 1, 1996 to act
as Executive Vice President and Chief Financial Officer. Mr. Cook was
appointed as President and Chief Executive Officer in October of 1996.
(2) Upon the execution of his employment agreement with the Company, Mr.
Cook received immediately exercisable options to acquire 100,000 shares
of the Company's common stock at a price of $1.50 per share. This
amount represents $1,163,000 of compensation recorded by the Company as
a result of the option grant to Mr. Cook. Mr. Cook also received an
option to acquire 40,000 shares of the Company's common stock at a
price of $1.50 per share, which vests over 10 years.
(3) Mr. Young resigned as Chairman of the Board and Chief Executive Officer
effective November 12, 1996. This action has resulted in further
compensation being owed to Mr. Young and payable over fiscal year 1997
pursuant to the terms of a settlement agreement. See "Transactions
with Related Parties."
(4) Includes (i) an option to acquire 34,500 shares of common stock at
$8.38 ($16.76 presplit) per share, granted on October 17, 1995, of
which all were exercised on October 17, 1995 at a market price equal to
exercise price and (ii) an option to acquire 62,500 shares of common
stock at $1.50 per share, granted on August 13, 1996, of which 12,500
were canceled pursuant to a settlement agreement between Mr. Young and
the Company. See "Transactions with Related Parties."
(5) Includes an option to acquire 250,000 shares of common stock at $1.50
per share and an option to acquire 56,250 shares of common stock at
$5.315 per share under the Company's 1995 Stock Option Plan.
(6) Represents nine-month period ended September 30, 1994.
11
<PAGE>
Other than the Company's 1995 Stock Option Plan, there are no
retirement, pension, or profit sharing plans for the benefit of the Company's
officers, directors and employees. The Company does provide health insurance
coverage for its employees. The Board may recommend and adopt additional
programs in the future for the benefit of officers, directors and employees.
Stock Option Grants
Information concerning grants of options to the named executive
officers is reflected in the table below. The amounts shown for the named
executive officers as potential realizable values are based on arbitrarily
assumed annualized rates of stock price appreciation of zero percent (0%), five
percent (5%) and ten percent (10%) over the full term of the options. These
potential realizable values are based solely on arbitrarily assumed rates of
price appreciation required by applicable SEC regulations. Actual gains, if any,
on option exercises and common stockholdings are dependent on the future
performance of the Company and overall stock market conditions. There can be no
assurance that the potential realizable values shown in this table will be
achieved.
<TABLE>
<CAPTION>
==================================================================================================================================
Option Grants in Fiscal Year 1996
Individual Grants
% of Total
Options Potential Realizable Value at Assumed
Granted Market Annual Rates of Stock Price Appreciation
to Employees Price on for Option Term
Options in Fiscal Year Exercise Date of
Name Granted (#) 1996 Price Grant Expiration Date (0%)($) (5%)($) (10%)($)
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Brent M. Cook(1) 100,000 6.2% $1.50 $13.125 June 1, 2006 $1,162,500 $1,256,834 $1,401,561
40,000 2.5% $1.50 $13.125 June 1, 2007 $ 465,000 $ 507,020 $ 576,187
- - -------------------------------------------------------------------------------------------------------------------------------
Kenneth M. Young(2) 34,500 2.1% $8.38 $16.75 October 16, 2005 $ 288,765 $ 470,585 $ 749,532
50,000 3.1% $1.50 $10.25 August 12, 2006 $ 43,750 $ 48,467 $ 55,703
================================================================================================================================
</TABLE>
(1) Upon the execution of his employment agreement with the Company, Mr.
Cook received immediately exercisable options to acquire 100,000 shares
of the Company's common stock at a price of $1.50 per share. This
amount represents $1,163,000 of compensation recorded by the Company as
a result of the option grant to Mr. Cook. Mr. Cook also received an
option to acquire 40,000 shares of the Company's common stock at a
price of $1.50 per share, which vests over 10 years.
(2) Includes (i) an option to acquire 34,500 shares of common stock at
$8.38 ($16.76 presplit) per share, granted on October 17, 1995, of
which all were exercised on October 17, 1995 at a market price equal to
exercise price and (ii) an option to acquire 62,500 shares of common
stock at $1.50 per share, granted on August 13, 1996, of which 12,500
were canceled pursuant to a settlement agreement between Mr. Young and
the Company. See "Transactions with Related Parties."
Aggregated Option Exercises and Year-End Option Values in 1996
The following table summarizes for the named executive officers of the
Company the number of stock options, if any, exercised during Fiscal Year 1996,
the aggregate dollar value realized upon exercise, the total number of
unexercised options held at September 30, 1996 and the aggregate dollar value of
in-the-money unexercised options held at September 30, 1996. Value realized upon
exercise is the difference between the fair market value of the underlying stock
on the exercise date and the exercise price of the option. The value of
unexercised, in-the-money options at September 30, 1996 is the difference
between its exercise price and the fair market value of the underlying stock on
September 30, 1996 which was $8.00 per share based on the closing bid price of
the common stock on September 30, 1996. The underlying options have not been
12
<PAGE>
and, may never be exercised; and actual gains, if any, on exercise will depend
on the value of the common stock on the actual date of exercise. There can be no
assurance that these values will be realized.
<TABLE>
<CAPTION>
=================================================================================================================================
Aggregated Option Exercises in Fiscal Year 1996
and Year-End Option Values
Number of Value of Unexercised
Unexercised Options In-the-Money Options
at 9/30/96(#) at 9/30/96($)
Shares Acquired Value
Name on Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Brent M. Cook -0- $-0- 100,000 40,000 $650,000 $ 260,000
- - -------------------------------------------------------------------------------------------------------------------------------
Kenneth M. Young 34,500 $-0-(1) -0- 100,000(2) $ -0- $ 650,000
===============================================================================================================================
</TABLE>
(1) The option to acquire 34,500 shares of common stock at $8.38 ($16.76
presplit) per share was granted and exercised on October 17, 1995 at a
market price equal to the exercise price.
(2) In accordance with Mr. Young's settlement agreement, options to
acquire 100,000 shares of common stock became fully vested on
January 1, 1997. See "Transactions with Related Parties."
Long-Term Incentive Plan Awards in Fiscal Year 1996
The Company has no "long-term incentive plan".
Future Benefits of Pension Plan Disclosure in Fiscal Year 1996
The Company has no such benefit plans.
Employment Agreements
Brent M. Cook. The Company entered into an employment agreement dated
June 1, 1996, with Brent M. Cook to act as Executive Vice President and Chief
Financial Officer. Mr. Cook was appointed as President and Chief Executive
Officer in October of 1996. The employment agreement provides for an annual base
salary of $80,000. An annual bonus may be paid as determined by the Company's
Board. Mr. Cook is entitled to all other fringe benefits provided to other
similar employees of the Company. The term of the employment agreement commenced
on June 1, 1996 and will terminate on May 31, 1999. If Mr. Cook does not
continue in the employ of the Company after termination of the agreement
(whether or not Mr. Cook is offered employment by the Company) the Company shall
pay Mr. Cook the sum of one year's annual wages no later than July 1, 1999.
Effective June 1, 1997, Mr. Cook's annual salary shall increase to $100,000 in
accordance with the employment agreement.
Kenneth Young. The Company entered into an employment agreement dated
as of January 1, 1992, with Kenneth M. Young. The employment agreement provides
for an annual base salary of $72,000. An annual bonus may be paid as determined
by the Company's Board. Mr. Young is entitled to all other fringe benefits
provided to other similar employees of the Company. The agreement is terminable
at will at anytime by either party. Upon termination of the employment
agreement, Mr. Young is subject to a 48-month covenant not to compete, during
which time Mr. Young has agreed not to compete with the Company. The Company has
agreed to pay Mr. Young a payment equal to 80% of his annual compensation
(exclusive of bonus and benefits) within 30 days after the termination of his
employment in exchange for his covenant not to compete.
13
<PAGE>
Effective November 12, 1996, Kenneth Young resigned as Chairman of the Board and
Chief Executive Officer of the Company. The Company and Kenneth Young have
entered into a settlement agreement. See "Transactions with Related Parties."
Officer Compensation
In September 1995, the Company's Board approved a new compensation
structure for management. The structure was to become effective on October 1,
1995 but has been deferred until such time as the board determines the Company's
cash flow is sufficient to support the new compensation structure. The Company
no longer intends to implement that structure. The Company's Board is currently
considering other compensation structures.
Employment Contracts
For a discussion of employment contracts with named executive officers,
please see the section entitled "TRANSACTIONS WITH RELATED PARTIES" herein.
Stock Option Plans
1995 Stock Option Plan. Under the Company's 1995 Stock Option Plan, as
amended (the "Option Plan"), 2,400,000 shares of common stock are reserved for
issuance upon the exercise of stock options. The Option Plan is designed to
serve as an incentive for retaining qualified and competent employees, directors
and consultants. As of September 30, 1996, options to purchase an aggregate of
approximately 900,000 shares of Common Stock were issued under the Option Plan,
all of which have been exercised.
A committee of the Company's Board, or in its absence, the Board (the
"Committee") administers and interprets the Option Plan and is authorized to
grant options and other awards thereunder to all eligible employees of the
Company, including officers and directors (whether or not employees) of the
Company. The Option Plan provides for the granting of both "incentive stock
options" (as defined in Section 422 of the Code) and non-statutory stock
options. Options can be granted under the Option Plan on such terms and at such
prices as determined by the Committee, except for the per share exercise price
of incentive stock options which will not be less than the fair market value of
the common stock on the date of grant and, in the case of an incentive stock
option granted to a 10% stockholder, the per share exercise price will not be
less than 110% of such fair market value. The aggregate fair market value of the
shares of common stock covered by incentive stock options granted under the
Option Plan that become exercisable by a grantee for the first time in any
calendar year is subject to a $100,000 limit.
Options granted under the Option Plan will be exercisable after the
period or periods specified in the option agreement. Options granted under the
Option Plan are not exercisable after the expiration of ten years from the date
of grant and are not transferable other than by will or by the laws of descent
and distribution.
14
<PAGE>
The following table sets forth information with respect to options
granted to the Company's executive officers and directors during the last fiscal
year.
<TABLE>
<CAPTION>
================================================================================================================================
Number of Exercise
Name Options Price
- - ----------------------------------------------- ------------------------------- ---------------------------------
<S> <C> <C>
Raymond J. Weller 30,000 $ 8.38(3)
25,000 $ 1.50
Brent M. Cook 140,000 $ 1.50
Alan D. Ayers 30,000 $ 8.38(3)
10,000 $ 1.50
100,000 $ 1.50
Russell G. Madsen 30,000 $ 8.38(3)
25,000 $ 1.50
Steve Brown 28,200 $ 8.38(3)
100,000 $ 1.50
George W. Ford 28,200 $ 8.38(3)
25,000 $ 1.50
Asael T. Sorensen, Jr. 28,200 $ 8.38(3)
100,000 $ 1.50
Kenneth M. Young (1) 34,500 $ 8.38(3)
25,000 $ 1.50
Kirby Cochran (1) 34,500 $ 8.38(3)
Michael Midgley (1) 30,000 $ 8.38(3)
25,000 $ 1.50
Michael Bodon (1)(2) 28,200 $ 8.38(3)
Lloyd C. McEwan(1) 30,000 $ 8.38(3)
================================================================================================================================
</TABLE>
(1) No longer with the Company.
(2) Mr. Bodon is a cousin of the spouse of Mr. Young.
(3) These options were exercised in December 1995.
Recipients of these options may exercise them at any time. Shares
related to exercised options are held in escrow and are made available as the
options vest. The options vest at different times based upon the terms offered
with some options vesting immediately and others over terms of up to 10 years.
(In the event that an executive officer or employee terminates employment with
the Company, or a director ceases to be a director, prior to the specified
vesting period, the Company will cancel any of the shares in which the recipient
has not vested) When options are issued with terms considered compensatory, the
compensation expense related to these options is being amortized to expense over
the specified vesting period.
Stockholder Return Performance Graph
Federal regulation requires the inclusion of a line graph comparing
cumulative total shareholder return on Common Stock with the cumulative total
return of (1) NASDAQ Combined Index and (2) a published industry or
line-of-business index. The performance comparison appears below.
15
<PAGE>
The Board recognize that the market price of stock is influenced by
many factors, only one of which is Company performance. The stock price
performance shown on the graph is not necessarily indicative of future price
performance.
Comparison of Cumulative Total Return
Total Returns Assume Reinvestment of Dividends
[Graphic}
Total Return Analysis 9/30/94 9/30/95 9/30/96
Covol Technologies, Inc. $100 $230 $265
S&P Energy Composite $100 $120 $150
Nasdaq Composite (US) $100 $137 $161
TRANSACTIONS WITH RELATED PARTIES
Brent M. Cook Employment Agreement. The Company entered into an
employment agreement dated June 1, 1996, with Brent M. Cook to act as Executive
Vice President and Chief Financial Officer. Mr. Cook was appointed as President
and Chief Executive Officer in October of 1996. The employment agreement
provides for an annual base salary of $80,000. An annual bonus may be paid as
determined by the Company's Board. Mr. Cook is entitled to all other fringe
benefits provided to other similar employees of the Company. The term of the
employment agreement commenced on June 1, 1996 and will terminate on May 31,
1999. If Mr. Cook does not continue in the employ of the Company after
termination of the agreement (whether or not Mr. Cook is offered employment by
the Company) the Company shall pay Mr. Cook the sum of one year's annual wages
no later than July 1, 1999. Effective June 1, 1997, Mr.Cook's annual salary
shall increase to $100,000 in accordance with the employment agreement.
Formation of Majority Owned Partnerships. In June of 1996, the Company
formed Utah Synfuel #1, Ltd. and Alabama Synfuel #1, Ltd., each a Delaware
limited partnership, for the purpose of facilitating the financing and
construction of certain briquetting plants. The Company owns a majority
interests in each of the partnerships. The Company has entered into, and is
expected to enter into, various agreements and contracts with Utah Synfuel #1,
Ltd. and Alabama Synfuel #1, Ltd. which may not be structured on an arm's-length
basis. For a description of the agreements entered into by and between the
Company and Utah Synfuel #1, Ltd., please see the Company's current report on
Form 8-K dated March 21, 1997.
General Partner of Purchaser of Utah Plant. As part of the sale of the
coal briquetting facility located in Price, Utah (the "Utah Plant") by Utah
Synfuel #1, Ltd., the Company became the sole corporate general partner of
16
<PAGE>
Coaltech No. 1, L.P., a Delaware limited partnership ("Coaltech"), the purchaser
of the Utah Plant. Accordingly, the Company is the sole corporate general
partner of the seller and buyer of the Utah Plant. For a description of the
agreements entered into by and between Utah Synfuel #1, Ltd. and Coaltech,
please see the Company's current report on Form 8-K dated March 21, 1997.
Key Bank Loan. In an effort to obtain capital for the construction of
certain briquetting plants, the Company borrowed $700,000 from Key Bank of Utah
("Key Bank"). The loan accrues interest at Key Bank's prime rate plus 2% per
annum and was to be paid in full in October 1996. In November 1996 the Company
paid accrued interest plus principal of $100,000. The Company and Key Bank have
agreed to rollover the remaining $600,000 principal balance until January 29,
1997. In January, the Company and Key Bank agreed to further roll over the
principal balance of the loan until May 31, 1997. As a condition to making the
loan, Key Bank required that certain officers, directors and employees of the
Company also sign as guarantors of the note evidencing the loan (the "Key Bank
Note"). To induce such officers, directors and employees to sign the Key Bank
Note, the Company further loaned $100,000 each to Mr. Russell G. Madsen, Mr.
Dean Young, Mr. Kenneth M. Young, Mr. Alan D. Ayers, Mr. Asael T. Sorensen, Jr.,
Mr. Steven Brown and Mr. Michael Midgley (the "Individuals"). The loan to the
Individuals is on the same terms as the loan from Key Bank. The proceeds of the
loan from the Company to the Individuals, along with other money of the
Individuals aggregating $1,850,000, were invested in partnership interests in
Utah Synfuel #1, Ltd. and Alabama Synfuel #1, Ltd. Mr. Russell G. Madsen
invested $50,000 of the loan in Alabama Synfuel #1, Ltd. and $50,000 of the loan
in Utah Synfuel #1, Ltd. The remaining Individuals invested the full amount of
their respective loans in Utah Synfuel #1, Ltd. The Company has not received any
payments from the Individuals.
Settlement Agreement with Kenneth M. Young. In November of 1996, the
Company entered into a settlement agreement with Kenneth M. Young. Pursuant to
the settlement agreement, the Company agreed: (i) to pay Mr. Young $4,000 twice
a month through December 31, 1996, (ii) to pay $25,030 in deferred compensation
over 24 semi-monthly installments of $1,042 beginning January 1, 1997, (iii) to
pay for Mr. Young's medical insurance until December 31, 1997, (iv) to pay
$2,500 semi-monthly for 24 payments beginning January 1, 1997 in consideration
for consulting services reasonably requested by the Company and Mr. Young's
agreement to refrain from any activities in competition with the Company, (v) to
allow options representing 50,000 shares of Company common stock at $1.50/share
to become fully vested on January 1, 1997 (these options were originally issued
under a stock option agreement dated January 1, 1995 relating to 250,000 shares)
and (vi) to allow options representing 50,000 shares of Company Common Stock at
$1.50/share to become fully vested on January 1, 1997 (these options were
originally issued under a stock option agreement dated January 1, 1995 relating
to 62,500 shares, of which the remaining 12,500 shares expired).
Settlement Agreement with Michael Q. Midgley. In November of 1996, the
Company entered into a settlement agreement with Michael Q. Midgley. Pursuant to
the settlement agreement, the Company agreed: (i) to pay $20,000 in November
1996 and $38,479 in salary, deferred compensation and unused vacation pay over
24 semi-monthly installments of $1,605 beginning November 15, 1996, (ii) to pay
$2,500 semi-monthly for 24 payments beginning January 1, 1997 in consideration
for consulting services reasonably requested by the Company and Mr. Midgley's
agreement to refrain from any activities in competition with the Company, (iii)
to allow options representing 50,000 shares of Company Common Stock to become
fully vested on January 1, 1997 (these options were originally issued under a
stock option agreement dated January 1, 1995) and (iv) to allow options
representing 25,000 shares of Company Common Stock at $1.50/share to become
fully vested on January 1, 1997 (these options were originally issued under a
stock option agreement dated January 1, 1996 relating to 50,000 shares, of which
the remaining 25,000 shares expired).
Potential Contribution of Contracts and Other Property. On May 12,
1997, the Company distributed a Notice to Class A Limited Partners of Utah
Synfuel #1, Ltd. requesting their written consent (the "Request for Consent") to
(i) the Company's contribution of certain engineering/construction contracts and
17
<PAGE>
other property (the "Property") to Utah Synfuel #1, Ltd. for additional limited
partnership interests and (ii) the amendment of certain provisions of the
partnership agreement for Utah Synfuel #1, Ltd. The Property relates to an
expansion coal briquetting line (the "Utah Expansion Line") that would be housed
in the same building as the existing Utah Plant. The Request for Consent also
contained a private placement memorandum for the private offering of additional
limited partnership interests in Utah Synfuel #1, Ltd. to existing Class A
Limited Partners that are "accredited investors' as defined in Rule 501 of
Regulation D of the Securities Act of 1933. The proceeds of the private offering
would be used, along with other financing yet to be obtained, to assemble and
construct the Utah Expansion Line. The Company's contribution of the Property,
the amendments to the partnership agreement and private offering by Utah Synfuel
#1, Ltd. is subject to obtaining the written approval of the Company, as general
partner, and the Class A Limited Partners.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent
(10%) of a registered class of the Company's equity securities, to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten-percent (10%) stockholders
are required by Securities and Exchange Commission regulations to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on review
of the copies of such forms furnished to the Company since it became subject to
the Securities Exchange Act of 1934 to December 31, 1996, year-end reports
furnished to the Company after December 31, 1996 and representations by current
officers and directors that no other reports were required, the Company believes
that during the 1996 fiscal year all applicable Section 16(a) filing
requirements for the current officers and directors were met; provided, however,
that the Company has been unable to reconcile year-end balances for certain
officers and directors.
PROPOSAL NO. 2 -- APPROVAL OF AN AMENDMENT TO CERTIFICATE OF
INCORPORATION TO CREATE A NEW CLASS OF PREFERRED STOCK
General. The Board of Directors has unanimously adopted and proposes
that the stockholders of the Company approve an amendment to the Company's
Certificate of Incorporation to create a new class of 10,000,000 shares of
preferred stock, $.001 par value per share (the "Preferred Stock"), issuable in
series as the Board may be resolution authorize, with such designations,
relative rights, preferences and limitations as the Board shall specify in such
resolution. A copy of the proposed amendment to the Certificate of Incorporation
is attached to this Proxy Statement as Exhibit A. The following summary of the
proposed amendment is qualified in its entirety by reference to the complete
text of such amendment.
The Company's current Certificate of Incorporation makes no provision
for any class of shares other than Common Stock. The class of Preferred stock
provided for under the proposed amendment to the Certificate of Incorporation
may be issued, without further shareholder approval, by the Board, which would
have the authority to establish series of unissued shares of any or all
preferred or special classes by fixing and determining the relative rights and
preferences of the shares of Preferred Stock authorized for issuance by it,
including:
(a) The rate of dividend payable with respect to shares of such series,
and the dates, terms and other conditions on which such dividends shall be
payable;
(b) The nature of the dividend payable with respect to shares of such
series as cumulative, noncumulative, or partially cumulative.
18
<PAGE>
(c) The price at and the terms and conditions on which shares may
be redeemed (if applicable);
(d) The amount payable to holders of such series in the event of
involuntary liquidation of the Company;
(e) The amount payable to holders of such series in the event of
voluntary liquidation of the Company;
(f) The sinking fund provisions (if any) for the redemption or
purchase of shares;
(g) The terms and conditions on which shares of such series may be
converted, if the shares of any series are issued with the privilege of
conversion;
(h) The voting rights (if any); and
(i) The repurchase obligations of the Company with respect to the
shares of each series (if any);
and to increase or decrease the number of shares within each series; provided,
however, that the Board may not decrease the number of shares within a series
below the number of shares within such series that is then issued.
The Board believes that Preferred Stock is often a useful financing
tool. and that it is advisable that the Board be given flexibility in setting
the terms of the Preferred Stock. If opportunities arise that would make
desirable the issuance of the Company's Preferred Stock through either public
offering or private placements, the proposed amendment would avoid the possible
delay and expense of a stockholders' meeting, except as may be required by law
or regulatory authorities or pursuant to the rules of the NASDAQ or any other
stock exchange on which the Company's securities may then be listed. The
Preferred Stock might also be used for acquiring large blocks of the Company's
Common Stock. The Company's stockholders will have no preemptive rights with
respect to the issuance of any such shares.
Issuance of the Preferred Stock could result in one or more classes of
securities outstanding that will have certain preferences with respect to
dividends and in liquidation over the Common Stock, and could result in the
dilution of the voting rights, net income per share and net book value of the
Common Stock.
The specific terms of any series of Preferred Stock will depend
primarily on market conditions and other factors existing at the time of
issuance. The Board has no present plans, understandings or agreements for
issuing any of the Preferred Stock, and the Board does not intend to issue any
such stock except on terms which the Board deems to be in the best interests of
the Company and its stockholders.
In the event of a hostile attempt to take over the Company which the
Board determines is not in the best interest of the Company and its
stockholders, it might be possible for the Board to issue Preferred Stock with
rights and preferences which could impede the completion of a takeover. Such
possibilities may make the Company less attractive as a takeover candidate and
may deter takeover attempts not approved by the Board. For example, the Board
could issue to a friendly party a series of the Preferred Stock, the favorable
vote of which would be necessary to approve any merger, sale of assets or other
extraordinary corporate transaction. Also, the issuance of new shares of
Preferred Stock could be used to dilute the stock ownership of a person or
entity seeking to obtain control of the Company. Although the Company has no
current intention to issue Preferred Stock not presently reserved for issuance,
the authorized but unissued shares of such stock would be available for such
purposes. Accordingly, the amendment may be viewed as having the effect of
depriving stockholders of an opportunity to sell their shares at a premium over
the then current market price, since takeover bids frequently involve purchases
of shares directly from stockholders at such a premium price. In addition,
because such proposals may discourage accumulations of large blocks of the
19
<PAGE>
Company's Common Stock by purchasers whose objective would be to have such
Common Stock repurchased by the Company at a premium, such amendments could tend
to reduce temporary fluctuations in the market price of the Company's stock
which might be caused by such accumulations. Stockholders could, therefore, be
deprived of certain opportunities to sell their shares at a temporarily higher
market price. The Company's management, however, is not aware of any specific
effort to accumulate the Company's securities or to obtain control of the
Company by any means. The instant proposals are not part of the plan by
management to adopt a series of such amendments and management does not
presently intend to propose other anti-takeover measures in future proxy
solicitations, although the Board will give consideration to additional
proposals as they arise. The overall effects of this proposal, if adopted, may
be to render more difficult or to discourage a merger, tender offer, or proxy
contest, the assumption of control by a holder of a large block of the Company's
securities and the removal of incumbent management. These proposals could make
the accomplishment of a given transaction more difficult even if it is favorable
to the interests of stockholders.
Proposed or Existing Provisions in the Certificate of Incorporation and
Bylaws. The Company's Certificate of Incorporation and Bylaws presently contain
other provisions which might have the effect of deterring or frustrating
takeover attempts.
Proposed Article 3, Section 1 of the Company's Bylaws if approved would
provide for (a) a classified Board, (b) set the minimum and maximum number of
directors on the Board, (c) the removal of directors with the vote or written
consent of stockholders representing not less than two-thirds of the issued and
outstanding stock entitled to vote and (d) increased to the size of the Board
with the vote or written consent of stockholders representing not less than
two-thirds of the issued and outstanding stock entitled to vote.
Article 7 of the Bylaws provides that the Bylaws may be altered,
amended or repealed, or new Bylaws may be adopted at any meeting of the Board.
The proposed and existing provisions in the Certificate of
Incorporation and Bylaws, taken together, could effectively reduce the
possibility that a third party could effect a sudden change in the majority
control of the Board without the support of the incumbent Board.
The affirmative vote of the holders of a majority of the shares of the
Common Stock present or represented by proxy at the Meeting and entitled to vote
is necessary to approve this proposal.
THE BOARD DEEMS PROPOSAL NO. 2 TO BE IN THE BEST INTERESTS
OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS
A VOTE "FOR" APPROVAL THEREOF
PROPOSAL NO. 3 -- APPROVAL OF AN AMENDMENT TO BYLAWS TO PROVIDE FOR
CLASSIFICATION OF THE BOARD, THE MINIMUM AND MAXIMUM NUMBER OF DIRECTORS,
REMOVAL OF DIRECTORS AND INCREASES TO THE SIZE OF THE BOARD
General. The Board has unanimously approved, and recommends to the
stockholders that they adopt, an amendment to the Company's Bylaws that would
amend Article 3, Section 1 so as to (a) classify the Board of Directors into
three classes, nearly equal in size as possible, serving staggered three-year,
terms, (b) set a minimum and maximum number of directors on the Board and (c)
provide that a director may be removed from office at any time by the vote or
written consent of stockholders representing not less than two-thirds of the
issued and outstanding stock entitled to vote and (d) provides that an incease
in the size of the board requires the vote or written consent of stockholders
representing not less than two-thirds of the issued and outstanding stock
entitled to vote. As more fully discussed below, the Board believes the proposed
amendment would, if adopted, effectively reduce the possibility that a third
party could effect a sudden or surprise change in majority control of the
Company's Board without the support of the incumbent Board. Stockholders are
urged to read carefully the following sections of this Proxy Statement, which
20
<PAGE>
describe the amendment and its purpose and effect, and Exhibit B, which sets
forth the full text of this proposed amendmentto the Bylaws, before voting on
Proposal No. 3. Each of the four parts of this proposal will be voted upon
separately.
Classification of the Board of Directors. The Company's Bylaws
currently provide that all directors shall be elected at the annual meeting of
stockholders to hold office until the next annual meeting or until their
respective successors are elected. Proposed Article 3, Section 1 provides that
the Board will be divided into three classes with staggered terms, designated as
Class I, Class II and Class III. Class I will initially consist of two
directors, each to hold office until the annual meeting of stockholders in 1998;
Class II will initially consist of two directors, each to hold office until the
annual meeting of stockholders in 1999; Class III will initially consist of two
directors, each to hold office until the annual meeting of stockholders in 2000;
and in each case, until their successors are duly elected or until their earlier
resignation, removal from office or death. Starting with the 1998 annual meeting
of stockholders one class of directors would be elected for a three-year term at
each annual meeting, with the remaining continuing in office. The directors of
each class would be as follows:
================================================================================
CLASS I CLASS II CLASS III
- - --------------------------------------------------------------------------------
Vern T. May Raymond J. Weller Brent M. Cook
- - --------------------------------------------------------------------------------
Joe K. Johnson DeLance M. Squire Stanley M. Kimball
================================================================================
Classification of the Board, which prevents more than approximately
one-third of the Board from being replaced at any one annual meeting, will help
to assure the continuity and stability of the Company's management and policies
since a majority of the directors will have prior experience as directors of the
Company.
Number of Directors. The Company's Certificate of Incorporation
currently provide that the number of Directors shall be fixed in the Bylaws that
in no case shall the number of Directors be less than one. The amendment to the
Bylaws, if adopted would provide that the Board shall be composed of not less
than five and not more than nine directors. By requiring that an increase in the
size of the Board beyond nine directors be by a vote or consent of stockholders
representing not less than two-thirds of the issued and outstanding stock
entitled to vote, it will be more difficult to stack the Board, and therefore
may frustrate attempts to gain control.
Removal of Directors. By requiring that the removal of directors be by
a vote or consent of stockholders representing not less than two-thirds of the
issued and outstanding stock entitled to vote, incumbent directors are less
likely to be removed, and therefore may frustrate attempts to gain control
Purposes and Effects of Proposal No. 3. The purpose of Proposal No. 3
is to discourage certain types of activity that involve an actual or threatened
change in control of the Company. Proposal Three is designed to make it more
difficult and time consuming to change majority control of the Board and thereby
reduce the vulnerability of the Company to an unsolicited proposal for a
takeover that does not contemplate the acquisition of all of the Company's
outstanding shares or an unsolicited proposal for the restructuring or sale of
all or part of the Company. As more fully discussed both in the preceding
sections of this Proxy Statement and below, the Board believes that, as a
general rule, such takeover proposals are not in the best interests of the
Company and its stockholders.
There has been a recent trend toward the accumulation of substantial
stock positions in public companies by third parties with a view toward using a
control block of stock to force a merger, consolidation, restructuring or to
force a corporation to repurchase a control block of stock at a premium. Such
actions are taken without advance notice to, or consultation with, the board of
directors or management of the corporation.
21
<PAGE>
In many cases, such third parties seek representation on the corporation's board
of directors in order to increase the likelihood that their proposals will be
implemented. If the corporation resists their efforts to obtain representation
on the corporation's board, such parties may commence proxy contests to have
themselves or their nominees elected to the board of directors in place of
certain directors or the entire board. In some cases, the third party may not be
interested in taking over the corporation, but uses the threat of a proxy fight
or takeover bid as means of forcing the corporation to repurchase its holdings
at a substantial premium over market price.
The Board of the Company believes that the threat of removal of the
Company's management in such situations would curtail management's ability to
negotiate effectively with such purchasers. Management would be deprived of the
time and information necessary to evaluate the takeover proposal, to study
alternative proposals and to help ensure that the best price is obtained in any
transaction involving the Company which may ultimately be undertaken.
Proposed Article 3, Section 1 would have the effect of making it more
difficult to change the composition of the Board. A classified Board upon which
directors serve three-year terms requires at least two annual shareholder
meetings in order to effect a change in control in the Board. At present, a
change in control of the Board could be effected in one shareholder meeting.
By stabilizing the composition of the Board, Proposal No. 3 is designed
to encourage any person who might seek to acquire control of the Company to
consult with the Company's Board and to negotiate the terms of any proposed
business combination or tender offer. The Board believes that any takeover
attempt or business combination in which the Company is involved should be
thoroughly studied by the Company's management and its Board to assure that all
of the Company's stockholders are treated fairly.
Takeovers or changes in management of the Company which are proposed
and effected without prior consultation and negotiation with the Company's Board
and management may not necessarily be detrimental to the Company and its
stockholders. The adoption of Proposal No. 3 could discourage or frustrate
future attempts to acquire control of the Company that are not approved by the
incumbent Board, but which a majority of stockholders may deem to be in their
best interests. One of the effects of proposed Article 3, Section 1 may be to
discourage prospective acquirors from making tender offers for, or open market
purchases of, shares of the Company's Common Stock. As tender offers are often
made at a premium above market price, and as large purchases made in the open
market often result in temporary fluctuations in the market price of such
shares, stockholders may be denied the opportunity to sell their shares at
prices in excess of historic market prices if the proposed amendments discourage
such tender offers or open market purchases. Proposed Article 3, Section 1, if
adopted, could also delay or frustrate the assumption of control by a holder of
a large block of the Company's shares or the removal of incumbent directors,
even if stockholders considered such event to be beneficial. However, the Board
feels that the benefits of seeking to protect its ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to take over or restructure
the Company outweigh the disadvantages of discouraging such proposals.
For a description of proposed and existing anti-take over provisions,
see the discussion under Proposal No. 2.
The affirmative vote of the holders of a majority of the shares of the
Common Stock present or represented by proxy at the Meeting and entitled to vote
is necessary to approve this proposal.
THE BOARD DEEMS PROPOSAL NO. 3 TO BE IN THE BEST INTERESTS
OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS
A VOTE "FOR" APPROVAL THEREOF
22
<PAGE>
PROPOSAL NO. 4 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has appointed Coopers & Lybrand L.L.P., certified public
accountants, as auditors to examine the financial statements of the Company for
Fiscal 1997 and to perform other appropriate accounting services and is
requesting ratification of such appointment by the stockholders. Coopers &
Lybrand L.L.P. has served as the Company's auditors since 1996.
In the event that the stockholders do not ratify the appointment of
Coopers & Lybrand L.L.P., the adverse vote will be considered as a direction to
the Board to select other auditors for the next fiscal year.
It is understood that even if the selection of Coopers & Lybrand L.L.P.
is ratified, the Board, in its discretion, may direct the appointment of a new
independent accounting firm at any time during the year if the Board feels that
such a change would be in the best interests of the Company and its
stockholders.
A representative of Coopers & Lybrand L.L.P. is expected to attend the
Meeting and will have an opportunity to make a statement if he desires to do so
and to respond to appropriate questions.
THE BOARD DEEMS PROPOSAL NO. 4 TO BE IN THE BEST INTERESTS
OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS
A VOTE "FOR" APPROVAL THEREOF
STOCKHOLDER PROPOSALS
Stockholders may submit proposals on matters appropriate for
stockholder action at the Company's annual meetings consistent with regulations
adopted by the SEC. For such proposals to be considered for inclusion in the
proxy statement and form of proxy relating to the 1998 annual meeting, they must
be received by the Company not later than January 27, 1997. Such proposals
should be addressed to the Company at 3280 North Frontage Road, Lehi, Utah
34043, Attn: Corporate Secretary.
OTHER MATTERS
Management does not intend to present, and has no information as of the
date of preparation of this Proxy Statement that others will present, any
business at the Meeting other than business pertaining to matters required to be
set forth in the Notice of Annual Meeting and Proxy Statement. However, if other
matters requiring the vote of the stockholders properly come before the Meeting,
it is the intention of the persons named in the enclosed proxy to vote the
proxies held by them in accordance with their best judgment on such matters.
SOLICITATION OF PROXIES
The accompanying form of proxy is being solicited on behalf of the
Board. The expense of solicitation of proxies for the Meeting will be paid by
the Company. In addition to the mailing of the proxy material, such solicitation
may be made in person or by written communication, telephone or telegraph by
directors, officers or employees of the Company or its subsidiaries.
23
<PAGE>
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON SOLICITED BY
THIS PROXY STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
FINANCIAL STATEMENTS, EXHIBITS AND SCHEDULES THAT ARE ATTACHED TO THE COMPANY'S
ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
FOR ITS MOST RECENT FISCAL YEAR. SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO THE
INVESTOR RELATIONS DEPARTMENT AT THE ADDRESS OF THE COMPANY APPEARING ON THE
FIRST PAGE OF THIS PROXY STATEMENT OR FAXED TO THE COMPANY AT (801) 768-4483.
By Order of the Board of Directors,
ASAEL T. SORENSEN
Secretary
THE BOARD ENCOURAGES STOCKHOLDERS TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO COMPLETE, DATE
AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE.
STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR SHARES PERSONALLY EVEN THOUGH
THEY HAVE SENT THEIR PROXIES.
24
<PAGE>
EXHIBIT "A"
AMENDMENT TO CERTIFICATE OF INCORPORATION AUTHORIZING
A NEW CLASS OF PREFERRED STOCK
Article V of the Certificate of Incorporation shall be amended
in its entirety to read as follows:
"A. The capital stock authorized, the par value thereof,
and the characteristics of such stock shall be as follows:
================================================================================
Number of Shares Par Value Class of
Authorized Per Share Stock
- - --------------------------------------------------------------------------------
25,000,000 $.001 Common
- - --------------------------------------------------------------------------------
10,000,000 $.001 Preferred
================================================================================
B. The Board of Directors of the Company is authorized, from
time to time, to establish series of unissued shares of Preferred stock, to
designate each series, and to issue shares of any series then or previously
designated; and to fix and determine separately for each series any one or more
of the following relative rights and preferences:
(a) The rate of dividend payable with respect to
shares of each series and the dates, terms and other conditions on which such
dividends shall be payable;
(b) The nature of the dividend payable with
respect to shares of such series as cumulative, non-cumulative, or partially
cumulative.
(c) The price at and the terms and conditions on
which shares may be redeemed (if applicable);
(d) The amount payable to holders of such series
in the event of involuntary liquidation of the Company;
(e) The amount payable to holders of such series
in the event of voluntary liquidation of the Company;
(f) The Sinking fund provisions (if any) for the
redemption or purchase of shares;
(g) The terms and conditions on which shares may
be converted, if the shares of any series are issued with the privilege of
conversion;
(h) The Voting rights (if any); and
(i) The Repurchase obligations of the Company
with respect to the shares of each series (if any).
25
<PAGE>
C. The Board of Directors may increase or decrease the number
of authorized shares within each series, whether or not any shares of the series
are outstanding; provided. however, that the Board of Directors may not decrease
the number of shares within a series below the number of shares within such
series that is then issued. The approval of existing Preferred stock or Common
Stock stockholders shall not be required.
D. Dividends on the Preferred stock when and as declared by
the Board of Directors out of any funds legally available therefor may be
cumulative or non-cumulative, as determined by the Board of Directors. The
Preferred stock as a class shall have a preference over the Common Stock as a
class as to the payment of such dividends. The relative preference between
series of Preferred stock as to the payment of such dividends may be fixed and
determined by the Board of Directors.
E. In the event of voluntary or involuntary liquidation of the
Company, the Preferred stock shall have a preference in the assets of the
Company over the Common Stock, as fixed and determined by the Board of
Directors. The relative preference between series of Preferred stock may be
fixed and determined by its Board of Directors."
26
<PAGE>
EXHIBIT "B"
AMENDMENT TO BYLAWS PROVIDING FOR
CLASSIFIED BOARD, NUMBER OF DIRECTORS AND REMOVAL OF
DIRECTORS
Article 3, Section 1 of the Bylaws shall be amended in its
entirety to read as follows:
Section 1. Number, Qualification, Election and Term. The
number of directors of the Corporation shall be fixed from time to
time, within the limits specified by the Certificate of Incorporation,
by resolution of the Board of Directors; provided, however, no
director's term shall be shortened by reason of a resolution reducing
the number of directors. Directors need not be residents of the State
of Delaware, stockholders of the Corporation or citizens of the United
States. Unless provided otherwise by law, any director may be removed
at any time, with or without cause, at a special meeting of the
stockholders for that purpose. Members of the initial Board of
Directors shall hold office until the first annual meeting of
stockholders and until their successors shall have been elected and
qualified. Following the first annual meeting of stockholders, the
Board of Directors may be divided into three classes, each class to be
as nearly equal in number as possible, the term of office of directors
of the first class to expire at the first annual meeting of
stockholders after their election, that of the second class to expire
at the second annual meeting after their election, and that of the
third class to expire at the third annual meeting after their election.
At each annual meeting following such classification and division of
the members of the Board of Directors, a number of directors equal to
the number of directorships in the class whose term expires at the time
of such meeting shall be elected to hold office until the third
succeeding annual meeting of stockholders of the Corporation.
Each Director shall hold office for the class term for which
he is elected and until his successor shall be elected and qualified.
Notwithstanding anything herein to the contrary, any director may be
removed from office at any time by the vote or written consent of
stockholders representing not less than two-thirds of the issued and
outstanding stock entitled to vote.
The Board of directors shall have no less than five members and no more
than nine members. Notwithstanding anything herein to the contrary, the
size of the Board of Directors may not be increased without the vote or
written consent of stockholder representing not less than two-thirds of
the issued and outstanding stock entitled to vote.
27
<PAGE>
Proxy card
COVOL TECHNOLOGIES
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, JUNE 25, 1997
The undersigned stockholder(s) of Covol Technologies, Inc., a Delaware
corporation (the "Company"), revoking all previous proxies, hereby appoints
Asael T. Sorensen, Esq., and Harlan M. Hatfield, Esq. and each of them acting
individually, as the attorneys and proxies of the undersigned, with full power
of substitution, to cast all votes for all shares of Common Stock of the Company
which the undersigned would be entitled to cast if personally present at the
Annual Meeting of Stockholders of the Company to be held at Little America Hotel
and Towers, 500 South Main Street, Salt Lake City, Utah 84101, on Wednesday,
June 25, 1997, at 1:00 p.m., Mountain Standard Time, and any and all
adjournments or postponements thereof. Said proxies are authorized and directed
to vote as indicated with respect to the following matters:
(Please date and sign on reverse side)
Please mark
your vote
as this
|X|
------------
COMMON
1. ELECTION OF DIRECTORS
Raymond J. Weller FOR WITHHOLD
(If elected, Mr. Weller's term would AUTHORITY
expire in 1999)
|-| |-|
Brent M. Cook FOR WITHHOLD
(If elected, Mr. Cook's term would AUTHORITY
expire in 2000)
|-| |-|
Stanley M. Kimball FOR WITHHOLD
(If elected, Mr. Kimball's term would AUTHORITY
expire in 2000)
|-| |-|
DeLance M. Squire FOR WITHHOLD
(If elected, Mr. Squire's term would AUTHORITY
expire in 1999)
|-| |-|
Vern T. May FOR WITHHOLD
(If elected, Mr. May's term would AUTHORITY
expire in 1998)
|-| |-|
<PAGE>
Joe K. Johnson FOR WITHHOLD
(If elected, Mr. Johnson's term would AUTHORITY
expire in 1998)
|-| |-|
2. APPROVE AMENDMENT TO CERTIFICATE OF
INCORPORATION TO CREATE CLASS OF PREFERRED STOCK,
$.001 PAR VALUE, IN AN AUTHORIZED AMOUNT OF 10,000,000
SHARES
FOR AGAINST ABSTAIN
|_| |_| |_|
3. (a) APPROVE AMENDMENT TO BYLAWS TO CLASSIFY THE
BOARD OF DIRECTORS
FOR AGAINST ABSTAIN
|_| |_| |_|
3. (b) APPROVE AMENDMENT TO BYLAWS TO SET MINIMUM AND
MAXIMUM NUMBER OF MEMBERS OF BOARD
FOR AGAINST ABSTAIN
|_| |_| |_|
3. (c) APPROVE AMENDMENT TO BYLAWS TO REQUIRE THE VOTE
OR CONSENT OF NOT LESS THAN TWO-THIRDS OF THE
ISSUED AND OUTSTANDING STOCK ENTITLED TO VOTE TO
REMOVE A DIRECTOR
FOR AGAINST ABSTAIN
|_| |_| |_|
3. (d) APPROVE AMENDMENT TO BYLAWS TO REQUIRE THE VOTE
OR CONSENT OF NOT LESS THAN TWO-THIRDS OF THE
ISSUED AND OUTSTANDING STOCK ENTITLED TO VOTE TO
INCREASE THE SIZE OF THE BOARD
FOR AGAINST ABSTAIN
|_| |_| |_|
<PAGE>
4. RATIFY THE SELECTION BY THE BOARD OF COOPERS
& LYBRAND, LLP AS INDEPENDENT AUDITORS OF
THE COMPANY FOR THE 1997 FISCAL YEAR
FOR AGAINST ABSTAIN
|_| |_| |_|
5. To vote on such other business which This Proxy is solicited on
may properly come before the 1997 behalf of the Board of
Annual Meeting of Stockholders and any Directors. Unless otherwise
and all adjustments or postponements specified, the shares will
thereof. be noted "FOR" the election
of the nominees for
director. This Proxy also
delegates discretionary
authority to vote with
respect to any other
business which may properly
come before the 1997 Annual
Meeting of Stockholders and
any and all adjournments
or postponements thereof.
THE UNDERSIGNED HEREBY
ACKNOWLEDGES RECEIPT OF
THE NOTICE OF ANNUAL
MEETING, PROXY
STATEMENT AND ANNUAL
REPORT OF COVOL
TECHNOLOGIES, INC.
Dated: ________, 1997
------------------------
Signature of Stockholder
------------------------
Signature of Stockholder
NOTE:
Please date and sign this
Proxy exactly as
the names appear hereon.
When signing as
attorney-in-fact,
executor, administrator,
trustee or guardian,
please add your title
as such. Proxies executed
in the name of a
corporation should be
signed on behalf of
the corporation
by a duly authorized
officer. Where
shares are owned in
the name of two or
more persons, all such
persons should sign.
PLEASE RETURN YOUR COMPLETED PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE
