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EXHIBIT 10.5
MARKETING SERVICES AGREEMENT
This Marketing Services Agreement (the "Agreement") is dated as of
March 3, 2000 (the "Effective Date") by and among Pegasus Technologies, Inc., a
South Dakota corporation with offices in Denver, Colorado and Mentor, Ohio
("Pegasus"), Net Power Solutions, LLC, a limited liability company formed under
the laws of the State of Colorado, with offices in Denver, Colorado (the
"Company" or "NPS"), KFuel, LLC, a Delaware limited liability company, with
offices in Denver, Colorado ("KFuel"), KFx Inc., a Delaware Corporation, with
offices in Denver, Colorado ("KFx") and Kennecott Energy Company, a Delaware
corporation with offices in Gillette, Wyoming and Denver, Colorado
("Kennecott"). Pegasus, NPS, KFuel, KFx and Kennecott are sometimes collectively
referred to herein as the "Parties" and individually as a "Party".
RECITALS
The Parties are entering into this Agreement for the following reasons:
A. Pegasus is principally engaged in the development and installation
of a neural net software and related technology, including any upgrades
and improvements developed in connection therewith, which shall be
referred to as the "Pegasus Products" for use in electric utility
generation facilities for the purpose of improving the efficiency of
coal-fired plants and reducing the emission of NOx and other
potentially harmful pollutants from such plants;
B. The majority and principal stockholder of Pegasus is KFx. KFx is
also a 51% member of KFuel which is engaged in the development of a
coal enhancement technology known as the "K-Fuel Process" that utilizes
heat and pressure to form an upgraded coal ("K-Fuel Products") for use
by electric utilities in coal-fired boilers;
C. Kennecott is a minority stockholder in Pegasus, a major producer of
coal in the United States and the largest producer of low sulfur coal
from the Powder River Basin in Montana and Wyoming. Kennecott is also a
49% member of KFuel;
D. Kennecott and Pegasus formed the Company for the primary purpose of
marketing Pegasus Products, the Coal Services and Coal Products (as
hereinafter defined) to electric utilities throughout the United
States;
E. Kennecott believes that the successful implementation of Pegasus
Products will have a beneficial effect on Kennecott's business and
potential coal markets;
F. Pegasus believes that the knowledge, sophistication, and resources
of Kennecott in utility markets will enhance the ability of the Company
to market Pegasus Products and related services and technology.
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AGREEMENT
THEREFORE, in consideration of the mutual promises exchanged herein and
other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties hereby agree as follows:
1.0 Marketing Services. The Company will provide marketing services and
overall coordination of its marketing activities as required by Pegasus
in connection with marketing Pegasus Products, Coal Products and Coal
Services. The marketing services will include among other things, the
preparation and annual update of a marketing plan to (a) identify
potential customers and their specific needs, (b) provide an economic
analysis to identify optimal pricing and economic returns for Pegasus
Products, Coal Products and Coal Services with respect to targeted
customers (the "Marketing Plan"), and (c) develop an integrated sales
and marketing program for the Pegasus Products, Coal Products and Coal
Services. The Company will coordinate the marketing of all Pegasus
Products for the Company whether or not it is the entity that makes the
direct sale. The Company will coordinate marketing of Pegasus Products
with the marketing of Coal Products and Coal Services by Kennecott.
2.0 Kennecott Support.
2.1 Marketing Manager. Kennecott will make available and the
Company will utilize the services of a Kennecott employee
experienced in coal marketing and utility analysis to direct
the marketing services to be provided by the Company to
Pegasus (the "Marketing Manager"). Kennecott will be
responsible for the compensation and benefits of the Marketing
Manager.
2.2 Coal Products and Services. Assuming mutual agreement on
essential contractual terms can be reached, Kennecott will
provide NPS and its customers with access to coal from
Kennecott affiliated mines ("Kennecott Coal") and, where
appropriate, will broker coal from non-Kennecott affiliated
mines ("Third Party Coal") (together, the Kennecott Coal and
Third Party Coal will be known as "Coal Products"). Kennecott
will also provide coal transportation, coal delivery, coal
inventory management and other coal-related services ("Coal
Services") that may be requested or required by the Company to
assist it in marketing Pegasus Products.
3.0 K-Fuel Process. At such time as the K-Fuels Process becomes
commercially feasible, NPS shall have the right to market K-Fuel
Products on a non-exclusive basis. KFx, Kennecott and KFuel each agrees
to provide NPS with the necessary rights and support to market K-Fuel
Process and K-Fuel Products to the appropriate targeted customers.
4.0 Principles of Marketing. The Parties agree that the following
principles will apply in connection with marketing of the Coal
Products, Coal Services and the Pegasus Products:
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4.1 Potential Customers. The Pegasus Products will be marketed to
utilities with the economic and technical wherewithal to
understand and appreciate the benefits and risks of utilizing
such products and to provide the appropriate indemnifications
to Pegasus and NPS in connection with such utilization (the
"Potential Customer(s)"). A transaction involving the sale of
Pegasus Products, Coal Services and Coal Products (or a mix
thereof) offered to a Potential Customer by NPS will be
referred to herein as a "Proposed Transaction".
4.2 Kennecott Involvement. Kennecott will have the right but not
the obligation to market or sell Coal Products and Coal
Services as part of any Proposed Transaction, it being
understood that Kennecott shall have no obligation to provide
such Coal Services or Coal Products if the Proposed
Transaction is not deemed by Kennecott to be either viable or
sufficiently profitable to Kennecott.
4.3 Pegasus Involvement. Pegasus will have the right to sell or
license the Pegasus Products through NPS for a Proposed
Transaction but it is not required to do so if the Proposed
Transaction is not deemed by Pegasus to be viable or
sufficiently profitable to Pegasus. Even if NPS is not
directly involved in a Proposed Transaction, Kennecott will
have the right to participate in communications with the
Potential Customer and, to the extent permitted by the
Potential Customer, to receive information provided by the
Potential Customer to Pegasus or NPS for use in the marketing
of Coal Products, Coal Services and Pegasus Products by NPS
and for the general use of Kennecott in understanding the
coal-related needs of the Potential Customer.
4.4 Related Sales. The Parties acknowledge and agree that other
suppliers of services and products to Potential Customers may
become involved in attempting to market the Pegasus Products
to Potential Customers without any requirement to reimburse
NPS for services provided with respect to such sales ("Related
Sales"); provided, however, the Parties acknowledge that to
the extent practicable, that Related Sales' opportunities
shall be developed through NPS. .
4.5 Marketing Information and Transaction Documentation; Marketing
Manager Approval. In order to assure coordination of the sales
efforts and the use and development of documentation
appropriate for the contemplated transactions, Pegasus agrees
that it will require all other parties to coordinate their
Related Sales activities with the Marketing Manager. No
written agreement involving a Related Sale or a Proposed
Transaction will be executed without prior review and approval
of the Marketing Manager as to the form of the written
documentation. The Marketing Manager will also coordinate and
approve any advertising
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materials or information brochures utilized in connection with
the development of a potential Related Sale or a Proposed
Transaction.
4.6 Kennecott's Access to Information. To the extent permitted by
the Potential Customer and applicable law, Kennecott will have
the right to obtain coal-related information from the
Potential Customer for use in the marketing of Coal Products,
Coal Services, and Pegasus Products by NPS and for the general
use of Kennecott in understanding the coal-related needs of
the Potential Customer.
4.7 Potential Kennecott Conflicts. The Company and Pegasus each
recognize that Kennecott may currently market and sell Coal
Products and Coal Services to the Potential Customers and that
Kennecott will continue its ongoing sales activities with such
Potential Customers while it may be marketing for or
negotiating with a particular Potential Customer with respect
to Coal Products and Coal Services associated with the
marketing and sale of the Pegasus Products.
4.8 Potential Pegasus Conflicts. Kennecott recognizes that Pegasus
may currently market Pegasus Products to Potential Customers
who are also customers or Potential Customers of Kennecott,
independent from NPS. Kennecott acknowledges that Pegasus will
continue its ongoing activities while Kennecott may be
marketing for or negotiating with a particular Potential
Customer for Coal Products and Coal Services produced from the
operating affiliates of Kennecott and while the Company may be
marketing to or negotiating with Potential Customers with
respect to Pegasus Products.
4.9 Pricing of Products. The Parties agree that the goal of NPS
will be to provide a "Power Solution" to Potential Customers
that will decrease their operating costs and/or improve their
operations (either by way of emissions reductions,
enhancements in efficiencies, or both). NPS will establish a
price for Pegasus Products, Coal Services and Coal Products
that covers the aggregated revenue that each of its
Participants would have received were they individually to
deal with the Potential Customers (the "Agreed Revenue") and
an amount to cover the costs plus an agreed markup for the
Marketing Manager and KFx personnel such as Xxx Xxxxxxx, when
working with NPS in selling its Power Solution, as applicable,
(together, the Agreed Revenue and the markup for the Marketing
Manager and KFx personnel shall be referred to as the "Base
Price"). As part of a Proposed Transaction, NPS will strive to
share in the benefit that the Potential Customer will enjoy
either from reduced costs or increased revenues (a "Successful
Transaction") to the Potential Customer and will provide a
formula for sharing in the resulting efficiencies to the
Potential Customer over and above the Base Price benefit (the
"Benefit Portion").
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5 Cost Sharing. Initially, Pegasus and Kennecott will each be responsible
for its own costs and the reimbursement of its own employees associated
with developing the Company's marketing activities. To the extent that
a sale of Pegasus Products is made without a corresponding sale of Coal
Products or Coal Services, Kennecott will be reimbursed for the time
directly expended by its Marketing Manager in effecting the Successful
Transaction. Similarly, to the extent that sales of Coal Services and
Coal Products are made without a corresponding sale of Pegasus
Products, KFx shall be reimbursed for the time directly expended by
such party in effecting the Successful Transaction to the extent such
time has not already been compensated for by Pegasus. To the extent
that a sale of Pegasus Products is associated with a sale of Coal
Products and/or Coal Services, Kennecott and KFx, as applicable, will
not seek reimbursement for the time directly expended by the Marketing
Manager or the KFx participant in connection with that Successful
Transaction.
6 Revenue Sharing. After each Participant has received the Agreed Revenue
for its own product or service from the Base Price, it will share in
the additional upside available from the Benefit Portion of a
Successful Transaction. This sharing will occur based on the relative
value added by each Participant and will be agreed to prior to entry
into any Proposed Transaction. Neither Pegasus nor Kennecott will be
required to proceed with a joint or separate proposal if it is not
satisfied with the "Agreed Revenue" or the determination of the
"relative value" represented by the Base Price or the Benefit Portion.
The difference between the Agreed Revenue and the Base Price shall be
allocated among the Parties in a manner consistent with Section 4.10
above.
7 Identified Supplier of Products and Services. To the extent that the
Potential Customer wants a Pegasus Product, Pegasus will provide it. To
the extent that the Potential Customer wants Coal Products or Coal
Services, Kennecott will provide them. Neither Pegasus nor Kennecott
will be required to enter into any agreement or provide any service or
product unless it is satisfied with the profit potential and terms of
the transaction. Each Participant will bear the cost of providing its
respective Product and Service.
8 Miscellaneous.
8.1 Confidentiality. The Parties hereto acknowledge and agree that
all information obtained in connection with this Agreement or
the operations of the Company in the provision of services
hereunder and the receipt and review of information from any
Potential Customer (whether in written, oral or electronic
form) shall be maintained in confidence by such Party and its
employees, officers and agents and not disclosed to any third
party without the consent of the providing party or as may
otherwise be required by applicable law.
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8.2 Notices. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon
personal delivery to the party to be notified: (b) when sent
by facsimile if sent during normal business hours of the
recipient, if not, then on the next business day; (c) five
days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (d) two days
after deposit with a nationally recognized overnight courier
service, specifying next day delivery. All communications
shall be sent to the parties hereto at the respective
addresses set forth below:
If to Kennecott: Kennecott Energy Corporation
000 X. Xxxxxxxx Xxx.
P.O. Box 3009
Gillette, WY 82717-3009
Attention: Xxxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
With a copy to: Xxxxx, Xxxxxx & Xxxxxx LLP
0000 Xxxxxxxx Xxxxx
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxxxxxxx
Facsimile: (000) 000-0000
If to KFx Inc.: KFx Inc.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Chairman
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxxxx Xxxxx
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
If to the Company: Net Power Solutions, LLC
0000 Xxxxx Xxxxxxxx Xxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
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If to Pegasus Technologies, Inc.: Pegasus Technologies, Inc.
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxx 00000
Attention: Chairman
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxxxx Xxxxx
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
8.3 Entire Agreement. This Agreement supersedes any other agreement,
whether written or oral, that may have been made or entered into by the
Parties relating to the matters contemplated hereby, including the Term
Sheet dated as of February 8, 2000 among Kennecott, KFx and Pegasus,
and constitutes the full and entire understanding and agreement between
the Parties with regard to the subject matter hereof.
8.4 Term. Unless otherwise extended by the mutual agreement of the Parties
hereto, this Agreement shall remain in full force and effect until the
earlier of March 3, 2003 or the date the Parties hereto mutually agree
to terminate the Agreement.
8.5 Assignment. Any Party hereto may assign this Agreement to the surviving
party in any merger or consolidation in which it participates or to a
purchaser of all or substantially all of its assets or capital stock.
Otherwise, no Party to this Agreement may assign any rights or delegate
any duties hereunder without the prior written consent of the other
Parties, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, any Party hereto may assign its rights
and obligations hereunder to any wholly owned subsidiary or the parent
thereof without the prior consent of any Party hereto.
8.6 Amendment. This Agreement may only be amended in writing by the
agreement of all Parties hereto.
8.7 Governing Law.
(a) This Agreement shall be governed in all respects by the laws
of the State of Colorado as such laws are applied to
agreements between Colorado residents entered into and
performed entirely in Colorado
(b) Any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this
Agreement may be brought or otherwise commenced in any state
or federal
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court located in the City and County of Denver, Colorado. Each
Party to this Agreement:
(i) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in
the County of Denver, Colorado (and each appellate
court located in the State of Colorado) in connection
with any such legal proceeding, including to enforce
any settlement, order or award;
(ii) agrees that each state and federal court located in the
City and County of Denver, Colorado shall be deemed to
be a convenient forum; and
(iii) waives and agrees not to assert (by way of motion, as
a defense or otherwise), in any such legal proceeding
commenced in any state or federal court located in the
City and County of Denver, Colorado, any claim that
such Party is not subject personally to the
jurisdiction of such court, that such legal proceeding
has been brought in an inconvenient forum, that the
venue of such proceeding is improper or that this
Agreement or the subject matter of this Agreement may
not be enforced in or by such court.
(c) Each Party hereto agrees to the entry of an order to enforce
any resolution, settlement, order or award made pursuant to
this Section by the state and federal courts located in the
County of Denver, Colorado and in connection therewith hereby
waives, and agrees not to assert by way of motion, as a
defense, or otherwise, any claim that such resolution,
settlement, order or award is inconsistent with or violative
of the laws or public policy of the laws of the State of
Colorado or any other jurisdiction.
(d) Each Party to this Agreement hereby knowingly, voluntarily,
and intentionally waives the right to a trial by jury in
respect of any litigation arising out of, under or in
connection with this Agreement, this waiver being a material
inducement for each such Party to enter into this Agreement.
8.8 Waiver. A provision of this Agreement may be waived only by a written
instrument executed by or on behalf of the party waiving compliance.
The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right at a later
time to enforce the same. No waiver by any Party of any condition, or
of any
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breach of any term, covenant, representation or warranty contained in
this Agreement, in any one or more instances, shall be construed to be
a waiver of any other condition or of any other breach of the same or
any other term, covenant, representation or warranty.
8.9 Counterparts; Facsimile. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. This Agreement (or any
counterpart hereof) may be delivered by a Party by facsimile, which
facsimile delivery shall be effective as if the original counterpart
had been delivered.
8.10 Expenses. Each Party hereto will pay its own expenses incurred in
connection with the transactions contemplated hereby, whether or not
such transactions shall be consummated.
8.11 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the Parties hereto and their respective permitted successors
and assigns and are not for the benefit of, nor may any provision
hereof be enforced by, any other person.
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IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT AS OF THE
EFFECTIVE DATE.
KENNECOTT ENERGY COMPANY
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, Vice President and CFO
KFx INC.
By: /s/ Xxxx X. Xxxxxxxxx
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Xxxx X. Xxxxxxxxx, Executive Vice President
and CFO
PEGASUS TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxxxxx
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Xxxx X. Xxxxxxxxx, Vice President of
Finance and CFO
NET POWER SOLUTIONS, LLC
By: Kennecott Energy Company, its Manager
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, Vice President and CFO
KFUEL, LLC
By: KFx Inc., its Manager
By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx, Vice President
