[LETTERHEAD] COVOL TECHNOLOGIES, INC.
March 6, 1996
Xx. Xxxxxxx Xxxxxxxx
AGTC, Inc.
0 Xxxxxxx Xxx
Xxxxxxxxxxxx XX 00000
Dear Xxxx,
The purpose of this letter is to memorialize our agreement concerning terms
under which Covol Technologies, Inc. ("Covol") will utilize the services of
AGTC, Inc. - Xxxx Xxxxxxxx, Alpine Coal Company, Inc. - Xxxx Xxxxx and X.X.
Xxxxxx and Associates, Inc. - Xxxxx Xxxxxx, Xx. (hereafter referred to as
"AGTC"). All of the work that will be performed by AGTC is subject to the
approval of Covol Technologies, Inc. ("Covol").
AGTC intends to use its best efforts to investigate, identify and participate in
the selection of project sites for the construction of suitable coal extrusion
manufacturing facilities (the "Project"). Each Project (capacity 1,000,000 tons
per year) will be identified based on an economic evaluation of centralized
locations, which minimize transportation costs, maximize the quantity of
available coal and coal fines and consider the interests of potential end users,
Covol and XxXxx or other qualified purchasers. AGTC will negotiate relating to
contractual arrangements with respect to the use of the selected sites for
purposes of constructing the Project. AGTC will assist with the acquisition of
all necessary mining, air quality, water discharge and property use permits
which must be secured for each Project site.
AGTC intends to investigate, identify and participate in the selection of
suitable coal fines reserves or supply sources for purposes of furnishing the
Project with a source of raw materials. AGTC will negotiate relating to
contractual arrangements with respect to the supply of coal resources for the
Project. AGTC will assist with all necessary mining, air quality, water
discharge and property use permits which must be secured for each Project site.
AGTC intends to investigate, identify and participate in the selection of
suitable end users or consumers of the coal product produced. AGTC will assist
with negotiations relating to contractual arrangements with respect to the sale
of the coal product produced by the Project.
As compensation for services, AGTC will receive a combination of the following
four items:
1. A monthly retainer of $35,000 to be paid on the first of each month.
Payment is to be made by wire transfer to the account of AGTC, Inc.
2. Reimbursement for all direct expenses which are defined as airfare,
lodging, car rental and meals incurred in conjunction with project
development.
3. The retainer and reimbursement for expenses (Items 1 and 2) will remain
in place until the Project is placed into commercial operation. At the
time the Project is placed into commercial operation, the product
sales commission, as defined hereafter, will become effective and the
monthly retainer and reimbursement for expenses (Item 1 and 2) and will
no longer be paid. The product sales commission for all coal sold will
be on a graduated incentive scale for all coal contracted for FOB plant
as follows:
[LETTERHEAD]3280 NO. FRONTAGE ROAD, LEHI, UT 00000 000-000-0000 FAX 000-000-0000
1
(a) Sales price less than $23.49 per ton: Product Sales Commission
= $1.00 per ton.
(b) Sales price greater than $23.50 and less than $26.00 per ton:
Commission = $1.50 per ton.
(c) Sales price greater than $27.00 and less than $30.99 per ton:
Commission = $2.00 per ton.
(d) Sales price greater than $31.00 and less than $49.99 per ton:
Commission = $2.50 per ton.
(e) Sales price greater than $50.00 per ton:
Commission = 10% per ton.
4. At the time and date of closing for the monetizing or sale of any
Project, a commission of each percent (8%) of the gross sales or
monetized price of the Project shall be paid to AGTC. After the time
and date of closing, AGTC will no longer be entitled to Items 1, 2 and
3 above.
RESPONSIBILITIES OF COVOL. Covol will use its best efforts in connection with
the following responsibilities:
License to Use Coal Technology. Covol agrees to license its proprietary
Coal Technology, as defined in Exhibit "A" (to be furnished by Covol),
to operating companies to be established hereafter by the parties. The
operating companies will be entitled to commercially exploit Covol's
Coal Technology and related binding agents by means of the production,
marketing and sale of coal briquette products and related goods and
services. Covol at its sole discretion shall grant the operating
companies a license to use the trademarks, trade names and service
marks used by Covol and pertaining to the Coal Technology.
Use of Proprietary Binder. Covol shall sell and supply to the operating
companies all of their needs, and the operating companies shall
exclusively buy from Covol all of their respective requirements, for
the proprietary binding agents.
Construction Services. Covol shall be responsible to coordinate all
construction services incident to the manufacturing facilities,
including the execution of such documents of assignment or otherwise as
may be necessary to insure the operating companies qualify for Section
29 Tax Credits as contemplated herein (i.e., all necessary assignments
of existing binding contracts under IRC Section 29).
Section 29 Tax Credits. Covol's Coal Technology was approved under a
Private Letter Ruling by the IRS for Section 29 Tax Credits. Covol
cannot warrant or guarantee the continuation of the Private Letter
Ruling or the application of the Private Letter Ruling to the operating
entities in the future.
Financing. Covol shall utilize its best efforts to coordinate and
acquire the necessary financing for the manufacturing facilities to be
constructed by Covol.
MISCELLANEOUS PROVISIONS. Covol and AGTC agree to the following additional
provisions:
Confidentiality and Nondisclosure. Information of a confidential and
proprietary nature ("Confidential Information") will be shared between
the parties as commercially necessary for the purposes hereof AGTC
agrees to and shall strictly maintain during the term hereof and for
three years afterwards the Confidential Information of Covol, including
specifically the "Coal Technology" and all proprietary manufacturing
processes incident thereto. The parties acknowledge that the
Confidential Information has not been disclosed, published or
disseminated to third parties so as to have become public knowledge or
to be found in the public domain, and that they have required, or will
be required hereafter, all persons to whom Confidential Information has
been, or will be, disclosed to execute a written agreement containing
commercially reasonable confidentiality provisions against unauthorized
disclosure.
Governing Law. This agreement shall be governed by Utah law.
Arbitration. Any and all disputes which may arise between the parties
shall be finally resolved and settled exclusively by arbitration to be
held in Salt Lake City, Utah before a panel of three (3) arbitrators
under the American Arbitration Association's Commercial Arbitration
Rules.
Progress Reports and Standing Meeting Schedule. To insure that open and
direct communication is maintained between the parties, a standing
meeting schedule shall be established whereby written progress reports
shall be exchanged between the parties and discussed at no shorter
intervals than every week.
Critical Path. A critical path shall be established to facilitate
performance hereunder. This critical path shall be reviewed at each
weekly standing meeting.
Modification and Integration. This agreement shall constitute the
entire agreement of the parties with respect to the subject matter
hereof and no modification hereof will be legally recognized unless
executed in writing by both parties.
Term. This agreement will automatically renew annually until such time
that the Project is sold or monetized and AGTC is paid the commission
for each Project they presented. At the end of four (4) months AGTC
shall have presented to Covol at least two (2) Projects ready to be
financed for construction and then placed into commercial operation. If
less than two (2) Projects are presented and accepted then the retainer
shall be renegotiated or canceled and the agreement may be canceled.
Acceptance of the Projects presented by AGTC shall be with
the sole discretion of Covol based on its own analysis of the economic
viability of any such Projects. If this agreement is terminated, the
terms of this agreement will continue to apply to any Projects that
have been presented by AGTC at the time of termination and which are
accepted and constructed by Covol, until the time of monetizing or sale
of such Projects.
If this letter of intent accurately sets forth your understanding of our
intentions and agreements, please execute both copies of this letter in the
space provided below and return one copy to us.
Sincerely,
AGTC, Inc. Alpine Coal Company, Inc. X.X. Xxxxxx & Associates,
Inc.
/s/ Xxxx Xxxxxxxx /s/ Xxxx Xxxxx /s/ Xxxxx Xxxxxx, Xx.
By: By: By:
Its: President Its: President Its: President
Acknowledgment
Xxxx authorized, agreed to and accepted this 6th day of March, 1996.
Covol Technologies, Inc.
/s/Xxxxx Xxxxxxx
By:
Its:
