EXCLUSIVE FINANCIAL ADVISOR AGREEMENT
This Exclusive Financial Advisor Agreement ("Agreement") is made as of
September 16, 1996, between Covol Technologies, Inc., a Delaware corporation
("Covol") and Coalco Corporation, a Massachusetts corporation ("COALCO").
WHEREAS, Covol is seeking financing in connection with its synthetic
coal producing, facility currently located at Xxxxxxx, Utah (the "Facility").
WHEREAS, Covol has generally discussed its objectives and activities
with COALCO and desires COALCO to assist with such financing in accordance with
the terms and conditions of this Agreement.
NOW, THEREFORE. in consideration of the mutual covenants and agreements
set forth below, it is hereby covenanted and agreed by the parties hereto as
follows:
1. Term and Duties.
(a) Covol engages COALCO as an independent contractor to
advise and consult with it with respect to financing for the Facility, the sale
of some or all of the Facility or other similar material transactions during the
period commencing on the date hereof and terminating on the Final Date (as
hereafter defined). COALCO's responsibilities under this Agreement shall be to
provide to Covol a list of prospective investors (the "Investor Lists"), to
introduce Covol to the person or entities on the Investor List, and to initiate
discussions with those parties. If Covol and COALCO mutually agree, COALCO may
initiate discussions with other parties which are not on the Investor List but
which are specified by Covol. The persons, entities and parties on the Investor
List or specified by Covol to COALCO for discussion are collectively referred to
herein as the "Investors." COALCO may have such other duties hereunder as the
parties may mutually agree. It is understood and agreed that COALCO has no
authority to contractually obligate Covol in any way whatsoever and that any
obligations of Covol must be authorized by the duly authorized representative of
Covol.
(b) For purposes of this Agreement,
"Final Date" means the later of August 20, 1997 or the
six-month anniversary of the "Operations Date";
"Operations Date" means the first date on which the Facility
has produced and sold 5,000 tons of synthetic coal product during any
consecutive 30-day period, provided (i) such Facility has been placed in service
within the meaning of Section 29(f) and (g) of the Code, and (ii) substantially
all of the energy content (expressed in MMBtus) of the synthetic coal comprising
such production and sale qualifies for the credit under Section 29 of the Code;
and
"Code" means the Internal Revenue Code of 1986, as amended and
any successor statute thereto.
(c) If, prior to the Final Date, any discussions initiated by
COALCO with an Investor on the Investor List or with an Investor specified by
Covol as described above result in (i) Covol selling a material portion (or
substantially all) of the Facility, or (ii) C financing or an investment for its
activities with respect to the Facility, (B) a binding commitment which results
in such financing, invent or sale, or (C) a guarantee which enables such
financing, investment or sale (including from a third party), (collectively the
"Financing"), Covol agrees to pay COALCO the compensation in the amount and at
the times provided in Section 5 hereof. COALCO shall be entitled to the
compensation provided for herein even if some, most or all of the actual funding
of the Financing occurs after the Final Date.
2. Related Transactions. Covol agrees to pay COALCO additional
compensation in the amount and at the times provided in Section 5 hereof, with
particular regard to the provisions of Section 5(e) if:
(a) (i) Covol receives any Financing from any Investor at any
time prior to the Final Date, and (ii) such Investor provides any other
Financing to Covol or any affiliate thereof (with respect to any facility
producing synthetic coal or substantially similar product) at any time during
the five (5) year period commencing on the date of the closing of the Financing
to Covol; or
(b) Covol or any affiliate thereof receives any Financing with respect
to any facility producing synthetic coal or substantially similar product from
any Investor on the Investor List at any time prior to December 31, 1998 and a
significant portion of the benefits intended to be received by such Investor as
a result of making such Financing is in the form of credits under Section 29 of
the Code.
3. No Requirements for Investment.
(a) Nothing combined in this Agreement requires Covol to accept any
Financing on the terns or conditions thereof. COALCO shall be entitled to the
compensation provided in Section 5 hereof only if Covol or any affiliate thereof
accepts any portion of the Financing and actually receives, directly or
indirectly, the gross proceeds of any portion thereof.
(b) This Agreement does not constitute a commitment or undertaking by
COALCO to provide any portion of the Financing, and not ensure the successful
arrangement or completion of any such Financing or any portion thereof.
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*** Missing informaiton mya be available upon request to the Company
4. Investor List. The term "Investor" as used in this Agreement shall
include any subsidiary or affiliate of such Investor. COALCO may add Investors
to the Investor List at arty time during the term hereof, with the consent of
Covol which consent shall not be unreasonably withheld. Investors may be removed
from the Investor List only by mutual agreement. Any investor directly
introduced to Covol by an Investor on the Investor List shall also be deemed to
be an Investor on the Investor List "introduced" by COALCO to Covol for all
purposes of this Agreement. However, the foregoing principle or secondary
introductions shall apply beyond the second step (i.e., COALCO introduces A,
which introduces B) only when such further introductions (i.e., B introduces C,
C introduces D, etc.) involve the material and active participation of COALCO in
the introduction which result in a Financing.
5. Compensation.
(a) Covol agrees to pay COALCO a fee in the amount set forth in this
Section 5 in the event that at any time prior to the "Final Date" Covol receives
any Financing from an Investor on the Investor List or an Investor specified by
Covol as described in Section 1 hereof.
(b) In the event the aggregate amount of the Financing is receive by
Covol in one lump sum at or soon after the closing of the Financing, the fee in
dollars payable to COALCO hereunder shall equal:
(i) ***
(ii) ***
(c) In the event the aggregate amount of the Financing is received by
Covol in quarterly installments based primarily on the Production Amount (as
defined below) during the calendar quarter immediately preceding the calendar
quarter in which Covol receives such installment, the fee in dollars payable to
COALCO hereunder shall be paid quarterly and shall equal each calendar quarter:
(i) ***
(ii) ***
(d) For purposes of this Section 5,
"Production Amount" shall mean the energy content (expressed in MMBtus
of the synthetic coal projected to be produced (by the Facility ) and sold to
any purchaser (which is unrelated to Covol within the meaning of Section
29(a)(2)(A) of the Code) during a specified period; provided, however that (A)
prior to the summation of the energy content for each calendar quarter during
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the specified period, such energy content shall be increased on an annual basis
commencing on January 1, 1996, by an amount equal to the change in the GNP
implicit price deflator ("GND") for the prior calendar year with 1995 as the
base year; (B) if the manner in which the GND is determined is substantially
revised or the GND shall become unavailable, the parties hereto shall cooperate
in good faith to determine an acceptable alternative comparable index; and (C)
in computing such energy content, there shall be excluded the energy content
resulting from such production and sale which does not or will not qualify, for
the credit under Section 29 of the Code.
"F" shall mean the aggregate gross proceeds of the Financing received,
directly or indirectly, by Covol at or soon after the closing of such Financing.
"T" shall mean the Production Amount (as defined above) during the
period commencing on the date of closing of such Financing and ending on
December 31, 2007, as accepted by the Investor in connection with its providing
the Financing.
"Q" shall mean the aggregate gross proceeds of the installments of the
Financing received, directly or indirectly, by Covol during a specific calendar
quarter.
"P" shall mean the Production Amount (as defined above) during the
calendar quarter immediately preceding the calendar quarter during which "Q" (as
defined above) is received by Covol.
(e) In the event the aggregate amount of the Financing is received by
Covol in a manner other than as specified in Section 5(b) or (c) above, the
parties shall use their best efforts to determine an acceptable alternative
comparable method to calculate the fee payable to COALCO hereunder so that the
amount of such fee and the manner of its payment shall be substantially the same
as described in Sections 5(b), (c) and (d) above and Section 5(f) below.
(f) The sums due pursuant to this Section 5 shall be paid to COALCO
contemporaneously with the receipt of the actual cash proceeds of the lump sum
payment or each installment of the Financing by Covol from the Investor. All
fees (or portions thereof) which are not paid within 30 toys of Covol's receipt
of the related cash proceeds from the Investor shall bear interest at 12% per
annum commencing on the date of such receipt by Covol.
6. Representations, Warranties Covenants and Agreements of Covol.
Covol hereby represents, warrants, covenants and agrees that:
(a) No Untrue Statement; Compliance with Securities Laws. No Document
(as defined in Section 9(a) hereof) will include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Furthermore, Covol represents and warrants
that any projections provided by Covol to
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COALCO or any Investor in connection with any aspect of the Financing will have
been prepared in good faith and will be based upon assumptions which, in light
of the circumstances under which they were made, are reasonable.
(b) Notification of Subsequent Material Events. If Covol incurs any
material liability or obligation, direct or contingent, or enters into any
material transaction not in the ordinary course of business, or there has been
any material adverse change in the financial position or results of operation of
Covol, then Covol shall promptly notify COALCO of any such event.
(c) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by Covol and constitutes a valid and binding
agreement of Covol enforceable in accordance with its terms, except as may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law); the performance of this Agreement by Covol and the
consummation by Covol of the transactions contemplated herein, will not result
in a material breach of any of the terms and provisions of, or constitute a
default under, any law, regulation, indenture, mortgage, deed of trust, note,
agreement, lease or other agreement or instrument to which Covol is a party or
by which it or any of its property is bound, or under any rule or regulation or
order of any court or other governmental agency or body applicable to Covol;
and, no consent, approval, authorization or order of any court or governmental
agency or body has been or is required for the performance of this Agreement by
Covol, or for the consummation by Covol of the transactions contemplated hereby.
7. Exclusivity; Non-solicitation. By the terms of this Agreement,
COALCO has been appointed by Covol as its sole and exclusive financial advisor
with respect to matters pertaining to any Financing. Accordingly, Covol agrees
that it will not solicit, entertain proposals from, or hold discussions with,
any other person or entity regarding a Financing to Covol with respect to the
Facility, during the period commencing the date hereof and ending on the Final
Date, except for discussions with Investors on the Investor List or Investors
specified by Covol as set forth in Section 1 hereof which are initiated by, or
immediately referred to, COALCO.
8. Indemnification.
(a) Indemnification of COALCO. Covol agrees to indemnify, defend and
hold harmless COALCO, its shareholders, directors, officers, employees and
agents (individually, the "Indemnitee" and collectively, the "Indemnitees"),
from and against any losses, claims, damages or liabilities, joint or several,
including costs and reasonable attorneys' fees incurred in the investigation and
defense of such claims, to which any Indenmitee becomes subject, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof), arise
out of or are based, directly or indirectly, upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any documents or
written material
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furnished by Covol to COALCO or any Investor in connection with the transactions
contemplated herein (collectively, the "Documents"), (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, (iii) any breach by Covol of any of its
representations, warranties, covenants or agreements in this Agreement, or (iv)
any Financing. In addition, Covol agrees to reimburse each Indemnitee for any
legal or other expenses reasonably incurred by such Indemnitee in connection
with investigating or defending any such loss, claim, damage, liability or
action.
(b) Indemnification of Covol. COALCO agrees to indemnify, defend and
hold harmless Covol, its shareholders, directors, officers, employees and agents
(individually the "Covol Indemnitee" and collectively, the "Covol Indemnitees"),
for any willful violation by COALCO in connection with the transactions
contemplated herein, of (i) any applicable state or federal law or any rule or
regulation thereunder, provided that such violation is not based upon any
violation by any Covol Indemnitee of such law, rule or regulation, or (ii) any
breach by COALCO of any of its representations, warranties, covenants or
agreements in this Agreement.
(c) Notice of Claim. Within 30 allays of the receipt by a party
entitled to indemnification or legal defense under Section 8(a) or (b) hereof of
notice of the commencement of any action referred to therein, such indemnified
party shall, if any claim in respect thereof is to be made against the
indemnifying party under Section 8(a) or (b), notify the indemnifying party in
writing of the commencement thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
the indemnified party otherwise than under Section 8(a) or (b) hereof. In case
any action shall be brought against any indemnified party, and it shall notify
the indemnifying party of the commencement thereof, the indemnifying xxxxx shall
be entitled to participate in, and, to the extent that it shall wish, jointly
with any indemnifying party similarly notified, to assume the defense thereof
with counsel satisfactory to the indemnified party. After notice to the
indemnified party of its election to so assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under Section
8(a) or (b) for any expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than the reasonable costs of
investigation; provided, however, that the indemnifying party shall continue to
be liable for all other losses sustained by the indemnified party to the extent
provided in Section 8(a) or 8(b) hereof. No indemnification shall be required
hereunder for any payment made in settlement of any suit or claim unless such
payment is approved by the indemnifying party or by a court of competent
jurisdiction.
(d) Contribution. If the indemnification provided in Section 8(a) above
is for any reason held to be unavailable, then Covol shall contribute to any
damages paid by any Indemnitee. If the indemnification provided in Section 8(b)
above is for any reason held to be unavailable, then COALCO shall contribute to
any damages paid by the Covol Indemnitee. Any contribution in either case shall
be based on relative fault and on the relative benefits received.
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9. Confidentiality. Neither party hereto stall disclose any of the
terms, conditions or other aspects of the transactions contemplated herein,
except to their advisors, shareholders and Investors and the advisors of such
Investors. Any information (a) provided by COALCO to Covol or by Covol to
COALCO, and (b) which is not otherwise customarily excluded for the definition
of confidential information, shall be treated in accordance with the
confidentiality agreement dated on or about July 2, 1996, signed by Covol and
LKD Energy Corporation as if such agreement were reciprocal with respect to the
treatment of such information and as if the agreement had been signed by Covol,
on the one hand, and by COALCO, on the other hand.
10. Termination. This Agreement shall terminate on the Final Date,
unless sooner terminated by any party hereto in accordance with this Section.
The term of this Agreement may be extended by mutual agreement of all of the
parties hereto. Covol shall have the right to terminate this Agreement in the
event of a material default by COALCO under this Agreement or a material breach
of any representation or warranty by COALCO under this Agreement; and COALCO
shall have the right to terminate this Agreement in the event of the occurrence
of one of the events with respect to Covol set forth In Section 6(b) hereof, a
material default by Covol under this Agreement or a material breach of any
representation or warranty by Covol under this Agreement; provided in the case
where a non-defaulting party asserts that a material default has occurred, it
shall notify the defaulting party in writing and allow the party in default a
period of 30 days from the date of receipt of such notice to cure the default.
In the event of a default or breach under this Agreement by my party hereto, the
the other parties shalt have all rights and remedies as are provided at law or
in equity in addition to the rights expressly provided herein.
Notwithstanding anything contained herein, the provisions of Sections
2, 5, 8 and 9 hereof shall remain operative and in full force and effect, and
shall survive the termination or expiration of this Agreement.
11. Notices. All notices, demands and other communications provided for
or permitted herein shall be in writing and shall be deemed properly served (i)
by hand delivery, telecopy or other facsimile transmission, on the day sued at
the time on which delivered to the intended recipient at the address or
telecopier number set forth in this Agreement, (ii) if sent by mail, on the
third business day after the day on which deposited in the United States
certified or registered mail, postage prepaid, return receipt requested,
addressed to the intended recipient at its address set forth in this Agreement;
or (iii) if by Federal Express or other reputable express mail service for
overnight delivery, on the next business day after delivery to such express mail
service, addressed to the intended recipient at its address set forth in this
Agreement. All notices required or permitted to be served upon either party
hereunder will be directed to:
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if to CovoL, to: Covol Technologies, Inc.
0000 Xxxxx Xxxxxxxx Xxxx
Xxxx, Xxxx 00000
Attn: Xxxxxxx Xxxxxxx, President
(000) 000-0000 (fax)
if to COALCO, to: COALCO
c/x Xxxxxx Management Corp.
00 Xxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx
(000) 000-0000 (fax)
Any party may specify a different address or telecopier number by
sending the other parties a notice thereof in the manner specified in this
Section 11.
12. Construction. All questions with respect to the construction of
this Agreement and the rights and liabilities of the parties hereunder shall be
determined in accordance with the laws of the State of Massachusetts. The
parties agree that, to the extent possible, the federal and/or state courts of
the State of Massachusetts shall have jurisdiction over any litigation entered
into hereunder. If the parties hereto so agree in writing at the time any
dispute arises, any dispute between any of the parties hereto arising under this
Agreement which cannot be settled may be submitted to arbitration conducted in
accordance with the Rules of the American Arbitration Association. The award or
decision rendered by any arbitrator shall be final, and judgment may be entered
in any court having jurisdiction concept that any party may petition a court of
competent jurisdiction for review of errors of law.
13. Counterparts. This Agreement may be executed in counterparts
each of which shall be deemed an original and all of which shall constitute a
single agreement
14. Headings. The headings appearing in this Agreement are
intended for convenience and reference only, and are not to be considered in
construing this Agreement or any part hereof.
15. Severability. If any term or provision of this Agreement or the
application thereof to any party or circumstance be invalid or unenforceable to
any extent, the remainder of this Agreement or the application of such terms or
provisions to persons or circumstances other than those to which it has been
held invalid or unenforceable shall not be affected thereby and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
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16. Successors and Assigns. Subject to the restrictions on assignment
herein contained, the terms and provisions of this Agreement shall be binding
upon, and shall inure to the benefit of, the successors, assigns and personal
representatives of the respective parties hereto. This Agreement shall not
(directly, indirectly. contingently or otherwise) confer or be construed as
conferring any rights or benefits on any person or entity not named as a party
hereto, except as otherwise specifically provided in Section 9 hereof. No party
hereto may assign this Agreement or any of its obligations hereunder without the
prior consent of the other parties. except that COALCO may subcontract out or
delegate any or all of its obligations hereunder without obtaining the consent
of Covol, provided in such case, COALCO is not relieved of any of its
obligations or liabilities hereunder.
17. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior oral or written agreements end understandings between the
parties relating to the subject matter hereof.
18. Amendments. This Agreement may only be amended or modified by a written
instrument signed by both parties hereto.
IN WITNESS WHEREOF, COVOL and COALCO have executed this Agreement as of the
date set forth above.
COVOL TECHNOLOGIES, INC.
a Delaware corporation
By: Xxxxxxx Xxxxxxx
COALCO CORPORATION,
a Massachusetts corporation
By: Xxxxxxx X. Xxxxxx
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