HEADWATERS INCORPORATED
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT is entered into by and between
Headwaters Incorporated, a Delaware corporation (the "Company"), and the
undersigned executive employee of the Company ("Executive") to be effective as
of the 20th day of September, 2005 ("Effective Date").
1. Severance Pay and Benefits.
If the Executive's employment with the Company is terminated
by reason of an Involuntary Termination without Cause (as defined below) or a
Voluntary Termination For Good Reason (as defined below) solely during the
twelve-month period beginning on the Effective Date and ending on the one-year
anniversary of the Effective Date, and provided Executive executes a valid
release in substantially the form attached as Exhibit A ("Release of Claims"),
then the Company shall provide the following severance pay and benefits to
Executive as follows:
(1) Severance Pay. Within five (5) business days of the
effective date of the Release of Claims (following the expiration of any
required rescission period under any applicable law), the Company shall pay
Executive an amount equal to the annual base salary payable to the Executive
during the period of employment in lieu of any other severance or employment
termination payments or legal damages. The severance amount shall not exceed
twelve (12) months pay.
(2) Severance Benefits.
(a) Health Benefits. The Company shall continue and
pay for the same or similar group health benefits coverage for the benefit of
Executive and Executive's covered dependents at the time of the termination of
Executive's employment at the same level that it paid for such coverage prior to
the termination of Executive's employment, for the period set forth in Section
1(1) above. Such coverage shall apply towards the period of continuation
coverage required to be offered by the Company to a terminated employee under
section 4980B of the federal Internal Revenue Code of 1986, as amended, and
section 601, et seq., of the federal Employee Retirement Income Security Act of
1974, as amended.
(b) Other Benefits. The Company shall continue and
pay for all other group welfare benefits (including but not limited life
insurance coverage) received by Executive and Executive's covered dependents at
the time of the termination of Executive's employment at the same level that it
paid for such benefits and perquisites immediately prior to the termination of
Executive's employment, for the period set forth in Section 1(1) above.
2. Definitions. The following terms in this Agreement shall have the
meanings set forth below solely for purposes of this Agreement.
(a) "Involuntary Termination without Cause" shall mean the
involuntary termination of Executive's employment by the Company for reasons
other than (1) the commission by Executive of a felony or a misdemeanor
involving moral turpitude, (2) any intentional act of fraud, embezzlement or
misappropriation of property of the Company by Executive which has a materially
adverse impact on the business or affairs of the Company, (3) any intentional
unauthorized use or disclosure by Executive of confidential information or trade
secrets of the Company (or any affiliated corporation or entity of the Company
("Affiliate")), (4) any other intentional misconduct by Executive which has a
materially adverse impact on the business or affairs of the Company (or any
Affiliate), (5) the death of Executive, (6) the inability of Executive to
perform Executive's duties due to a disability (as defined and determined under
the terms of the Company's long-term disability plan), or (7) the failure or
refusal by Executive to perform the duties of Executive's position with the
Company, provided that solely for the purpose of this item (7), Executive shall
be given thirty (30) days written notice (and the opportunity to correct such
conduct if such conduct can be corrected during that notice period) of the
Company's intention to terminate the employment of Executive and to deem the
termination of Executive's employment to be for the foregoing reason.
(b) "Voluntary Termination With Good Reason" shall mean
Executive's voluntary resignation within sixty (60) days following the
occurrence of any of the following actions without Executive's consent ("Good
Reason"): (1) the material, involuntary reduction in Executive's title,
responsibilities, authorities or functions as an employee of the Company (but
not merely a change in title or reporting relationships), except in connection
with the termination of Executive's employment for death, disability,
retirement, fraud, misappropriation, embezzlement or any other conduct listed
under the definition of Cause; (2) a reduction in Executive's level of
compensation (including base salary, fringe benefits and target bonuses under
any corporate-performance based bonus or incentive programs) by more than ten
percent (10%) unless such reduction is part of a general reduction applicable to
all of the executives of the Company, or (3) a relocation of Executive's regular
place of employment by more than twenty-five (25) miles.
Notwithstanding the foregoing, Executive must provide the
Company with twenty (20) days advance written notice of Company's conduct giving
rise to Good Reason prior to Executive's resignation as a Voluntary Termination
With Good Reason (the "Cure Period") and during the Cure Period, the Company may
attempt to rescind or correct the matter giving rise to Good Reason. If the
Company does not rescind or correct the conduct giving rise to Good Reason to
Executive's reasonable satisfaction by the expiration of the Cure Period,
Executive may then resign Executive's employment and to claim that such
resignation is a Voluntary Termination With Good Reason.
3. Employment and Post Termination Covenants. By accepting the terms of
this Agreement and as a condition for the termination payments and benefits
Executive hereby agrees to the following covenants in addition to any
obligations Executive may have by law and makes the following representations.
(a) Confidentiality. Executive acknowledges that, in
connection with Executive's employment by the Company, Executive will have
access to trade secrets of the Company and other information and materials which
the Company desires to keep confidential, including customer lists, supplier
lists, financial statements, business records and data, marketing and business
plans, and information and materials relating to the Company's services,
products, methods of operation, key personnel, proprietary software and other
proprietary intellectual property and information disclosed to the Company of
third parties to which the Company owes a duty of nondisclosure (collectively,
the "Confidential Information"); provided, however, that Confidential
Information does not include information which (i) is or becomes publicly known
other than as a result of your actions in violation of this Agreement; (ii) is
or becomes available to Executive from a source (other than the Company) that
Executive reasonably believes is not prohibited from disclosing such information
to Executive by a contractual or fiduciary obligation to the Company, (iii) has
been made available by the Company, directly or indirectly, to a non-affiliated
third party without obligation of confidentiality; or (iv) Executive is
obligated to produce as a result of a court order or pursuant to governmental
action or proceeding, provided that Executive gives the Company prompt written
notice of such requirement prior to such disclosure and assistance in obtaining
an order protecting such Confidential Information from public disclosure.
Executive covenants and agrees that, both during and after the term of
Executive's employment with the Company, Executive will keep secret all
Confidential Information and will not disclose, reveal, divulge or otherwise
make known any Confidential Information to any person (other than the Company or
its employees or agents in the course of performing Executive's duties
hereunder) or use any Confidential Information for Executive's own account or
for the benefit of any other individual or entity, except with the prior written
consent of the Company.
(b) Ownership of Intellectual Property. Executive agrees that
all inventions, copyrightable material, software, formulas, trademarks, trade
secrets and the like which are developed or conceived by Executive in the course
of Executive's employment by the Company or on the Company's time or property
(collectively, the "Intellectual Property") shall be disclosed promptly to the
Company and the Company shall own all right, title and interest in and to the
Intellectual Property. The parties expressly agree that any and all of the
Intellectual Property developed by the Employee shall be considered works
made-for-hire for the Company pursuant to the United States Copyright Act of
1976, as amended from time to time. In order to ensure that the Company shall
own all right, title and interest in and to the Intellectual Property in the
event that any of the Intellectual Property is not deemed a work made-for-hire
(as defined in the Copyright Act of 1976) and in any other event, Executive
hereby sells and assigns all right, title and interest in and to all such
Intellectual Property to the Company, and Executive covenant and agree to affix
to the Intellectual Property appropriate legends and copyright notices
indicating the Company's ownership of all Intellectual Property and all
underlying documentation to the extent reasonably appropriate, and shall execute
such instruments of transfer, assignment, conveyance or confirmation as the
Company reasonably considers necessary to transfer, confirm, vest, perfect,
maintain or defend the Company's right, title and interest in and to the
Intellectual Property throughout the world. Executive's obligation under this
Section 4(b) to assign to the Company inventions created or conceived by
Executive shall not apply to an invention that Executive developed entirely on
Executive's own time without using the Company's equipment, supplies,
facilities, or trade secret information, provided that those inventions (i) do
not or did not relate directly, at the time of conception or reduction to
practice of the invention, to the Company's business as conducted at such time
or actual or demonstrably anticipated research or development of the Company;
and (ii) do not or did not result from any work performed by Executive for the
Company.
(c) Non-Solicitation. Executive agrees for a period of not
less than two (2) years following termination of Executive's employment or
service (which ever is later) with the Company that Executive shall not solicit
the services or employment of the employees of the Company and Executive shall
not divert clients or customers of the Company to the disadvantage of the
Company; provided that (i) general advertisements not specifically directed at
employees of the Company shall not constitute solicitation for purposes of this
clause (c), and (ii) this clause (c) shall not prohibit Executive from hiring
employees of the Company who first approach Executive seeking employment.
(d) Non-Competition. Executive agrees not to compete directly
or indirectly as a principal, partner, shareholder, equity holder, limited
liability company member, agent, officer, other employee, advisor, consultant,
member of a board of directors, or in any other capacity, with any current or
future business of the Company during the period of Executive's employment or
service with the Company and during the period of twelve (12) months following
the termination of Executive's employment or service with the Company.
4. Alternate Dispute Resolution
(a) Arbitration. The parties agree that any future disputes
between Executive and the Company (the "parties") under this Agreement including
but not limited to disputes relating to the Release of Claims shall be resolved
by binding arbitration, except where the law specifically forbids the use of
arbitration as a final and binding remedy, except as provided in Section 4(a)(7)
below.
(1) The complainant shall provide the other party a
written statement of the claim. Such statement shall identify any supporting
witnesses or documents and the relief requested.
(2) The respondent shall furnish a statement of the
relief, if any, that it is willing to provide, and identifying supporting
witnesses or documents. If the matter is not resolved, the parties agree to
submit their dispute to a non-binding mediation paid for by the Company,
provided, however, that if the amount in dispute is $50,000 or less, this step
may be waived at the election of either party.
(3) If the matter is not resolved, the parties agree
that the dispute shall be resolved by binding arbitration according to the
commercial arbitration rules of the American Arbitration Association, including
any provisions thereof pertaining to discovery.
(4) The arbitrator shall have the authority to
determine whether the conduct complained of in Section 4(a)(1) violates the
complainant's rights under this Agreement and, if so, to grant any relief
authorized by law; subject to the provisions of Section 4(a)7) below. The
arbitrator shall not have the authority to modify, change or refuse to enforce
any lawful term of this Agreement and the Release of Claims.
(5) The Company shall bear the costs of the
arbitration, provided, however, if the Company prevails in the arbitration,
Executive shall pay any arbitration costs of the Company awarded by the
Arbitrator to the same extent as if the matter had been heard in a court of
general jurisdiction.
(6) Arbitration shall be the exclusive final remedy
for any dispute between the parties [under this Agreement/, such as disputes
involving claims for discrimination or harassment (such as claims under the Fair
Employment and Housing Act, Title VII of the Civil Rights Act of 1964, the
Americans with Disabilities Act, or the Age Discrimination in Employment Act),
wrongful termination, breach of contract, breach of public policy, physical or
mental harm or distress or any other disputes, and the parties agree that no
dispute shall be submitted to arbitration where the complainant has not complied
with the preliminary steps provided for in Sections 5(a)(1) and (2) above.
(7) The parties agree that the arbitration award
shall be enforceable in any court having jurisdiction to enforce this Agreement
and Release of Claims, so long as the arbitrator's findings of fact are
supported by substantial evidence on the whole and the arbitrator has not made
errors of law; however, either party may bring an action in a court of competent
jurisdiction, regarding or related to matters involving the Company's
confidential, proprietary or trade secret information, or regarding or related
to inventions that Executive may claim to have developed prior to or after
joining the Company, seeking preliminary injunctive relief in court to preserve
the status quo or prevent irreparable injury before the matter can be heard in
arbitration.
(8) The arbitration shall be held in the city of Salt
Lake City, Utah, unless the parties mutually agree to a different location for
the arbitration.
(9) In the event that the Company wishes to contest
or dispute a Voluntary Termination for Good Reason by Executive, it must give
written notice of such dispute within the ten (10) business day period after the
date of Executive's resignation. If Executive wishes to contest or dispute a
termination for cause by the Company, or any failure to make payments claimed to
be due hereunder, Executive must give written notice of such dispute within
thirty (30) days of receiving a Notice of Termination. In the event of a dispute
as to whether Executive's employment was terminated due to a Involuntary
Termination Without Cause, the Company shall continue to pay Executive's full
base salary and continue all of Executive's employee benefits in force until the
final resolution of any such dispute by mutual agreement, arbitrator's award or
the final judgment, decree or order of a court of competent jurisdiction
(including any appeals, if such are perfected). Executive may, at Executive's or
the Company's option, be suspended from all duties during the pendency of such a
contest or dispute. If Executive prevails in any such contest or dispute, the
Company or its successor or assign shall thereupon be liable for the full
amounts due under Section 1 as of the date of termination after adjustments for
amounts already paid. If the Company or its successor or assign prevails in any
such contest or dispute, Executive shall thereupon be liable to the Company or
its successor or assign for all amounts previously paid to Executive during the
pendency of the contest or dispute.
5. Tax Withholding and Deductions. All payments under this Agreement
shall be made subject to all applicable tax withholding and other deductions
required by law.
6. No Additional Rights. This Agreement and the provisions herein shall
not be construed to be a grant to or modification of any right of the Executive
to continued employment with the Company or its successor. Such right, if any,
shall be governed by any other employment agreements between Executive and the
Company.
7. Notices. Notices to the parties under this Agreement shall be made
to the following persons and addresses (or such other persons and addresses
designated by the recipient party):
To Executive:
-------------
Scott K. Sorensen
c/o 1020 Oak Hills Way
Salt Lake City, Utah 84108
with a copy to:
Paul Durham Esq.
Durham, Jones & Pinegar LLP
111 East Broadway, Suite 900
Salt Lake City, Utah 84111
To Company:
-----------
Harlan Hatfield, General Counsel
10653 S. River Front Parkway, Suite 300
South Jordan, UT 84095
with a copy to:
Linda Williams, Esq.
Pillsbury Winthrop Shaw Pittman LLP
50 Fremont Street
San Francisco, CA 94105
Facsimile: (415) 983-1200
Delivery may be made by U.S. Mail or by facsimile transmission to the facsimile
telephone numbers set forth above with the name of the recipient set forth in
the facsimile transmission.
8. Successors and Assigns. This Agreement shall be binding on the
successors and assigns of the Company (including but not limited to any
successors or assigns of the Company) for the benefit of Executive.
9. Complete Agreement and Modification of this Agreement. This
Agreement represents the sole agreement of the parties regarding the subject
matter of this Agreement and supersedes any prior or contemporaneous verbal or
written agreements, promises or representations regarding the subject matter of
this Agreement. This Agreement may not be modified except by a written
instrument signed by both parties.
10. Jurisdiction and Governing Law. Jurisdiction and venue in any
action to interpret or enforce the terms of this Agreement shall be in the State
of Utah and in the City of Salt Lake City. This Agreement shall be governed by
the laws of the State of Utah other than the choice of laws principles of the
laws of that state.
In Witness Whereof, the parties hereto have executed this Agreement to
be effective as of the date first above written.
Executive Headwaters Incorporated
/s/ Scott K. Sorensen /s/ Kirk A. Benson
By: Kirk A. Benson
Its: CEO
10653 S. River Front Parkway, Suite 300
South Jordan, UT 84095.
EXHIBIT A
GENERAL RELEASE LANGUAGE
Executive agrees, for himself, his spouse, heirs, executor or administrator,
assigns, insurers, attorneys and other persons or entities acting or purporting
to act on his behalf (the "Executive's Parties"), to irrevocably and
unconditionally release, acquit and forever discharge the Company, its
affiliates, subsidiaries, directors, officers, employees, shareholders,
partners, agents, representatives, predecessors, successors, assigns, insurers,
attorneys, benefit plans sponsored by the Company and said plans' fiduciaries,
agents and trustees (the "Company's Parties"), from any and all actions, cause
of action, suits, claims, obligations, liabilities, debts, demands, contentions,
damages, judgments, levies and executions of any kind, whether in law or in
equity, known or unknown, which the Executive's Parties have, have had, or may
in the future claim to have against the Company's Parties by reason of, arising
out of, related to, or resulting from Executive's employment with the Company or
the termination thereof. This release specifically includes without limitation
any claims arising in tort or contract, any claim based on wrongful discharge,
any claim based on breach of contract, any claim arising under federal, state or
local law prohibiting race, sex, age, religion, national origin, handicap,
disability or other forms of discrimination, any claim arising under federal,
state or local law concerning employment practices, and any claim relating to
compensation or benefits. This specifically includes, without limitation, any
claim which the Executive has or has had under Title VII of the Civil Rights Act
of 1964, as amended, the Age Discrimination in Employment Act, as amended, the
Americans With Disabilities Act, as amended, and the Employee Retirement Income
Security Act of 1974, as amended. It is understood and agreed that the waiver of
benefits and claims contained in this section does not include a waiver of the
right to payment of any vested, non-forfeitable benefits to which the Executive
or a beneficiary of the Executive may be entitled under the terms and provisions
of any employee benefit plan of the company which have accrued as of the
separation date and does not include a waiver of the right to benefits and
payment of consideration to which Executive may be entitled under this
agreement. Executive acknowledges that he is only entitled to the severance
benefits and compensation set forth in this agreement, and that all other claims
for any other benefits or compensation are hereby waived, except those expressly
stated in the preceding sentence.
Executive expressly waives and relinquishes all rights and benefits under that
section and any law of any jurisdiction of similar effect with respect to his
release of claims.