Exhibit 10.96

 

 

 

 

26 October   2007

 

Mr. Steven G. Stewart

2134523 S. Sunset Circle

Bountiful, UT  84010

 

Re:                          Employment Agreement

 

Dear Steve:

 

I am pleased to confirm your employment as Chief Financial Officer of Headwaters
Incorporated (“the Company”) and offer terms and conditions of employment as set
forth in this letter agreement (this “Agreement”).  This Agreement supersedes
the terms of the Employment Transition Agreement between you and the Company
dated 1 October 2005 (“Transition Agreement”).  You may accept this Agreement by
signing and returning a copy of this Agreement as provided below.

 

1.             Term of Employment.    Your new employment assignment as CFO
commenced effective 4 September 2007 (“CFO Start Date”) and shall continue under
this Agreement until 30 September 2010, unless it is terminated earlier either
by you or the Company or is extended by both you and the Company in a signed
writing (“Transition Date”), and then for an additional 24 months (“Separation
Date”).  Your employment under this Agreement is terminable at will by you or
the Company at any time (for any reason or for no reason) subject to the
provisions of Section 3.   This Agreement is personal to you and you may not
assign or delegate any of your rights or obligations hereunder.

 

2.             Position and Duties.  Between the CFO Start Date and the
Transition Date (“CFO Service Period”), you shall report to the Chief Executive
Officer of the Company.  Your duties shall include the duties set forth in the
bylaws of the Company for your position and as customarily performed by the CFO
of Headwaters and any other duties the Board and the Chief Executive Officer of
the Company may delegate to you from time to time.  You will be expected to
commit your attention and efforts to the position on a full-time basis.  During
the CFO Service Period, you may serve on two boards, either corporate, civic, or
charitable, as long as such activities do not materially conflict with the
performance of your duties under this Agreement.  Between the Transition Date
and the Separation Date (“Transition Period”), you will be employed as the
Director of Financial Affairs of the company to work on such projects as
determined by the Chief Executive Officer or Chief Financial Officer of the
Company.

 

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3.             Compensation and Benefits.  In consideration for your services to
the Company during the time period in which this Agreement is effective, you
shall receive the following compensation and benefits:

 

                (a)           Base Salary.  During the CFO Service Period, the
Company shall pay you an annual base salary at the rate of $304,685 per year. 
Your salary will be reviewed on an annual basis during the CFO Service Period,
and may be increased at the discretion of the Company.  During the Transition
Period, the Company shall pay you an annual base salary at the rate of $120,000
per year.  At all times, your salary shall be paid in installments according to
the Company’s regular payroll policy.  The Company shall withhold and deduct all
applicable federal and state income and employment and disability taxes from
your salary and other compensation payable under this Agreement or otherwise, as
required by applicable laws.

 

                (b)           Annual Incentive Opportunity.  During the CFO
Service Period, you shall be eligible to participate in any bonus plan which the
Company may maintain or establish for its executives on the terms of such plan
and the awards thereunder.  Currently, the Company maintains a Short Term
Incentive Bonus Plan (“STIB Plan”).  You will be eligible to participate in the
STIB Plan effective 1 October 2007 with a Bonus Percent of 40 percent and
subject to other terms of the STIB Plan, as may be amended.  In lieu of
participating in the FY2007 STIB Plan, you have received a bonus payment in
September 2007 in the amount of $88,700.  On the appropriate future date or
dates consistent with the STIB Plan and awards thereunder, you will be paid any
banked bonus amounts.

 

                (c)           Retention Bonus.  Conditioned upon your remaining
continuously employed as CFO through 31 December 2008 and that you perform your
duties in a manner acceptable to the CEO, you will be paid a retention bonus
amount of $90,000 (less taxes and applicable withholdings) in the first full pay
period of January 2009.

 

                (d)           Long Term Incentives.  During the CFO Service
Period, you shall be eligible to participate in future long term incentive
programs which the Company may establish for its executives, on the terms of
such programs and grants thereunder.

 

                (E)           SECTION 401(K) PLAN AND ESPP. DURING THE CFO
SERVICE PERIOD, YOU WILL BE ELIGIBLE TO PARTICIPATE IN THE COMPANY’S 401(K) PLAN
AND EMPLOYEE STOCK PURCHASE PLAN, SUBJECT TO THE TERMS OF THOSE PLANS.

 

                (F)            HEALTH, WELFARE, AND OTHER BENEFITS.  SUBJECT TO
THE TERMS OF SUCH OTHER PLANS, YOU SHALL BE ELIGIBLE TO RECEIVE THROUGH THE
SEPARATION DATE SUCH OTHER BENEFITS OR RIGHTS AS MAY BE PROVIDED UNDER ANY
EMPLOYEE BENEFIT PLANS PROVIDED BY THE COMPANY TO ITS EXECUTIVES THAT ARE NOW OR
HEREAFTER WILL BE IN EFFECT, INCLUDING PARTICIPATION IN LIFE, MEDICAL,
DISABILITY, AND DENTAL INSURANCE PLANS, AND PARTICIPATION IN THE COMPANY VEHICLE
POLICY.

 

 

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                (G)           EXTENDED MEDICAL BENEFIT.  CONDITIONED UPON YOUR
REMAINING CONTINUOUSLY EMPLOYED AS CFO THROUGH 30 SEPTEMBER 2010 (PROVIDED THAT
THIS CONDITION SHALL NOT APPLY IN THE CASE OF TERMINATION WITHOUT CAUSE OR FOR
GOOD REASON IF SECTION 3(I)(2) IS APPLICABLE), YOU AND YOUR SPOUSE (PAULA
STEWART) WILL BE ELIGIBLE TO PARTICIPATE IN THE MEDICAL BENEFIT PLAN PROVIDED BY
THE COMPANY TO ITS REGULAR, FULL-TIME EXECUTIVES THROUGH THE DATES THAT YOU AND
YOUR SPOUSE INDIVIDUALLY BECOME ELIGIBLE FOR FEDERAL MEDICARE, AT THE COMPANY’S
REGULAR LEVEL OF EXPENSE CONTRIBUTION.  EACH YEAR AT OPEN ENROLLMENT, YOU WILL
BE NOTIFIED OF CHANGES IN MEDICAL PLAN BENEFITS AND YOU WILL BE GIVEN THE SAME
ELECTION OPTIONS AVAILABLE TO THE COMPANY’S REGULAR, FULL-TIME EXECUTIVES.  THE
FOREGOING EXTENDED MEDICAL BENEFIT SHALL BEGIN AFTER THE TERMINATION OF COBRA
BENEFITS FOLLOWING THE SEPARATION DATE. DURING THE COBRA PERIOD, ALL COBRA
PREMIUMS WILL BE PAID BY THE COMPANY.  THE COMPANY WILL BE RESPONSIBLE TO PAY
THE COST OF YOUR PARTICIPATION AND YOUR SPOUSE’S PARTICIPATION IN THE EXTENDED
MEDICAL BENEFIT PLAN THROUGH THE DATE THAT YOU BECOME ELIGIBLE FOR MEDICARE
BENEFITS.  YOU WILL BE RESPONSIBLE TO PAY THE COST OF YOUR SPOUSE’S
PARTICIPATION AFTER THE DATE THAT YOU BECOME ELIGIBLE FOR MEDICARE BENEFITS. 
THE BENEFITS PROVIDED BY THE COMPANY UNDER THIS PROVISION WILL BE REPORTED ON
FORM W-2 OR FORM 1099, AS APPLICABLE, AND YOU WILL BE RESPONSIBLE FOR ANY
ASSOCIATED TAX OBLIGATION.  IF FOR ANY REASON, THE COMPANY CEASES TO OFFER
MEDICAL BENEFITS TO ITS REGULAR, FULL-TIME EXECUTIVES, THE COMPANY SHALL BE
UNDER NO OBLIGATION TO CONTINUE THE FOREGOING EXTENDED MEDICAL BENEFIT TO YOU OR
YOUR SPOUSE.  IN SUCH CASE, THE COMPANY SHALL PAY YOU A LUMP SUM PAYMENT EQUAL
TO THE FAIR VALUE OF THE COMPANY’S PAST LEVEL OF EXPENSE CONTRIBUTION FOR
BENEFITS THAT YOU WOULD HAVE RECEIVED, BUT NOT MORE THAN $50,000.

 

                (H)           VACATION AND SICK LEAVE.  YOU SHALL BE ENTITLED TO
FOUR WEEKS PAID VACATION PLUS SICK LEAVE ON THE SAME BASIS AS ALL OTHER
EXECUTIVES OF THE COMPANY IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE
COMPANY’S VACATION AND SICK LEAVE POLICIES.

 

                (i)            Termination and Change in Control.

 

                                (1)           Termination for any Reason.  In
the event that your employment with the Company is terminated for any reason
(including Cause, as defined in section 3(j)(1) below), then you (or your
estate, if applicable) shall be entitled to payment of your accrued but unpaid
salary and vacation pay through the date of the termination of your employment.

 

                                (2)           Termination Without Cause or for
Good Reason.   In the event that your employment is terminated by the Company
without Cause or is terminated by you for a Good Reason prior to the Separation
Date and no later than six months following the initial existence of the
condition constituting Good Reason, then, provided that you execute and deliver
within 45 days of termination an effective release in a form to be provided by
the Company with terms substantially as set forth in the attached Exhibit A, you
shall be entitled to:

 

(A)                         continued participation in the medical benefit plan
provided by the Company to its executives then in effect as provided in section
3(g) above;

 

 

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(B)           payment in a lump sum 60 days following termination of the product
of two multiplied by the sum of:

                                                                               
(i)            your annual base salary at the rate in effect as of your
termination of employment, or, if higher, the highest rate in effect during the
two-year period prior to the date of termination, and

                                                                               
(ii)           the highest amount of any additional cash incentive compensation,
including but not limited to any sums awarded under the Company’s STIB Plan (or
any replacement or successor plans), awarded to you for either (but not both) of
the two preceding fiscal years most recently ended.

                (C)           the continued use for sixty days of the Company
vehicle on similar terms.

                                (3)           CHANGE IN CONTROL.   THE COMPANY
WILL ENTER INTO A CHANGE IN CONTROL AGREEMENT WITH YOU EFFECTIVE AS OF THE CFO
START DATE, WHICH AGREEMENT IS INCORPORATED BY REFERENCE.  IN THE EVENT YOU
BECOME ELIGIBLE TO RECEIVE THE SEVERANCE PAYMENTS AND BENEFITS UNDER THE CHANGE
IN CONTROL AGREEMENT, SUCH AS IN THE EVENT YOUR EMPLOYMENT WITH THE COMPANY IS
TERMINATED WITHIN THE PROTECTION PERIOD PRIOR TO AND FOLLOWING A “CHANGE IN
CONTROL” AS DEFINED IN THE CHANGE IN CONTROL AGREEMENT, THEN ANY SEVERANCE
PAYMENTS AND BENEFITS TO BE PROVIDED TO YOU BY THE COMPANY SHALL BE MADE UNDER
THE CHANGE IN CONTROL AGREEMENT IN LIEU OF SEVERANCE PAYMENTS AND BENEFITS UNDER
THIS AGREEMENT, EXCEPT THAT UPON A CHANGE IN CONTROL, YOU WILL BE ENTITLED TO
THE EXTENDED MEDICAL BENEFIT PROVIDED UNDER SECTION 3(G) ABOVE, NOTWITHSTANDING
ANYTHING IN THE CHANGE IN CONTROL AGREEMENT TO THE CONTRARY, AND THE PROVISIONS
OF THE CHANGE IN CONTROL AGREEMENT PERTAINING TO THE YOUR EMPLOYMENT AND
POST-TERMINATION COVENANTS AND ARBITRATION AS PROVIDED IN THE CHANGE IN CONTROL
AGREEMENT SHALL APPLY TO YOU INSTEAD OF THE PROVISIONS HEREIN PERTAINING TO YOUR
EMPLOYMENT AND POST-TERMINATION COVENANTS AND ARBITRATION SET FORTH IN SECTIONS
5 AND 9, RESPECTIVELY.

 

                (J)            DEFINITIONS.

 

                AS USED IN THIS AGREEMENT, THE FOLLOWING TERMS SHALL HAVE THE
MEANINGS SET FORTH BELOW:

 

                                (1)           “Cause” shall mean:

 

                                                (i)            your engaging in
willful misconduct against the Company that is materially injurious to the
Company; provided that any action undertaken with a reasonable and good faith
belief that it is in the best interests of the Company shall not constitute
willful misconduct for purposes of this clause (i).

 

                                                (ii)           your engaging in
any activity that is a conflict of interest or competitive with the Company;

 

 

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                                                (iii)          your engaging in
any act of fraud or dishonesty that is materially injurious to the Company or
any of their subsidiaries or any material breach of federal or state securities
or commodities laws or regulations;

 

                                                (iv)          your engaging in
an act of assault or other acts of violence in the workplace;

 

                                                (v)           your harassment of
any individual in the workplace based on age, gender, or other protected status
or class or violation of any policy of the Company regarding harassment;  or

 

                                                (vi)          your conviction,
guilty plea or plea of nolo contendre for any felony crime.

 

Provided, that upon the CEO or General Counsel of the Company obtaining
knowledge of any of the foregoing conditions, the Company must provide written
notice to you of the existence of any of the foregoing conditions (i) through
(vi) within 60 days of the knowledge of the existence of the condition, and if
you have the ability and in fact cure the condition and harm caused thereby
within thirty (30) days following the written notice, Cause shall be deemed not
to exist.

 

                                (2)           “Good Reason” shall mean any one
of the following without your consent:

 

                                                (i)            a demotion or any
action by the Company which results in material diminution of your position,
reporting relationship, authority, duties or responsibilities (other than
changes permitted by this Agreement or any insubstantial action not taken in bad
faith);

 

                                                (ii)           requirement that
you report to work more than 50 miles from the Company’s existing headquarters
(not including normal business travel required of your position);

 

                                                (iii)          a material
reduction in your base salary or benefits (unless, in the case of a reduction in
benefits only, such reduction in benefits applies generally to executives of the
Company, and not including changes permitted by this Agreement or otherwise
resulting from your change in position upon the Transition Date pursuant to this
Agreement); or

 

                                                (iv)          a material breach
by the Company of its obligations hereunder.

 

Provided, that you must provide written notice to the Board of the existence of
any of the foregoing conditions (i) through (iv) within 60 days of the initial
existence of the condition, and if the Company cures the condition within thirty
(30) days following the written notice, Good Reason shall be deemed not to
exist.

 

 

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4.             Code Section 409A Compliance.

 

                (a)           To the fullest extent applicable, amounts and
other benefits payable under this Agreement, and amounts and benefits payable
under any other agreements or plans referenced in this Agreement are intended to
be exempt from the definition of “nonqualified deferred compensation” under
Section 409A of the Internal Revenue Code in accordance with one or more of the
exemptions available under the final Treasury regulations promulgated under
Section 409A.  In this regard, each payment under this Agreement, including
without limitation, each payment other than a life annuity (within the meaning
of Treasury Regulation Section 1.409A-2(b)(2)(ii)) in a series of scheduled
installments (within the meaning of Treasury Regulation Section
1.409A-2(b)(2)(iii)), shall be deemed a separate payment for purposes of Code
Section 409A.  To the extent that any such amount or benefit is or becomes
subject to Section 409A due to a failure to qualify for an exemption from the
definition of nonqualified deferred compensation in accordance with such final
Treasury regulations, this Agreement is intended to comply with the applicable 
requirements of Section 409A with respect to such amounts or benefits.   This
Agreement shall be interpreted and administered to the extent possible in a
manner consistent with the foregoing statement of intent.

 

                (b)           Notwithstanding anything in this Agreement or
elsewhere to the contrary, if you are a “specified employee” as determined by
the Company’s Compensation Committee on the date of termination of employment
within the meaning of Code Section 409A, and the Company reasonably determines
that any amount or other benefit payable under this Agreement, including
Transition Period compensation and benefits, on account of your termination of
employment constitutes nonqualified deferred compensation that will subject  you
to “additional tax” under Section 409A(a)(1)(B) of the Code (together with any
interest or penalties imposed with respect to, or in connection with, such tax,
a “409A Tax”) with respect to the payment of such amount or the provision of
such benefit if paid or provided at the time specified in the Agreement, then
the payment or provision thereof shall be postponed to the first business day of
the seventh month following the date of termination or, if earlier, the date of
your death (the “Delayed Payment Date”). You and the Company may agree to take
other actions to avoid the imposition of a 409A Tax at such time and in such
manner as permitted under Section 409A.  In the event that this Section 4
requires a delay of any payment, such payment shall be accumulated and paid in a
single lump sum on the Delayed Payment Date.  In addition, the provisions of
this Agreement which require the commencement of payments subject to Section
409A upon a termination of employment shall be interpreted to require that you
have a “separation from service” with the Company as defined for purposes of
Code Section 409A.

 

5.             Employment and Post Termination Covenants.   By accepting the
terms of this Agreement and as a condition for the termination payments and
benefits you hereby agree to the following covenants in addition to any
obligations you may have by law and make the following representations:

 

 

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                (a)           Confidentiality.  You acknowledge that, in
connection with your employment by the Company, you will have access to trade
secrets of the Company and its subsidiaries 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 you from a source (other than the
Company) that you reasonably believe is not prohibited from disclosing such
information to you 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; (iv) you are
obligated to produce as a result of a court order or pursuant to governmental
action or proceeding, provided that you give 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; or (v)
business knowledge you have acquired unrelated to any specific proprietary
information relating to the Company.  You covenant and agree that, both during
and after the term of your employment with the Company, you 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 you duties hereunder) or use
any Confidential Information for your 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.  You agree
that all inventions, copyrightable material, software, formulas, trademarks,
trade secrets and the like which are developed or conceived by you in the course
of your 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, you hereby
sell and assign all right, title and interest in and to all such Intellectual
Property to the Company, and you 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. Your obligation under this Section 4(b) to

 

 

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assign to the Company inventions created or conceived by you shall not apply to
an invention that you developed entirely on your 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 you for the Company.

 

                (c)           Non-Solicitation.  You agree for a period of not
less than twenty four (24) months following termination of your employment or
service with the Company that you shall not solicit the services or employment
or engage the services or employ any of the employees of the Company or its
affiliated companies.

 

                (D)           NON-COMPETITION.  FOR A PERIOD OF 24 MONTHS
FOLLOWING THE TERMINATION OF YOUR EMPLOYMENT OR SERVICE WITH THE COMPANY, YOU
AGREE NOT TO COMPETE DIRECTLY OR INDIRECTLY BY BECOMING A PRINCIPAL, PARTNER,
SHAREHOLDER, EQUITY HOLDER, LIMITED LIABILITY COMPANY MEMBER, AGENT, OFFICER,
OTHER EMPLOYEE, ADVISOR, CONSULTANT, MEMBER OF A BOARD OF DIRECTORS, OR BY
BECOMING INTERESTED IN ANY OTHER CAPACITY, WITH ANY BUSINESS THAT COMPETES WITH
ANY ACTIVITY OF THE COMPANY OR ITS AFFILIATES CONDUCTED AT ANY TIME DURING THE
TWO YEARS PRIOR TO TERMINATION, OR CONDUCTED DURING THE SIX MONTHS PERIOD
FOLLOWING THE TERMINATION, AS A RESULT OF PLANS INITIATED PRIOR TO SUCH
TERMINATION, INCLUDING ACQUISITIONS.

 

                (E)           AUTHORIZATION TO WORK FOR THE COMPANY.  YOU
REPRESENT THAT YOU ARE LEGALLY AUTHORIZED TO WORK IN THE UNITED STATES AND THAT
YOUR EMPLOYMENT WITH THE COMPANY SHALL NOT CONSTITUTE A VIOLATION OF ANY
CONTRACTUAL OR OTHER LEGAL OBLIGATION YOU MAY HAVE TO ANOTHER ENTITY OR
EMPLOYER.

 

                (F)            BREACH OF TERMS OF SECTION 5.  THE PARTIES TO
THIS AGREEMENT AGREE THAT (I) IF YOU BREACH THE PROVISIONS SET FORTH IN SECTIONS
5, 7 AND 9 OF THIS AGREEMENT, THE DAMAGE TO THE COMPANY MAY BE SUBSTANTIAL,
ALTHOUGH DIFFICULT TO ASCERTAIN, AND MONEY DAMAGES WILL NOT AFFORD THE COMPANY
AN ADEQUATE REMEDY, AND (II) IF YOU ARE IN BREACH OF ANY PROVISIONS OF SECTIONS
5 AND 7 OF THIS AGREEMENT OR THREATEN A BREACH OF ANY PROVISION OF SECTIONS 5
AND 7 OF THIS AGREEMENT, THE COMPANY SHALL BE ENTITLED, IN ADDITIONAL TO ALL
OTHER RIGHTS AND REMEDIES AS MAY BE PROVIDED BY LAW, TO SEEK SPECIFIC
PERFORMANCE AND INJUNCTIVE AND OTHER EQUITABLE RELIEF TO PREVENT OR RESTRAIN A
BREACH OF ANY PROVISION OF THIS SECTIONS 5 AND 7 OF THIS AGREEMENT.

 

6.             Business Expenses.  You shall be entitled to reimbursement by the
Company for such customary, ordinary and necessary business expenses as are
incurred by you in the performance of your duties and activities associated with
promoting or maintaining the business of the Company.  All expenses as described
in this paragraph shall be reimbursed only upon presentation by you of such
documentation as may be reasonably necessary to substantiate that all such
expenses were incurred in the performance of your duties in accordance with the
Company’s policies.

 

 

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7.             Return of Company Property.  On the Separation Date or as earlier
requested by the Company, you agree to return to the Company all Company
documents (and all copies thereof) and other Company property in your possession
or control, including, but not limited to, Company files, correspondence, memos,
notebooks, notes, drawings, records, business plans and forecasts, financial
information, specifications, computer-recorded information, tangible property
and equipment, credit cards, entry cards, identification badges and keys; and
any materials of any kind that contain or embody any proprietary or confidential
information of the Company (and all reproductions thereof in whole or in part)
(collectively, the “Company Property”). You agree to conduct a good faith and
diligent search of your belongings in advance of the aforementioned deadline to
ensure your compliance with the provisions of this Section 7.

 

8.             Binding on Successors.  This Agreement may be assigned by the
Company to a successor by merger, acquisition, consolidation or otherwise to the
business formerly carried on by the Company and shall be binding upon the
Company and any entity which is a successor by merger, acquisition,
consolidation or otherwise to the business formerly carried on by the Company,
or an affiliate of any such entity, and becomes your employer by reason of (or
as the direct result of) any direct or indirect sale or other disposition of the
Company or substantially all of the assets of the business currently carried on
by the Company, without regard to whether or not such person actively adopts
this letter agreement.

 

9.             Arbitration.  The parties agree that any future disputes between
you and the Company 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 as provided below, except as provided in Section 9(g) below.

 

                (a)           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.

 

                (b)           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.

 

                (c)           If the matter is not resolved, the parties agree
that the dispute shall be resolved by binding arbitration pursuant to the
commercial arbitration rules of the International Institute of Conflict
Prevention and Resolution (“CPR”), including any provisions thereof pertaining
to discovery.  If the parties are not able to agree upon the selection of an
arbitrator, an arbitrator shall be selected according to the applicable
procedures established by the CPR.

 

 

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                (d)           The arbitrator shall have the authority to
determine whether the conduct complained of in Section 9(a) violates the
complainant’s rights under this Agreement and, if so, to grant any relief
authorized by law; subject to the provisions of Section 9(g) 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.

 

                (e)           The Company shall pay for the arbitrator’s fees,
while each party shall pay its own attorneys’ fees.

 

                (f)            Arbitration shall be the exclusive final remedy
for any dispute between the parties under this Agreement and 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 9(a) and (b) above.

 

                (g)           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 you 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.

 

                (h)           The arbitration shall be held at a location within
Salt Lake City, Utah unless the parties mutually agree to a different location
for the arbitration.

 

                (i)            In the event that the Company wishes to contest
or dispute a termination for Good Reason by you, it must give written notice of
such dispute within the ninety (90) calendar day period after the date of your
resignation.  If you wish to contest or dispute a termination for Cause by the
Company, or any failure to make payments claimed to be due hereunder, you must
give written notice of such dispute within ninety (90) calendar days of
receiving a Notice of Termination.  You may, at either your or the Company’s
option, be suspended from all duties during the pendency of such a contest or
dispute.  If you prevail in any such contest or dispute, the Company or its
successor or assign shall thereupon be liable for the full amounts due under
Section 3 as of the date of termination after adjustments for amounts already
paid.

 

10.          Indemnification.  The Company has entered into an indemnification
agreement with you effective as of the CFO Start Date, which agreement is
incorporated by reference.

 

 

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11.          Miscellaneous.

 

(a)           This Agreement constitutes the complete, final and exclusive
embodiment of the entire agreement between you and the Company with regard to
the terms and conditions of your employment with the Company and your
anticipated termination of employment. It is entered into without reliance on
any promise or representation, written or oral, other than those expressly
contained herein, and it supersedes any other such promises, warranties or
representations and any other written or oral statements concerning your rights
to any compensation, equity, or benefits from the Company, its predecessors or
successors in interest, including specifically, but not limited to, the
Transition Agreement.

 

(b)           Subject to the mandatory arbitration provided in Section 9 above,
jurisdiction and venue in any action to enforce any arbitration award or to
enjoin any action that violates the terms of this Agreement shall be in the
state and federal courts serving the locality of Salt Lake City, Utah.

 

(c)           This Agreement may not be modified or amended except in a writing
signed by both you and a duly authorized officer of the Company. This Agreement
shall bind the heirs, personal representatives, successors and assigns of both
you and the Company, and inure to the benefit of both you and the Company, their
heirs, successors and assigns. If any provision of this Agreement is determined
to be invalid or unenforceable, in whole or in part, this determination shall
not affect any other provision of this Agreement and the provision in question
shall be modified by the court so as to be rendered enforceable in a manner
consistent with the intent of the parties insofar as possible.  Headings and
subheadings in this Agreement are solely for convenience and do not constitute
terms of this Agreement.

 

(d)           This Agreement may be signed in counterparts and the counterparts
taken together shall constitute one agreement. Facsimile or photocopied
signatures shall be deemed as effective as original signatures.

 

(e)           This Agreement shall be deemed to have been entered into and shall
be construed and enforced in accordance with the laws of the State of Utah
irrespective of any conflicts of law analysis.

 

If this Agreement is acceptable to you, please sign below and return the
original, fully executed Agreement to Harlan M. Hatfield, General Counsel.  A
copy of the Agreement is also being provided to you for your records.

 

 

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I look forward to your future contributions to the Company.

 

Sincerely,

 

 

 

 

 

HEADWATERS INCORPORATED

 

AGREED AND ACCEPTED:

 

 

 

    /s/ Kirk A. Benson

 

    /s/ Steven G. Stewart

Kirk A. Benson

 

Steven G. Stewart

Chief Executive Officer

 

Date: 10-26-07

 

 

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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 parent,
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, nonforfeitable 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
or any of the agreements contemplated hereby (including the indemnification
agreement and the stock option agreements).  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.

 

The Company agrees to irrevocably and unconditionally release, acquit and
forever discharge Executive 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 Company has, has had, or may in the future claim to have
against the Executive, liability for which the Company would otherwise be
obligated to indemnify the Executive under Delaware law, the Certificate of
Incorporation of the Company, the bylaws of the Company, or the Executive’s
indemnification agreement with the Company by reason of, arising out of, related
to, or resulting from Executive’s employment with the Company or the termination
thereof (the “Company’s Release”), provided that (i) Executive shall have

 

 

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acted in good faith and in a manner that Executive reasonably believed to be in
or not opposed to the best interest of the Company, and shall not have engaged
in willful misconduct or breach of an agreement with the Company; and (ii) the
Company’s Release shall not extend to any acts or omissions of the Executive for
which the Company would be prohibited from indemnifying the Executive under
Delaware Law,  the provisions of the Certificate of Incorporation, or  the
Bylaws of the Company then in effect or which would excuse, negate, or
invalidate the obligations of the insurer under any director and officer
liability policy procured by the Company and covering the Executive.

 

 

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