PREPARATION PLANT AND FINES PONDS LEASE
WELLINGTON UTAH
THIS PREPARATION PLANT AND FINES PONDS LEASE AGREEMENT ("Lease") is
made and entered into as of the 21 day of February, 1997, by and between
EARTHCO, a Nevada corporation/ and Covol Technologies, Inc., a Delaware
corporation, ("Covol").
RECITALS
A. EARTHCO owns the real property located in Carbon County, Utah, as
further identified on Exhibit A (the "Property").
X. Xxxxx desires to lease the Property from EARTHCO and to conduct coal
fines extraction, screening, washing, handling and other recovery, processing,
and preparation operations (collectively "Preparation Operations") on the
Property
C. EARTHCO wishes to grant to Covol the exclusive right (1) to occupy
the Property, and (2) to conduct Preparation Operations on the Property, all in
accordance with the terms hereof.
AGREEMENT
NOW, THEREFORE, in consideration of the recitals set forth above and
the mutual benefits and promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
EARTHCO and Covol covenant and agree as follows:
1. Grant of Lease. EARTHCO hereby leases the Property, together with
all coal fines and refuse located on, in or under the Property, to Covol for the
purpose of conducting coal fines and refuse removal, extraction, mixing,
processing, storage, handling, screening, washing, and other coal fines and
refuse Preparation Operations on the Property, and EARTHCO hereby grants to
Covol for the term hereof the exclusive right to occupy the Property, remove or
extract coal fines and refuse, and to conduct Preparation Operations from and on
the Property, subject to and in accordance with the terms hereof.
2. Property. The leased property shall consist of two (2) parcels.
Parcel A shall be referred to as the Preparation Plant Site ("PPS") and shall
contain approximately thirty (30) acres (more or less) and shall be located
adjacent to the fines ponds. Parcel ]L is more fully defined by the drawing and
legal description attached hereto and made a part hereof as Exhibit A.
*Confidential material has been omitted from the Exhibit and filed separately
with the Securities and Exchange Commission (the "Commission").
Parcel B shall be referred to as the Fines Pond Site ("FPs't)
and shall contain approximately three hundred fifty-seven (357) acres (more or
less) and shall include the property upon which is located the "upper fines
pond" and the "lower fines pond" and the property immediately surrounding these
ponds. Parcel B is more fully defined by the drawing and legal description
attached hereto and made a part hereof as Exhibit A.
3. Lease Payments.
a. Base Lease Payments. Covol agrees to pay EARTHCO *. The Base
Lease Payments shall be paid by Covol as follows:
i. * paid on February 12,1997, and receipt thereof is
hereby acknowledged by EARTHCO;
ii. * paid concurrent with the execution of this Lease
which shall be on or before February 21, 1997; and
iii. * shall be paid on August 21, 1997, and the same amount
shall be paid on the 21st day of every third month thereafter
until a total of twelve (12) payments of * have been made,
(i.e., twelve (12) quarterly payments of * each for a total of
*.
b. Adjustment for Excess Fines Recovery. Covol agrees to pay
EARTHCO * for each net saleable ton of coal fines from the fines ponds in excess
of two (2) million tons, up to two and one half (2.5) million tons. Any tonnage
in excess of two and one half (2.5) million net saleable tons shall be at no
additional price to Covol. Payments due under this provision, if any, shall be
paid by Covol on the last day of the month immediately following the calendar
qlarter in which the coal fines are removed from the Property. The requirement
to make payments pursuant to this paragraph shall remain in full force and
effect, even if Covol extends the Lease term or exercises its option to purchase
Parcel B.
2
* Confidential material has been omitted from this Exhibit and filed separately
with the Commission.
4. Term of Lease and Options to Extend. The term of the Lease on Parcel
A shall be fifteen (15) years from the date hereof, expiring on February 21,
2012. All Lease Payments for the fifteen tl5) year lease term are included in
the total Base Lease Payments paragraph defined herein (Section 3. a.). Covol
may extend the term of the Lease on Parcel A by two (2) five (5) year periods by
notifying EARTHCO, in writing at least six (6) months prior to the expiration of
the existing term, of its intention to extend and tendering payment of Five
Thousand Dollars ($5,000.00) as prepayment for the next five (5) year term.
The term of the Lease on Parcel B shall be five (5) years from
the date hereof, expiring on Fe} wary 21, 2002. All Lease Payments for the five
(5) year base term are included in the Base Lease Payments and the Adjustment
for Excess Fines Recovery paragraphs defined herein (Section 3 a. and b.). Covol
may extend the term of the Lease on Parcel B by one (1) five (5) year term
period by:
a. Notifying EARTHCO, in writing prior to August 21, 2001, of
its intention to extend the term of the Lease;
b. Tendering payment to EARTHCO in the amount of Ten Thousand
Dollars ($10,000.00) which shall constitute full prepayment for the next five
(5) years; and
c. Assuming the portion of reclamation permit (ACT/007/012)
which pertains to Parcel B and the posting of a bond which is acceptable in
form, substance and amount to DOGM relative to Parcel B and assuming the
reclamation responsibilities for Parcel B.
5. Option to Purchase. Covol shall have the option to purchase Parcel
A and/or Parcel B at any time during the Base Lease term of either parcel by:
a. Giving EARTHCO thirty (30) days written notice of its intent
to purchase at any time after all of the payments pursuant to Section 3. a.
herein have been fully paid; and
b. Assuming the portion of the reclamation permit (ACT/007/012)
which pertains to the parcel being purchased, assuming the reclamation
responsibility for the parcel(s) being purchased and the posting of a bond which
is acceptable in form, substance and amount to DOGM relative to the purchased
parcel, at or prior to the closing of the purchase. Said assumption and
activities shall be the total consideration for the purchase.
6. Access Easements. EARTHCO further leases and grants to Covol for
the term hereof non-exclusive easements upon
3
EARTHCO's surrounding lands for ingress, egress, water andother utility access
to the Property. Covol shall have the right to improve, pave, and maintain any
roads used by Covo1.
7. Water Rights. EARTHCO shall provide Covol with water rights of ____
acre feet to be used by Covol in its processing operations. If Covol exercises
its right to purchase Parcel A as described in Section 5 herein, EARTHCO shall
deed ___________ acre feet of water rights to Covol without additional
consideration.
8. Warranty of Title. EARTHCO hereby, warrants and agrees to defend
title to the Property and further covenants that EARTHCO has the lawful right,
power and authority to lease and utilize the Property in the manner herein
provided. Covol, at its option, may discharge any tax, mortgage or other lien
upon the Property and, in the event Covol does so, it shall be subrogated to
such lien with the right to enforce the same and apply Lease Payments accruing
to EARTHCO hereunder toward satisfying the same.
9. Liens and Encumbrances. Covol shall keep the Property free from all
mechanics' liens and other encumbrances arising from Covol's possession and
operations provided that Covol shall have the right voluntarily to mortgage,
pledge or otherwise encumber its equipment, improvements and leasehold estate
hereunder and provided further that Covol shall not be required prematurely to
discharge any lien which it disputes in good faith.
10. Commingling Measurement and Records.. Covol shall have the right
to transport, store, mix, process and sell on the Property coal fines produced
or removed from other lands, and to commingle such materials with materials
produced or removed from the Property; provided, however, that Covol shall
measure and record the amounts of materials produced from the Property and the
amounts which are produced from other lands. No Lease Payment shall be payable
hereunder on materials produced from lands other than the Property. Covol shall
keep accurate records of the coal fines processed from the Property and make
such records available for inspection and copying by EARTHCO upon request during
normal business hours.
11. Covol's Equipment. Fixtures and Improvements. Covol shall have the
right, in Covol's discretion and at its sole risk, to place, use, maintain and
remove such equipment, fixtures and improvements upon the Property as Covol may
reasonably require to conduct its operations on the Property from time to time.
All such equipment, fixtures and improvements shall be and remain the exclusive
property and responsibility of Covol, and shall be removed by Covol upon the
termination of this Lease.
4
12. Permits. Laws and Regulations. Covol shall obtain all necessary
permits required for the conduct of its operations hereunder, and Covol shall
conduct all operations on or relating to the Property in full compliance with
all applicable federal, state and local laws, regulations, permits and
ordinances.
Notwithstanding the preceding paragraph, EARTHCO will allow
Covol to operate its Preparation Operations on Parcel A under the existing
mining permit until September 1, 1998. EARTHCO and Covol shall cooperate to
apply for any mining permit modifications necessary for Covol's operations.
Covol will be responsible for the payment of any incremental increase in bond
costs, if any, caused by Covol's operations on Parcel X.
Xxxxx further agrees to apply to DOGM to have the portion of
the mining permit relative to Parcel A and Covol's operations on Parcel A
transferred to Covol on or before September 1, 1998. Covol shall also be
responsible to post its bond with DOGM relating to Parcel A on or before
September 1, 1998, thereby releasing the bond of EARTHCO relative to Parcel A.
Notwithstanding the first paragraph of Section 12 above,
EARTHCO will allow Covol to operate its fines recovery and removal operations on
Parcel B under the existing permit until February 21, 2002. EARTHCO and Covol
shall cooperate to apply for any permit modifications necessary for Covol's
operations on Parcel X. Xxxxx will be responsible for the payment of any
incremental increase in bond costs, if any, caused by Covol's operations on
Parcel X.
Xxxxx further agrees to apply to DOGM to have the portion of
the permit relative to Parcel B transferred to Covol and Covol agrees to post
its bond relative to Parcel B (releasing and replacing EARTHCO's bond on Parcel
B) upon the occurrence of any of the following events:
x. Xxxxx notifies EARTHCO of its intent to purchase Parcel B. or
ii. Covol has not removed all of the economically recoverable coal
fines from Parcel B by February 21, 2002, or
iii. Covol notifies EARTHCO of its intent to extend the Lease on
Parcel B.
13. Reclamation. Upon the termination of this Lease, Covol shall
reclaim those areas of Parcel A disturbed, from and after the date hereof, by
Covol's operations only to the
5
extent required by the mining permit then in force. EARTHCO shall be responsible
for any required reclamation arising from use of, or operations on, the Property
before the date of this Lease. EARTHCO expressly acknowledges and agrees that
the use of the Property consistent with the terms hereof shall not constitute
waste or other degradation of the Property, even though such may change the
appearance, terrain or condition of the Property. Covol may expand its
reclamation responsibilities to include Parcel B pursuant to Section 12 above.
14. Environmental Issues. Covol shall not conduct activities upon the
Property or bring materials or substances onto the Property which require
remediation or removal according to the federal Environmental Protection Agency
or the State of Utah Department of Environmental Protection rules, regulations
or statutes (the "Environmental Laws"). If Covol shall violate any of the
Environmental Laws during its occupancy and use of the Property, then Covol
shall be solely liable for the costs of correcting and abating such violations
and shall indemnify EARTHCO and hold EARTHCO harmless against any and all claims
arising therefrom.
15. Indemnitv and Insurance. Covol agrees to indemnify EARTHCO and
hold it harmless against any and all claims of any nature arising from or
related to Covol's activities, from and after the date hereof, on the Property,
other than claims arising out of EARTHCO's reclamation responsibilities or other
EARTHCO activities. EARTHCO agrees to indemnify Covol and hold it harmless
against any and all claims arising from or related to pre-existing conditions,
including environmental and reclamation liabilities and ongoing EARTHCO
activities. Covol shall maintain comprehensive general liability insurance
covering il:s operations hereunder, and EARTHCO shall be named as an additional
insured under such policy.
16. Taxes. From and after the date hereof, Covol shall pay when due
real property taxes for the Property and all taxes on Covol's equipment and
improvements on the Property.
17. Default. In the event of any material default by either party, in
addition to any other remedy available to the non-defaulting party, if such
default is not cured within thirty (30) days following written notice ore such
default, the non-defaulting party may terminate the Lease; provided that in the
event of a default which xxxxxx reasonably be cured within thirty (30) days, the
defaulting party shall have a reasonable time to cure, provided that immediate
actions to cure such default are initiated within said thirty (30) days and
diligently prosecuted to completion.
6
In the event of a default by Covol in tendering a payment in
the amount or upon the due date according to Sections 3. a. and b. herein, in
addition to any other available legal remedies, EARTHCO, at its option, shall
have the right to select one of the following remedies after giving Covol
fifteen (IS) days written notice specifying the default and describing EARTHCO's
intention to exercise its rights under this Section:
a. EARTHCO shall charge a late fee equal to five percent (5%)
of the defaulted payment.
b. EARTHCO may terminate this Lease and commence an action for
damages. Covol shall immediately vacate and relinquish possession and occupancy
of the Property.
Any waiver of a default in payment by Covol must be in writing.
18. Assignment. Each party reserves the right to assign its rights and
obligations under this Lease to an unaffiliated entity upon the consent of the
non-assigning party, which consent shall not be unreasonably withheld. In the
event that a party desires to assign its rights and obligations to an entity
affiliated with that party, it may do so without the consent of the
non-assigning party. EARTHCO shall have the right to assign the proceeds of this
Lease to third parties as collateral for any financing that EARTHCO may arrange
for its own corporate purposes. Covol will consent in writing to such
assignment.
19. Notices. Any notices or other communications required or permitted
hereunder will be in writing and will be delivered by hand or sent by prepaid
telecopy or sent by postage paid registered, certified, or express mail, or by
overnight courier service and shall be deemed given when so delivered by hand or
telecopy, or if mailed, three days after mailing (one business day in the case
of express mail or overnight courier service) as follows:
To Covol: Xxxxx X. Xxxx, President
Covol Technologies, Inc.
0000 Xxxxx Xxxxxxxx Xxxx
Xxxx, Xxxx 00000
Phone: 801/000-0000
Fax: 801/000-0000
To EARTHCO: Xxxxx X. Xxxxx, President
EARTHCO
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Phone: 317/000-0000
Fax: 317/000-0000
7
Or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein.
20. Effect of Headings. The subject headings of the sections of this
Lease are included for convenience only and shall not affect the construction or
interpretation of any of its provisions.
21. Force Mature. The obligations of each party shall be suspended to
the extent and for the period that performance is prevented by any cause beyoncL
its reasonable control; however, any such suspension shall not apply to payments
required by Section 3. a. and b. herein. The affected party shall promptly give
notice to the other party of the suspension of performance, stating therein the
nature of the suspension, the reasons thereof, and the expected duration
thereof. Abatement shall end as soon as it is reasonably practicable for the
affected party to resume performance.
22. Governing Law. This Lease shall be governed by and interpreted in
accordance with the laws of the State of Utah.
23. Specific Performance. The terms and obligations contained herein
may be specifically enforced.
24. Construction. This Lease shall be deemed to have been drafted
jointly by the parties. Any uncertainty or ambiguity shall not be construed for
or against any party based on attribution of drafting to that party.
25. Severability. Provided that no party is deprived of a material
right under this Lease, if any provision of this Lease is held invalid or
unenforceable, it is the intent of the parties that all other provisions be
construed to remain binding on the parties.
26. Counterparts. This Lease may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together shall constitute one and the
same Lease. A telecopy or reproduction of this Lease may be executed by one or
more parties hereto, and a copy of this Lease may be delivered by one or more
parties hereto by telecopy or similar instantaneous electronic transmission
device pursuant to which the signature of, or on behalf of, such party can be
seen, and such execution and delivery shall be considered valid, binding and
effective for all purposes. At the request of any party hereto, all parties
agree to execute an original of this Lease as well as any telecopy or other
reproduction thereof.
8
27. Entire Agreement. This Lease constitutes the entire understanding
of the parties relating to the subject matter hereof and supersedes all prior
and contemporaneous agreements and understandings, whether oral or written,
relating to the subject matter hereof. No amendment or modification of the terms
of this Lease shall be binding or effective unless expressed in writing and
signed by each party.
28. Non-waiver. No election or failure to exercise, delay in
exercising, or waiver of any right or remedy hereunder on any occasion by either
party shall be deemed to be an election or waiver of the same or of any other
remedy on the same or any other occasion.
29. Confidentiality. This Lease, its terms and all communications,
documents, data or other information generated as a part of this transaction are
strictly confidential. Neither party shall disclose such information to a third
person or entity without the consent of the other, except (1) as is essential
for bona fide business purposes of which this Lease is a part, or (2) as
compelled by legal proceedings.
30. Successors and Assigns. This Lease shall be binding on the parties
hereto and upon their respective heirs, representatives, successors and
permitted assigns.
IN WITNESS WHEREOF, EARTHCO and Covol have executed this Lease as of
the day and year first above written.
EARTHCO
By: /s/ Xxxxx X. Xxxxx
------------------
Xxxxx X. Xxxxx
Title: President
COVOL TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxx
-----------------
Xxxxx X. Xxxx
Title: President
9
