THIS CALL OPTION AGREEMENT (this "Agreement"), dated as of
February 20 1998, between Birmingham Syn Fuel, L.L.C., an Oregon limited
liability company ("Birmingham"), on the one hand, and Covol Technologies, Inc.,
a Delaware corporation ("Covol"), on the other hand.
WHEREAS, Reference is made to that certain Alabama Project
Purchase Agreement, dated as of March 20, 1997 as amended by letter agreements
dated June 27, 1997, July 7, 1997, August 28, 1997, December 12, 1997 and
February 20, 1998 (the "Purchase Agreement") by and between Covol and Alabama
Synfuel #1 Ltd., a Delaware limited partnership ("Alabama Synfuel"), as Sellers,
on the one hand, and Birmingham, as Buyer on the other hand. Capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to such
terms in the Purchase Agreement.
WHEREAS, the parties are mutually unwilling to close the
transfer of the Alabama Project under the Purchase Agreement unless each of the
parties hereto executes and delivers, and agrees to be bound by the terms of
this Agreement.
WHEREAS, each party hereto has received and will receive
material, direct or indirect benefits, by virtue of the execution, delivery and
performance by the other parties of the obligations under the Purchase Agreement
and the other Transaction Documents, it being acknowledged by each party hereto
that this Agreement is given in consideration of, among other things, such
benefits received and to be received by each party hereto and is not gratuitous.
NOW THEREFORE, in consideration of the foregoing and the
mutual promises and undertakings in this Agreement and the other Transaction
Documents, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant of Call Option. Birmingham hereby grants to Covol a call
option to require Birmingham to sell all of the right, title and interest of
Birmingham in the Alabama Project and in all the Transaction Documents
(excluding (i) any Shares (as such term is defined in the Loan Agreement)
received pursuant to the exercise of conversion rights under the Loan Agreement,
and (ii) all rights under the Registration Rights Agreement (as such term is
defined in the Loan Agreement; such non-excluded interests collectively referred
to as the "Interest") on the following terms and conditions:
(a) The call option granted hereby (the "Option") may only be
exercised during the Option Period (as defined below); provided, however, that
the Option may not be exercised at any time there has occurred and is continuing
any Default or Event of Default with respect to the payment of money by Covol or
any Affiliate of Covol (including, without limitation, Alabama Synfuel #1, Ltd.,
a Delaware limited partnership) to any of the PFS Parties under any of the
Transaction Documents (unless such Default or Event of Default has been waived
by the PFS Parties; it being acknowledged by the parties hereto that any such
waiver shall be in the sole discretion of the PFS Parties).
(b) For purposes hereof, the period beginning the first
Business Day immediately succeeding January 1, 2010 and ending sixty (60) days
thereafter shall be the "Option Period".
(c) The Option shall be exercisable by irrevocable written
notice (the "Option Notice") given to Birmingham by Covol at any time during the
Option Period. The Option Price (defined below) shall be payable in immediately
available U.S. funds on the closing date, which shall be a date, selected by
Covol, not more than the later of (i) sixty (60) days after the receipt by
Birmingham of the Option Notice or (ii) ten (10) Business Days after receipt of
the appraisal contemplated under subclause (d) below.
(d) The "Option Price" for the Interest shall be equal to the
fair market value of the Interest, which shall be set by mutual agreement of the
parties hereto; provided, however, that in the event that at the time of the
exercise of the option hereunder there is an outstanding Event of Default under
any of the Transaction Documents, the occurrence of which adversely effects the
fair market value of the Interest, the fair market value of the Interest shall
be determined as if such Event of Default had not occur; provided, further,
that, if the parties cannot agree on the Option Price within fifteen (15)
Business Days after the receipt by Birmingham of the Option Notice, the Option
Price shall be determined as follows:
(i) Subject to subclause (ii) hereof, the fair market value
shall be determined by an independent appraiser(s) experienced in
appraising similar projects in the Southeastern United States, who
shall be mutually agreed to by Birmingham and Covol; provided, however,
if they cannot agree within ten (10) Business Days after the Option
Notice, then Birmingham, on the one hand, and Covol, on the other hand,
shall each appoint an appraiser within the next succeeding ten (10)
Business Days and such appraisers shall jointly determine the fair
market value of the Interest; provided, further, that if either
Birmingham, on the one hand, or Covol, on the other hand, shall fail to
appoint an appraiser within such 10-Business Day period, the
determination of fair market value of the Interest by the single
appraiser appointed shall be final; provided, further, that if two
appraisers shall be appointed and within twenty (20) Business Days
after the appointment of the latter of such two appraisers, such two
appraisers cannot agree upon such amount, such two appraisers shall,
within 5 Business Days after such 20-Business Day period, appoint a
third appraiser and such amount shall be determined by such three
appraisers, who shall make their separate appraisals within ten (10)
Business Days following the appointment of third appraiser, and any
determination so made shall be final; provided, further, that, if no
such third appraiser is appointed within such 5-Business Day period,
either Birmingham, on the one hand, or Covol, on the other hand, may
apply to the Salt Lake City Office of the American Arbitration
Association to make such appointment, and Birmingham and Covol shall be
bound by any appointment so made;
(B) If three appraisers shall be appointed as contemplated under
subclause (A) and the difference between the determination which is farther
from the middle determination and the middle determination is more than 125%
of the difference between the middle determination and the third
determination, then such farther determination shall be excluded, the
remaining two determinations shall be averaged and such average shall be
final and binding upon Birmingham and Covol; otherwise, the average of all
three determinations shall be final and binding upon Birmingham and Covol;
(C) The expenses of the appraisal procedure shall be borne by
Covol.
2. Releases. Upon payment of the Option Price, each of the parties
hereto(and any Affiliate of any such parties) shall be automatically released
from any further obligations under the Transaction Documents (except for the
obligations under this Agreement and obligations and liabilities arising out of
an outstanding Event of Default under any of the Transaction Documents arising
prior to the exercise by Covol of the option hereunder).
3. Delivery of Interests; AS-IS. Upon payment in full of the Option Price,
Birmingham shall transfer to Covol all of its Interest. Birmingham shall only be
required to represent that it is transferring its entire Interest, that it has
made no prior transfers with respect to its Interest and that it has not
encumbered its Interest with any Liens. EXCEPT AS EXPRESSLY SET FORTH IN THE
IMMEDIATELY PRECEDING SENTENCE, THE TRANSFER OF THE INTEREST SHALL BE MADE "AS
IS," AND NEITHER BIRMINGHAM NOR ANY AFFILIATE THEREOF SHALL BE DEEMED TO HAVE
MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, NOW OR HEREAFTER AS TO
ANY OTHER MATTER RELATING TO THE INTERESTS, INCLUDING, WITHOUT LIMITATION, (A)
AS TO THE VALUE OF THE INTERESTS, OR THE VALUE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY, QUALITY OF MATERIAL OR WORKMANSHIP, FITNESS FOR USE OR FOR A
PARTICULAR PURPOSE, MAINTENANCE, OR MARKETABILITY OF THE ALABAMA PROJECT, (B) AS
TO THE CREDITWORTHINESS OF ANY OBLIGOR UNDER ANY DOCUMENT, OR (C) AS TO THE
ENFORCEABILITY OF ANY TRANSACTION DOCUMENT.
4. Further Assurances. Each party agrees, at the request of the other party,
at any time and from time to time after the exercise of the Option, to execute
and deliver all such further documents, and to take and forbear from all such
action, as may be reasonably necessary or appropriate in order more effectively
to perfect the transfers of rights contemplated herein or otherwise to confirm
or carry out the provisions of this Agreement.
5. Notices. All notices to or demands or requests of the parties
hereto shall be given pursuant to the terms of the Purchase Agreement.
6. Interpretation.
(a) Ambiguities. The parties acknowledge that each party and its
counsel has materially participated in the drafting of this Agreement and the
other Transaction Documents; consequently, the rule of contract interpretation,
that ambiguities, if any, in a writing be construed against the drafter, shall
not apply.
(b) Headings. The section headings in this Agreement are included
for convenience only; they do not give full notice of the terms of any portion
of this Agreement and are not relevant to the interpretation of any provision of
this Agreement.
(c) Governing Law. The parties intend that this Agreement shall be
governed by and construed in accordance with the laws of the State of Utah
applicable to contracts made and wholly performed within Utah by persons
domiciled in Utah (without regard to choice of law rules).
(d) Calculation of Time Periods. In the computation of any period
of time provided for in this Agreement, the day of the act or event from which
the period of time runs shall be excluded, and the last day of the period shall
be included, unless it is a Saturday, Sunday, or bank holiday under federal or
Utah law, in which case the period shall be deemed to run until the end of the
next day that is not a Saturday, Sunday, or bank holiday under federal or Utah
law.
(e) Severability. Any provision of this Agreement that is deemed
invalid or unenforceable shall be ineffective to the extent of such invalidity
or unenforceability, without rendering invalid or unenforceable the remaining
provisions of this Agreement. Furthermore, in lieu of each such invalid or
unenforceable provision, there shall be added automatically as a part of this
Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
7. Integration; Amendment. This Agreement, together with the other
Transaction Documents, constitutes the entire agreement of the parties relating
to the subject matter hereof. There are no promises, terms, conditions,
obligations, or warranties other than those contained herein and/or in the
Transaction Documents. The Transaction Documents supersede all prior
communications, representations, or agreements, verbal or written, among the
parties relating to the subject matter hereof. This Agreement may not be amended
except in writing signed by the parties hereto.
8. Waiver. No provision of this Agreement shall be deemed to have
been waived unless such waiver is in writing signed by the waiving party. No
failure by any party to insist upon the strict performance of any provision of
this Agreement, or to exercise any right or remedy consequent upon a breach
thereof, shall constitute a waiver of any such breach, of such provision or of
any other provision. No waiver of any provision of this Agreement shall be
deemed a waiver of any other provision of this Agreement or a waiver of such
provision with respect to any subsequent breach, unless expressly provided in
writing.
9. Expenses; Sales Taxes; Attorneys' Fees.
(a) Expenses. Covol shall pay to Birmingham on demand all
reasonable out-of-pocket costs and expenses incurred by Birmingham (including
the fees and charges of counsel) in connection with the preparation, execution
and delivery of any documentation required to effect the provisions of this
Agreement.
(b) Sales Taxes. Covol shall be responsible for and shall
indemnify, reimburse, and hold Birmingham harmless against all sales, use,
transfer or similar taxes which may be imposed by any Federal, State or local
authority in connection with the exercise of the Option and the transfer of the
Interests hereunder.
(c) Attorneys' Fees. If any suit or action arising out of or
related to the this Agreement is brought by any party to any such document, the
prevailing party or parties shall be entitled to recover the costs and fees
(including without limitation reasonable attorneys' fees, the fees and costs of
experts and consultants, copying, courier and telecommunication costs, and
deposition costs and all other costs of discovery) incurred by such party or
parties in such suit or action, including without limitation any post-trial or
appellate proceeding.
10. Late Payments. Any amount payable by any party hereunder not paid
when due shall bear interest at the lesser of the maximum rate permitted by
applicable law or the "Default Interest Rate" (as such term is defined in the
Loan Agreement) payable on demand, from the date when due until paid in full.
11. Binding Effect; Termination. This Agreement shall bind and inure to
the benefit of, and be enforceable by, the parties hereto and their respective
successors, heirs, and permitted assigns. In the event that the Option Period
has elapsed and the Option has not been exercised, then this Agreement shall
terminate and be of no further force and effect.
12. Third-Party Beneficiary Rights. No person not a party to this
Agreement is an intended beneficiary of this Agreement, and no person not a
party to this Agreement shall have any right to enforce any term of this
Agreement.
13. Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one agreement
binding on all the parties, notwithstanding that all parties are not signatories
to the same counterpart.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
COVOL TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxx
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Name: Xxxxx X. Xxxx
Title:President
BIRMINGHAM SYN FUEL, L.L.C.
By: /s/ Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
Title:Vice President
