COVOL TECHNOLOGIES, INC.
INCENTIVE BONUS PLAN
1. PURPOSE
The purpose of this Incentive Bonus Plan is to promote the success of
Covol Technologies, Inc. and Covol subsidiaries, by providing financial
incentive for employees to strive for more effective operation of the
business through ongoing development and use of their knowledge, skill,
ingenuity, resourcefulness and industry. The Plan provides that annual
Awards may be made to employees who are responsible for successful
operation and management of the Company.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan:
(a) "Award" means the total dollar amount that may be paid to a
Participant following a given Performance Year. It is the sum
of the "Business Unit Award" and the "Corporate Award" earned
by the Participant.
(b) "Base Compensation" means the annualized W2 wages of a
Participant determined on the last day of a Performance Year.
(c) "Board" means the Board of Directors of Covol Technologies,
Inc.
(d) "Bonus Percent" means the percentages associated with
different employment levels within the Company, as defined on
Schedule 1.
(e) "Business Unit" means the businesses or subsidiaries
identified on Schedule 2.
(f) "Business Unit Award" means the dollar amount earned by a
Participant during a Performance Year associated with Business
Unit performance.
(g) "Business Unit Percent" means the percentage of a
Participant's Award weighted towards performance of a Business
Unit, as defined on Schedule 1.
(h) "Committee" means the Covol Technologies Compensation
Committee, or such other committee comprised of members of the
Board designated by the Board to oversee the Plan.
(i) "Company" means collectively Covol Technologies, Inc. and
certain subsidiaries named on Schedule 3.
(j) "Corporate Award" means the dollar amount earned by a
Participant during a Performance Year associated with the
overall performance of the Company.
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Incentive Bonus Plan
(k) "Corporate Percent" means the percentage of a Participant's
Award weighted toward overall performance of the Company as
defined on Schedule 1.
(l) "EVA" means the net operating profit before taxes, as adjusted
pursuant to items identified in Schedule 4, ("NOPAT"), less
the average cost of capital employed by the Company during the
Performance Year.
(m) "EVA Multiplier" means that factor identified on Schedule 5,
either for a Business Unit or for the overall Company
performance, associated with different levels of EVA obtained
during the Performance Year that exceeds the Threshold EVA.
(n) "Participant" means a full time employee of the Company,
employed by the Company on the last day of a Performance Year.
(o) "Performance Adjustment Factor or PAF" means the multiplier
obtained by combining the completion factors from the MBO
commitments of the Participants. The Performance Adjustment
Factor can vary from 0% to 100% depending upon the attainment
of the Participant's MBOs. An MBO form is included in Schedule
6.
(p) "Performance Year" means a designated fiscal year of the
Company during which Company and individual performance will
be measured and Participant services will be rendered for
which an Award may be granted.
(q) "Plan" means this Covol Technologies, Inc. Incentive Bonus
Plan.
(r) "Chief Executive Officer" means the Chief Executive Officer of
Covol Technologies, Inc.
(s) "Retrospective Review" means the formal report prepared
annually which details the Company's, Business Units, and the
Participants' performance during the Performance Year and
provides the basis for the Committee's determination of the
Performance Adjustment Factor and individual Awards.
(t) "Threshold Eva" means the level of EVA performance below which
there will be no Award.
3. POWERS AND ADMINISTRATION
The Committee shall have such powers and duties as are
conferred upon it under this Plan, or any amendments thereto, or by the
Board. The Committee shall have the authority to determine the time or
times when approved Participant Awards shall be paid
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Incentive Bonus Plan
each year; and the Committee, shall determine Plan participation and
Award amounts for Participant's pursuant to Section 6 (a).
The Committee shall take whatever action is necessary in
fulfilling the purposes and intent of the Plan. The Committee is
authorized and empowered to interpret the terms and conditions of the
Plan, to promulgate any rules, regulations and schedules of general
applicability and to adopt such forms deemed necessary to carry out the
purposes of the Plan. However, no such interpretation, rule or
regulation shall be contrary to the clearly expressed provisions of the
Plan.
The Committee may prescribe rules and procedures for the
allocation of responsibilities among the agents appointed by the
Committee for the performance of ministerial duties.
4. ELIGIBILITY FOR PARTICIPATION
(a) Those employees of the Company employed by the Company on the
last day of the Performance Year.
(b) Those employees of the Company who are eligible to participate
shall receive a copy of this Plan document.
(c) Participation in a given Performance Year does not entitle
participation in any subsequent Performance Year.
5. DETERMINATION OF AWARDS
(a) The Business Unit Award shall be computed as follows:
EVA Multiplier X Base Compensation X Bonus Percent X Business Unit
Percent X PAF
(b) The Corporate Award shall be computed as follows:
EVA Multiplier X Base Compensation X Bonus Percent X Corporate Percent
X PAF
6. PARTICIPANT SELECTION AND AWARD DETERMINATION
(a) Chief Executive Officer. Each year the Chief Executive Officer
shall present to the Committee the list of Participants, their
PAF and the computation of the proposed Award, and the Award
amounts recommended for each Participant.
(b) Committee. The Committee shall consider the Chief Executive
Officer's report referred to in Section 6 (a) and approve the
total Awards to be granted for the Performance Year.
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7. INDIVIDUAL AWARDS
(a) A Participant's Award shall be prorated based upon number of
months of service in a given Performance Year or if the
Participant is in different employment categories during a
Performance year.
(b) The actual Award granted to any individual Participant
hereunder shall be based upon the Company's overall
performance and individual performance considerations and
shall be determined by the Committee, in its sole discretion.
(c) No Award will be granted if the Company's overall performance
is below Threshold EVA or if a Participant's individual
performance is unsatisfactory, as determined by the Committee
in its sole discretion, upon the recommendation of the Chief
Executive Officer.
8. FORM AND TIME OF PAYMENT
(a) An Award shall be paid to the Participant in cash, less
applicable federal, state, local and FICA taxes, as soon as
practicable after the date on which all awards are approved by
Committee.
(b) If Banking applies to a Participant as shown on Schedule 1,
then 50% of the amount of the Award that is in excess of the
Award that would be computed if the EVA multiplier were 1,
shall be withheld from payment. Payment of the withheld Award
shall be made over the two years immediately subsequent to the
Performance Plan Year (50% of the withheld year in the first
subsequent year and 50% in the second subsequent year) if the
Company reaches the Threshold EVA in the subsequent years. If
the Company fails to achieve the Threshold EVA in the
subsequent two years, the withheld amounts are forfeited.
9. RETIREMENT, TERMINATION, DISABILITY, INCOMPETENCY AND DEATH
(a) In the event of the Participant's disability, incompetency or
death, or retirement such Participant may receive an Award,
prorated to the effective date of such event, at the sole
discretion of the Committee. Any such prorated Award shall be
determined and paid in accordance with the regular procedures
of the Plan.
(b) Should an Award be approved under Section 9 (a), such Award
shall be paid in cash, less applicable federal, state, local
and FICA taxes, on the normal Award payout date to the
Participant, or, in the event of the Participant's death, to
the Participant's estate, or to the person or persons who have
acquired, by will or by the laws of descent and distribution
or by other legal proceedings, the right to such Award.
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10. NO RESERVE OR TRUST
Nothing contained in the Plan shall require the Company to segregate
any monies from its general funds, or to create any trust or make any
special deposit in respect of any amounts payable under the Plan to or
for any Participant or group of Participants. All amounts payable under
the Plan shall be paid out of the general funds of the Company.
11. NO RIGHT TO ASSIGN
No right or interest of any Participant in the Plan or in any unpaid
Award shall be assignable or transferable in whole or in part, either
voluntarily or by operation of law or otherwise, or be subject to
payment of debts of any Participant by execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner.
12. NO EMPLOYMENT RIGHTS CONFERRED
Nothing contained in the Plan or any Award shall confer upon any
employee any right with respect to continuation of employment with the
Company in any capacity or interfere in any way with the right of the
Company to terminate an employee's employment at any time or guarantee
any right of participation in any other employee benefit plan of the
Company.
13. SUCCESSORS AND MERGERS, CONSOLIDATIONS OR CHANGE IN CONTROL
The terms and conditions of this Plan shall ensure to the benefit of
and bind the Company, the Participants, their successors, assignees,
and personal representatives. If substantially all of the stock or
assets of the Company are acquired by another corporation or entity or
if the Company is merged into, or consolidated with another corporation
or entity, then the obligations created hereunder shall be obligations
of the acquirer or successor corporation or entity without the
requirement of further action by the acquirer or successor corporation
or entity.
14. GOVERNING STATE LAW
The provisions of this Plan shall be construed and administered in
accordance with the laws of the State of Utah.
15. AMENDMENT
The Board may from time to time amend, suspend, terminate or reinstate
any or all of the provisions of the Plan. However, the Board may not
cancel awards payable on account of a completed Performance Year.
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16. EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall become effective for the Performance Year commencing
October 1, 1999 upon adoption by the Board and shall remain in effect
until such time as the Board may terminate it.
Approved by Board: 25 May 2000
/s/ Kirk A. Benson
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Kirk A. Benson, Chairman & CEO
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