SETTLEMENT AGREEMENT
THIS AGREEMENT is made and entered into this 17th day of September
1996, by and between Covol Technologies, Inc., a Delaware corporation, and its
predecessor in interest, Environmental Technologies Group International, Inc., a
Nevada corporation, Larson Limestone Company, Inc., a Utah corporation
(collectively called "Plaintiffs"), Michael Q. Midgley, an individual, Mark
Hardman, an individual, and Kenneth M. Young, an individual (collectively called
"Messrs. Midgley Hardman and Young, or Consolidated Defendants"), Farrell
Larson, an individual, Irene Larson, an individual (collectively called
"Larsons"), and Gary Burningham dba Burningham and Company, a Financial
Consulting Firm, and Burningham Enterprises, Inc. a Utah corporation
(collectively called "Burningham"). All of the foregoing Parties to this
Agreement shall be referred to individually as a "Party" and collectively as
"Parties."
RECITALS
A. Plaintiffs have filed and maintain a lawsuit against the Larsons and
Burningham in the Fourth Judicial District Court of Utah County, State of Utah,
Case No. 950400278, entitled Environmental Technologies, Inc., Covol
Technologies, and Larson Limestone Company, Inc. v. Farrell Larson, Irene
Larson, Gary Burningham individually, and dba Burningham and Company, and
Burningham Enterprises, Inc. asserting a number of claims. The Larsons and
Burningham have denied the principal allegations which form the basis for
Plaintiffs' claims, and the Larsons have asserted counterclaims against
Plaintiffs in this lawsuit.
B. The Larsons filed a lawsuit against a number of Plaintiffs' agents,
their attorneys and their expert in the Fourth Judicial District Court of Utah
County, State of Utah, Case No. 960400032, entitled Farrell Larson and Irene
Larson v. Lynn G. Foster, Brett L. Foster, Foster& Foster L.C., Lynn M. Carlson,
Lynn M. Carlson & Co., Michael Q. Midgley, Mark Hardman and Kenneth M. Young,
asserting a number of claims. The Defendants in this case denied the principal
allegations which formed the basis for the Larsons' claims, but did not assert
any counterclaims in that lawsuit.
C. The two above-referenced lawsuits were consolidated into a single case
under Consolidated Case No. 950400278. These consolidated cases are hereafter
referred to as the "Litigation."
D. Lynn G. Foster, Brett L. Foster, Foster & Foster L.C., Lynn M. Carlson,
and Lynn M. Carlson & Co. moved the Court for summary judgment dismissal of all
claims the Larsons asserted against them. The Court has granted that motion,
dismissing all claims against them. Accordingly, the only claims still pending
in the Larsons' consolidated lawsuit are against the above-referenced
Consolidated Defendants.
E. Through this Agreement, the Parties desire to reach a full and final
compromise, settlement, and discharge of all claims, counterclaims, and defenses
which have been asserted or which could be asserted by Plaintiffs and
Consolidated Defendants against the Larson or Burningham, and which have been
asserted or which could be asserted by the Larsons or Burningham against
Plaintiffs and Consolidated Defendants in the Litigation. This Agreement
is specifically intended by the Parties to resolve and forever release any and
all disputes or claims which have been, may have been, or could be asserted
between the Parties prior to the date of this Agreement, without reservation.
AGREEMENT
Based upon the foregoing, the Parties agree as follows:
1. CONSIDERATION FOR SETTLEMENT. In full consideration for settlement and
mutual release of the claims, counterclaims and defenses asserted by the Parties
against one another in the Litigation and for the other obligations and
covenants set forth in this Agreement, the Parties agree as follows:
a. RELEASE OF DEPOSITED FUNDS TO THE LARSONS. Plaintiffs and
Consolidated Defendants shall and hereby do release all claims they may
have to any sums deposited by Plaintiffs with the Court in the
Litigation and agree to execute a stipulation and motion for the
release of said deposited sums and for disbursement of such funds to
the Larsons. The Parties assume and condition this Agreement on the
assumption that the amount deposited with the Court is equal to
$325,000 plus any interest accrued through the date of its
distribution.
b. RELEASE OF DEPOSITED ESCROW DOCUMENTS TO PLAINTIFFS. The
Larsons shall and hereby do release any claims they may have to all
escrow documents deposited by David Glazier, Esq. with the Court in the
Litigation and agree to execute a stipulation and motion for the
release of said deposited escrow documents and for tender of such
escrow documents to Plaintiffs. The Parties assume and condition this
Agreement upon the assumption that the following escrow documents are
on deposit with the Court:
(1) Original STOCK PURCHASE AGREEMENT, dated effective 30
September 1994, with schedules.
(2) Original PROMISSORY NOTE, dated effective 30
September 1994.
(3) Original LARSON LIMESTONE MINUTES.
(4) Original ETGI MINUTES.
(5) Original TRUST DEED, dated effective 30 September
1994; recorded 26 October 1994.
(6) ETGI FINANCING STATEMENT, original with exhibits and
carbon copy without exhibits.
(7) LARSON LIMESTONE FINANCING STATEMENT original with
exhibits and carbon copy without exhibits.
(8) Original AGREEMENT FOR SALE OF BUILDING AND
ASSIGNMENT OF LEASE, dated effective 30
September 1994.
(9) Original EMPLOYMENT AGREEMENT, dated effective 30
September 1994.
(10) Original OWNERS POLICY OF TITLE INSURANCE.
(11) Original STOCK CERTIFICATE NO. 4, for 750 shares
marked "Canceled."
(12) Original STOCK CERTIFICATE NO. 9, for 2,500 shares.
(13) A copy of SIX MONTH PAYMENT ON LOAN AT BANK OF
AMERICAN FORK in the form of $25,000 Certificate of
Deposit. A copy of check with letter from Midgley to
Chatfield (at Bank of American Fork) included.
(14) Original WAIVER OF CLOSING CONDITIONS.
(15) QUIT CLAIM DEED FROM FARRELL LARSON AND GERALD
LARSON TO LARSON LIMESTONE COMPANY, INC.
(16) Original LETTER FROM FAR WEST BANK, dated 19 October
1994, addressed to David Glazier.
(17) Original INDEMNITY AGREEMENT, dated 19 October 1994,
between Gerald Larson and ETGI.
c. RELEASE OF LIENS, LIS PENDENS, AND OTHER
ENCUMBRANCES RELATING TO PLAINTIFFS' REAL PROPERTY. The Larsons
shall and hereby do release any and all liens, lis pendens and other
encumbrances which they have caused to be filed or recorded against any
and all real property owned or reputed to be owned by Plaintiffs and
Consolidated Defendants, or any of them. Although there may be other
liens, lis pendens or other encumbrances which the Larsons have caused
to be filed or recorded against Plaintiffs' real property, Plaintiffs
have identified the following specific encumbrances:
(1) A $600,000 Trust Deed from Larson Limestone Company,
Inc. in favor of Farrell Larson, effective 30 September 1994, recorded
on 26 October 1994;
(2) A $10,000 Trust Deed issued by Larson Limestone
Company, Inc. in favor of Farrell Larson, Gerald Larson, Thelma Barnes
and Joanne Parker, effective October 7, 1988, recorded on March 30,
1989;
(3) A lis pendens filed by Farrell Larson against Larson
Limestone's property recorded on 8 December 1995, entry No. 85275, book
3836, page 442; and
(4) A lis pendens filed by Farrell Larson against ETGI's real
property recorded in the Utah County Recorder's Office on 8 December
1995 as entry No. 85276, book 3836, page 446.
In order to fulfill the intent of this Agreement, upon the execution of
this Agreement, the Larsons shall execute and tender to Plaintiffs (a)
a reconveyance of all trust deeds identified above in a recordable
form, attached hereto as Exhibit A; and (b) a release of all lispendens
identified above, in a recordable form, attached hereto as Exhibit B.
In respect to any other liens, lis pendens, or any other encumbrances
subsequently discovered but not listed above, if any, the Larsons agree
to execute whatever recordable instrument that may be necessary to
remove said liens, lis pendens, or other encumbrances or other clouds
from Plaintiffs' title to real property due to the Larsons' actions.
d. RELEASE OF LIENS AND ENCUMBRANCES RELATING TO PLAINTIFFS'
EQUIPMENT. The Larsons shall and hereby do release any and all liens or
other encumbrances which they have caused to be filed or recorded
against equipment (personal property) owned or reputed to be owned by
Plaintiffs and Consolidated Defendants, and any of them. Although there
may be other liens or encumbrances which the Larsons have caused to be
filed or recorded against Plaintiffs' equipment, Plaintiffs are aware
of the following such encumbrances:
(1) U.C.C. 1 filing by Farrell Larson for
certain equipment of ETGI, filed 26 October 1994; and
(2) U.C.C. 1 filing by Farrell Larson against certain
equipment of Larson Limestone Company, Inc. filed 26 October
1994. In order to fulfill the intent and purpose of this
provision, the Larsons shall execute U.C.C. 3 Termination
Statements in a recordable or fileable form, attached as
Exhibit C, for all of the foregoing U.C.C. 1 statements and
shall deliver those executed U.C.C. 3 Termination Statements
to an agreed upon escrow agent which shall remain in escrow
until all loans to which Farrell Larson has guaranteed are
paid off, at which time the escrow agent shall be instructed
by Plaintiffs and the Larsons to deliver said U.C.C. 3
Termination Statements to Plaintiffs . In respect to all liens
and encumbrances including U.C.C. 1 filings concerning
Plaintiffs' equipment which are not known but are discovered
after the execution of this Agreement, if any, the Larsons
agree to execute an appropriate, recordable release of said
liens and encumbrances, tender them to an agreed upon escrow
agent to hold them until all loans that Farrell Larson has
secured are paid off, at which time the escrow agent shall be
instructed who shall be instructed by Plaintiffs and the
Larsons to deliver said release of liens, encumbrances, or
U.C.C. 3 Termination Statements to Plaintiffs.
e. REFINANCING OF BEALL TRAILERS LEASE BY BURNINGHAM.
Burningham shall be required to refinance or payoff Zions Credit
Corporation Master Finance Lease No. 6528, equipment schedule No. 1,
relating to two Beall trailers, such that Larson Limestone Company,
Inc. is removed as a guarantor. Prior to the execution of this
Agreement, Burningham shall provide commercially reasonable evidence
that Larson Limestone Company, Inc. has been removed as a guarantor on
said Zions lease.
f. COVOL'S SALE OF LARSON LIMESTONE. The Larsons agree
that Covol may sell Larson Limestone Company, Inc. to any third party
without violating this Agreement, and without providing the Larsons
with any new causes of action.
g. COVENANT NOT TO PURCHASE COVOL STOCK. Burningham and
the Larsons hereby covenant and agree that they will directly or
indirectly following the execution of this Agreement purchase any stock
of Covol, any of its subsidiary companies, or any successors.
4. STIPULATED DISMISSAL OF CLAIMS OR ENTRY OF JUDGMENT.
Concurrently with the execution hereof, and as additional consideration for
settlement, counsel for each of the Parties shall execute a Stipulation and
Joint Motion to Dismiss all claims with prejudice, in the form attached hereto
as Exhibit D.
5. MUTUAL RELEASES. Each of the Parties to this Agreement hereby
forever release, completely acquit and discharge each other Party, their past
and present partners, predecessors and successors in interest, officers,
directors, shareholders, children, employees, representatives and agents from
and against any and all claims, demands, liabilities, obligations, costs,
expenses, damages, actions, and causes of actions of any kind known or unknown,
contingent or non-contingent, that they may have against any Party, arising
prior to the date of this Agreement, whether or not arising out of the
allegations set forth in the Litigation.
6. DISCLAIMER. By executing this Agreement, the Parties do not admit
any liability or wrongdoing and do not admit any allegations set forth in the
Litigation, nor do they admit any violation of state or federal law. Each of the
Parties acknowledge that the consideration received by them under this Agreement
is in full accord and satisfaction and in full compromise of disputed claims.
7. ATTORNEY'S FEES. The Parties hereto agree that they shall bear their
own costs and attorney's fees incurred in connection with the Litigation and
related proceedings. However, in the event any Party to this Agreement brings an
action to enforce the terms hereof, or to enter judgment in the breach of any
terms or conditions of this Agreement, the prevailing Party shall be entitled to
an award of its reasonable attorney's fees and costs incurred in such an
enforcement proceeding or entry and collection of judgment.
8. TERMS TO BE HELD IN CONFIDENCE. The terms of this Agreement shall be
held by the Parties in strict confidence and no Party shall be permitted to
disclose these terms unless they have been served with a valid subpoena
requiring such disclosure, or such disclosure is required to enforce the terms
of this Agreement. Each of the Parties may, when responding to inquiry regarding
the Litigation, state that a settlement has been reached by the Parties and
that the terms of the settlement are satisfactory and agreeable to all Parties.
However, the terms of the settlement agreement shall remain strictly
confidential.
9. ASSURANCES. Each of the Parties acknowledge that they have executed
this Agreement voluntarily, after consultation with counsel of their choice, and
of their own free will, without coercion or duress, intending to be legally
bound hereby. The Parties further acknowledge that they have had a reasonable
opportunity to review and consider the Agreement before signing it.
10. COUNTERPART ORIGINALS. This Agreement may be executed in multiple
counterpart originals and shall have the same force and effect as if all
signatures appeared on the same original. For purposes of this Agreement and the
documents required hereby, and executed copy shall be considered an executed
original.
11. CONSTRUCTION OF AGREEMENT. This Agreement and the documents
required hereby shall be construed in accordance with the laws of the State of
Utah.
12. INTEGRATION. This Agreement constitutes the final written
expression of all of the terms of the settlement of the Litigation between the
Parties and is a complete and exclusive statement of those terms. Each of the
Parties acknowledges that no representations or promises not expressly contained
in this Agreement have been made by any Party, or by the agents or
representative of any Party.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in
counterpart as of the date entered in the first paragraph of this Agreement.
COVOL TECHNOLOGIES, INC., ENVIRONMENTAL
a Delaware corporation TECHNOLOGIES GROUP
INTERNATIONAL, INC.,
a Nevada corporation
By: /s/ Michael Q. Midgley By: /s/ Michael Q. Midgley
Its: President Its: President
LARSON LIMESTONE COMPANY, INC.,
a Utah corporation
By: /s/
Its: President
/s/ MICHAEL Q. MIDGLEY, /s/ MARK HARDMAN,
Individually Individually
/s/ KENNETH M. YOUNG,
Individually
/s/ IRENE LARSON, /s/ FARRELL LARSON,
Individually Individually
GARY BURNINGHAM, Individually and
dba BURNINGHAM AND COMPANY,
a Financial Consulting Firm
By: /s/ Gary Burningham
BURNINGHAM ENTERPRISES, INC.
By: /s/ Gary Burningham
Its: President