EXHIBIT B
LICENSE AND BINDER SUPPLY AGREEMENT
THIS LICENSE AND BINDER SUPPLY AGREEMENT ("Agreement"), is made and
entered into as of June 26, 2000 by and among COALTECH NO. 1 L.P., a Delaware
limited partnership ("Coaltech"), UTAH SYNFUEL #1 LTD. ("Utah Synfuel") - and
COVOL TECHNOLOGIES, INC., a Delaware corporation ("Covol").
WHEREAS, Coaltech and Covol entered into various interelated agreements
relating to Covol's synthetic fuel operations in Utah (the "Utah Project");
WHEREAS, various disputes and claims have arisen between the parties
pertaining to the Utah Project and the synthetic fuel manufacturing facility
currently located in Price, Utah and any location to which the facility may be
moved or relocated in the future (the "Facility"); and
WHEREAS, simultaneously with the execution of this Agreement, the
parties are entering into that certain Settlement Agreement and Release dated as
of the date hereof by and among Covol, Utah Synfuel, Coaltech, AJG Financial
Services, Inc. and Square D Company (the "Settlement Agreement").
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants and agreements hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
ARTICLE I.
SUPPLY AND PURCHASE OF BINDER
Section I.1 Definition of Binder. As used herein, the term "Binder"
means and refers to the binder compound necessary for the production, by
Coaltech, of synthetic coal fuel that is reasonably expected to constitute
"qualified fuels" pursuant to the terms of Section 29(c)1(C) of the 1986
Internal Revenue Code, as amended (the "1986 Code") and with respect to which
Section 29 is applicable pursuant to Sections 29(f) and 29(g) of the 1986 Code.
Section I.2 Sale and Purchase. Covol agrees to supply to Coaltech, at
Coaltech's sole discretion, such quantity of Binder as Coaltech may request
pursuant to Section 1.5 hereof. On or before the fifteenth (15th) day of each
calendar month immediately following the delivery of Binder to Coaltech
hereunder, Covol shall deliver an invoice to Coaltech for the Binder delivered
to Coaltech during the immediately preceding calendar month. Payments for Binder
delivered by Covol to Coaltech during any calendar month shall be due and
payable to Covol on the tenth (10th) business day after the date upon which
Coaltech receives an invoice for such delivered Binder. Notwithstanding anything
in this Agreement to the contrary, Covol acknowledges and agrees that Coaltech
has no obligation to purchase any minimum quantity of Binder from Covol and
that, in addition, Coaltech has the unrestricted right to purchase and use
binders obtained from any third party in lieu of the Binder supplied by Covol.
Section I.3 Price. The price which Coaltech shall pay for the Binder
delivered to Coaltech by Covol during any calendar month shall be an amount
equal to Covol's direct and actual costs of such Binder (including, but not
limited to, material, labor, and transportation costs, with overhead or
administrative costs or charges not to exceed $** per ton) plus ** ($**) per ton
of synthetic fuel produced. To the extent that the Facility produces synthetic
fuel without use of the Binder, Coaltech shall nevertheless pay to Covol **
($**) per ton of synthetic fuel produced by the Facility. Coaltech shall have
the right, directly or through its authorized representatives, at any time
during normal business hours, to inspect the books and records of Covol to
verify the direct and actual costs of the Binder, and to make copies or extracts
of such books and records relating to such costs.
Section I.4 Covenants of Covol and Utah Synfuel. Covol and Utah Synfuel
jointly and severally covenant and agree to and with Coaltech as follows:
I.4.1 Covol shall convey to Coaltech good title to all Binder
supplied to Coaltech by Covol hereunder, free and clear of any and all
liens, claims, security interests, equities and encumbrances of any
type whatsoever.
I.4.2 All Binder supplied by Covol to Coaltech hereunder shall
be of such quality and nature as to be suitable for processing so as to
produce synthetic coal fuel which constitutes "qualified fuel" for
purposes of Section 29 of the 1986 Code.
I.4.3 The Binder shall not contain any hazardous material and
all Binder shall meet all applicable laws and governmental rules,
rulings, ordinances, requirements and regulations.
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I.4.4 Covol, at its cost and expense, shall carry from a
reputable insurer at all times during the term of this Agreement
general third party liability insurance, including product liability
coverage with a ten million dollar ($10,000,000) coverage limit which
may be comprised of primary and umbrella policies. Any policy providing
such insurance shall name Coaltech as an additional insured thereunder
and shall provide that Coaltech shall be given written notice of the
cancellation of such policy, or the reduction of any amounts or
coverages thereunder, not less than ten (10) business days prior to the
effective date thereof. Upon the request of Coaltech, Covol shall
provide Coaltech with a certificate of insurance confirming the
foregoing.
Section I.5 Order Procedure and Delivery. Coaltech shall deliver all
orders for the Binder to Covol at least thirty (30) days in advance of the first
day of the month in which delivery of such Binder is required under such order,
and all such orders received by Covol from Coaltech during the term of this
Agreement shall be deemed to have been accepted by Covol. (For example, Coaltech
shall deliver an order for December delivery by no later than the immediately
preceding November 1st). Each such order shall be delivered either (i) in
writing, or (ii) orally by telephone by an authorized agent of Coaltech (subject
to the condition that it is followed by a written purchase order within 24
hours). Such orders shall be sent to Covol at such address as Covol shall direct
or, in the absence of such direction, at 0000 Xxxxx Xxxxxxxx Xxxx, Xxxx, Xxxx
00000; facsimile (000) 000-0000. Covol acknowledges that time is of the essence,
and Covol agrees to deliver the Binder so ordered no later than the delivery
date specified in such order.
ARTICLE II.
GRANT OF LICENSE
Section II.1 Definition of Synthetic Fuel Technology. As used herein,
the term "Synthetic Fuel Technology" means all intellectual property, patents
(including, but not limited to, United States Patent Numbers 5,487,764,
5,453,103, and 5,599,361) and applications therefor, printed and unprinted
technical data, know-how, trade secrets, copyrights and other intellectual
property rights, inventions, discoveries, techniques, works, processes, methods,
plans, software, designs, drawings, schematics, specifications, communications
protocols, source and object code and modifications, test procedures, program
cards, tapes, discs, algorithms, and all other scientific or technical
information in whatever form relating to, embodied in or used in the proprietary
process to produce synthetic coal fuel from waste coal dust, coal fines and
other similar coal derivatives, including all such information in existence as
of the date of this Agreement as well as related information later developed by
Covol or Utah Synfuel; provided, however, that the defined term "Synthetic Fuel
Technology" shall not include the proprietary process developed by Covol to
produce synthetic coke extrusions and briquettes from coke breeze, iron revert
materials, or any technology for other than the processing and production of
synthetic coal fuel.
Section II.2 License. Subject to the terms and conditions of this
Agreement, Covol and Utah Synfuel hereby grant to Coaltech, for the full and
entire term hereof, a license to use the Synthetic Fuel Technology for
commercial use in connection with Coaltech's production of synthetic fuel, which
license shall be paid for pursuant to section 4(d) of the Settlement Agreement.
This license does not extend to the State of Alabama.
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Section II.3 Know-How and Assistance. To enable Coaltech to benefit
fully from the license of the Synthetic Fuel Technology, Covol and Utah Synfuel,
promptly upon the request of Coaltech, shall provide at Covol and/or Utah
Synfuel's expense (i) access to all technical information, relevant
documentation, drawings, engineering specifications and other know-how in either
Utah Synfuel's or Covol's possession and (ii) reasonable access to Utah
Synfuel's and Covol's employees or agents who are familiar with the Synthetic
Fuel Technology, and any Improvements (as defined below) to the Synthetic Fuel
Technology. Covol and Utah Synfuel shall further provide to Coaltech, promptly
upon the request of Coaltech, all technical advice necessary to exploit the
Synthetic Fuel Technology as is reasonably requested by Coaltech and relevant to
the provisions of this Agreement and Coaltech shall reimburse Covol and Utah
Synfuel for its reasonable out of pocket expenses associated therewith
(exclusive of compensation, employment taxes, benefits costs and overhead or
administrative costs) within 30 days of invoice supported by appropriate
documentation.
Section II.4 Improvements. Each of Covol and Utah Synfuel shall notify
Coaltech of any improvements, variations or modifications ("Improvements") made
by it (or any of its affiliates or independent contractors or other parties
retained for such purpose) on or to the Synthetic Fuel Technology promptly after
such Improvements are made (including a detailed description of such
improvements, variations or modifications and the technical assistance required
to implement same in connection with Coaltech's operations). The term
"Improvements" shall include changes in the Synthetic Fuel Technology that
reduce production costs, improved performance, broaden applicability or increase
marketability, but shall not include changes that do not relate to the
production process using the Synthetic Fuel Technology (i..e., changes relating
solely to administrative and marketing practices and procedures). Improvements
made by or on behalf of Covol or Utah Synfuel (or any of their respective
affiliates) shall be owned by Covol and shall be considered a part of the
Synthetic Fuel Technology licensed hereunder and each of Covol and Utah Synfuel
hereby grants to Coaltech (without royalty or payment) a non-exclusive license
to utilize the Improvements made by any of the parties on the same terms and
conditions as the Synthetic Fuel Technology is licensed to Coaltech hereunder.
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Section II.5 Confidentiality. Each of the parties hereby agree to
maintain the Synthetic Fuel Technology confidential and not to disclose the
Synthetic Fuel Technology, or any aspect thereof, or the Improvements, or any
aspect thereof (collectively, "Confidential Information"), except as provided in
this Agreement. Notwithstanding the foregoing, information which (i) is or
becomes generally available to the public other than as a result of an
unauthorized disclosure by the parties or their respective agents, employees,
directors or representatives, (ii)was available to the party receiving
disclosure on the non-confidential basis prior to its receiving disclosure
hereunder, or (iii) lawfully becomes available to the party receiving disclosure
on a non-confidential basis from the third party source (provided that such
source is not known by the party receiving disclosure or its agents, employees,
directors or representatives to be prohibited from transmitting the
information), shall not be subject to the terms of this Section 2.5. At the
termination of this Agreement, the party receiving disclosure shall return all
copies of any Confidential Information shall be returned by the party receiving
disclosure. Nothing in this Agreement shall prohibit Coaltech from disclosing
the Confidential Information to others as may be reasonably necessary for
Coaltech to produce synthetic fuel using the Binder or to relocate any of the
equipment Covol and Utah Synfuel sold to Coaltech in connection with the
Facility.
ARTICLE III.
REPRESENTATIONS, WARRANTIES AND INDEMNITIES
Section III.1 Authority. Covol, Utah Synfuel and Coaltech represent and
warrant to one another that (i) the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized on its behalf by all requisite action, corporate or otherwise,
(ii) it has the full right, power and authority to enter into this Agreement and
to carry out the terms of this Agreement, (iii) it has duly executed and
delivered this Agreement, and (iv) this Agreement is a valid and binding
obligation of it enforceable in accordance with its terms.
Section III.2 No Consent. Covol, Utah Synfuel and Coaltech represent
and warrant to one another that no approval, consent, authorization, order,
designation or declaration of any court or regulatory authority or governmental
body or any third-party is required to be obtained by it, nor is any filing or
registration required to be made therewith by it for the consummation by it of
any of the transactions contemplated under this Agreement.
Section III.3 Intellectual Property Matters.
III.3.1 Representations of Covol. Covol represents and
warrants that it (i) owns, free and clear of all liens and
encumbrances, all intellectual property, patents (including but not
limited to United States Patent Numbers 5,487,764, 5,453,103, and
5,599,361) and applications therefor, printed and unprinted technical
data, know-how, trade secrets, copyrights and other intellectual
property rights and all other scientific or technical information in
whatever form relating to, embodied in or used in the proprietary
process to produce synthetic coal fuel from waste coal dust, coal fines
and other similar coal derivatives, and, the right to freely use, sell
and exploit the Binder used in manufacturing synthetic coal fuel from
waste coal dust, coal fines and other similar coal derivatives, (ii)
has the right and power to grant to Coaltech the licenses granted
herein, (iii) has not made and will not make any agreement with another
in conflict with the rights granted herein, and (iv) has no knowledge
that the sale or use of the rights, Binder and/or licenses granted
herein as contemplated by this Agreement would infringe any
third-party's intellectual property rights. Covol agrees to take all
steps necessary to maintain all of the patents hereunder at Covol's
sole expense.
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III.3.2 Representations of Utah Synfuel. Utah Synfuel
represents and warrants that it (i) has sufficient rights, free and
clear of all liens and encumbrances, to all intellectual property,
patents (including but not limited to United States Patent Numbers
5,487,764, 5,453,103, and 5,599,361) and applications therefor, printed
and unprinted technical data, know-how, trade secrets, copyrights and
other intellectual property rights and all other scientific or
technical information in whatever form relating to, embodied in or used
in the proprietary process to produce synthetic coal fuel from waste
coal dust, coal fines and other similar coal derivatives, and,
sufficient rights to use and exploit Binder used in manufacturing
synthetic coal fuel from waste coal dust, coal fines and other similar
coal derivatives, (ii) has the right and power to grant to Coaltech the
licenses granted herein, (iii) has not made and will not make any
agreement with another in conflict with the rights granted herein, and
(iv) has no knowledge that the sale or use of the rights, Binder and/or
licenses granted herein as contemplated by this Agreement would
infringe any third-party's intellectual property rights.
Section III.3.3 Guaranty of License. Each of Covol and Utah
Synfuel hereby represent and warrant that they have sufficient rights
in the Synthetic Fuel Technology and the Binder to make the license
granted by this Agreement. Covol and Utah Synfuel agree that both Covol
and Utah Synfuel and each of them is a "licensor" under Section 365(n)
of the United States Bankruptcy Code.
Section III.3.4 Covol Indemnification. Covol and Utah Synfuel,
jointly and severally, shall indemnify, defend and hold harmless
Coaltech and its affiliates and their partners, directors, officers,
agents, representatives, successors and assigns from and against any
and all claims, demands or suits (by any party, including any
governmental entity), losses, liabilities, damages, obligations,
payments, costs and expenses (including the costs and expenses of
defending any and all actions, suits, proceedings, demands and
assessments which shall include reasonable attorneys' fees and court
costs) resulting from, relating to, arising out of, or incurred in
connection with any breach by Covol or Utah Synfuel of any of the
representations, warranties and/or covenants or agreements of Covol
and/or Utah Synfuel contained in this Agreement, including, without
limitation, any and all charges of patent infringement or violation of
other property rights.
Section III.3.5 Coaltech Indemnification. Coaltech shall
indemnify, defend and hold harmless Covol and Utah Synfuel and their
affiliates, partners, directors, officers, agents, representatives,
successors and assigns from and against any and all claims, demands or
suits (by any party, including any governmental entity), losses,
liabilities, damages, obligations, payments, costs and expenses
(including the costs and expenses of defending any and all actions,
suits, proceedings, demands and assessments which shall include
reasonable attorneys' fees and court costs) resulting from, relating
to, arising out of, or incurred in connection with any breach by
Coaltech of any of the representations, warranties and/or covenants or
agreements of Coaltech contained in this Agreement.
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ARTICLE IV.
MISCELLANEOUS PROVISIONS
Section IV.1 Term. This Agreement shall be for the period from the date
hereof to the later of December 31, 2007 or the end of the term of Section 29 of
the 1986 Code, as the same may be amended.
Section IV.2 Waiver. The failure of any party to enforce at any time
any provision of this Agreement shall not be construed as a waiver of such
provision or the right thereafter to enforce each and every provision. No waiver
by any party, either express or implied, of any breach of any of the provisions
of this Agreement shall be construed as a waiver of any other breach of such
term or condition.
Section IV.3 Severability. If any provision of this Agreement shall be
held by a court of competent jurisdiction to be invalid or unenforceable in any
respect for any reason, the validity and enforceability of any such provision in
any other respect and of the remaining provisions of this Agreement shall not be
in any way impaired.
Section IV.4 Notices. Any notice, statement or xxxx provided under this
Agreement, or any notice or communication required, contemplated or permitted by
this Agreement by either party, shall be in writing and shall be duly delivered
by personal delivery, telegram, telecopy (provided receipt thereof is confirmed
in writing on the date of receipt by the recipient thereof), private courier
service, postage prepaid, return receipt request, certified or registered mail
or first class mail, to the party to whom intended at the following address:
If to Covol: 0000 Xxxxx Xxxxxxxx Xxxx
Xxxx, Xxxx 00000
Attn: President
Facsimile: (000) 000-0000
If to Utah Synfuel #1 Ltd.: C/O of Covol Technologies, Inc.
0000 Xxxxx Xxxxxxxx Xxxx
Xxxx, Xxxx 00000
Attn: President
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If to Coaltech: C/O Xxxxx X'Xxxxx
0000 Xxxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
with a copy of such notice AJG Financial Services, Inc.
to be provided to: The Xxxxxxxxx Xxxxxx
Xxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
Section IV.5 Remedies Cumulative. Remedies provided under this
Agreement shall be cumulative and in addition to other remedies provided by law
or in equity.
Section IV.6 Entire Agreement. This Agreement constitutes the entire
agreement of the parties relating to the subject matter hereof, and, together
with the Settlement Agreement, hereby supercedes and cancels that certain
License and Binder Purchase Agreement dated as of March 7, 1997. There are no
promises, terms, conditions, obligations, or warranties other than those
contained herein and in the Settlement Agreement. This Agreement may not be
amended except in writing signed by the parties hereto.
Section IV.7 Governing Law. All questions concerning the execution,
construction, performance, breach or enforcement of this Agreement shall be
construed under the substantive laws of the State of Delaware and not just the
Delaware laws regarding conflicts of laws.
Section IV.8 Coaltech Assignment; Sublicense. Covol agrees to use
reasonable efforts to cooperate with Coaltech in marketing, selling, or
otherwise transferring the Facility. Coaltech may grant a sublicense to any
person with respect to this Agreement (a "Facility Sub License") or assign its
rights and obligations under this Agreement to an person (a "Facility
Assignment"), except that any such sublicense or assignment must be limited
solely to the ownership and/or operation of the Facility. No such attempted
sublicense or assignment by Coaltech shall be valid unless the putative
transferee shall have agreed unqualifiedly to assume the obligations of Coaltech
under this Agreement and Covol shall have consented to such sublicense or
assignment in writing, which consent shall not be unreasonably withheld. In the
event of a Facility Assignment, if the transferee fails to make (i) any payment
for the purchase of Binder required by Section 1.3 of this Agreement within 15
days of the due date therefor, or (ii) any license payment required by Section
2.2 of this Agreement and Section 4(d) of the Settlement Agreement within 15
days of the due date therefor, then AJG Financial Services, Inc., a Delaware
corporation, and Square D Company, a Delaware corporation, jointly and severally
agree to promptly pay Covol such unpaid amounts upon written demand therefor.
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Section IV.9 Covol Assignment. Covol may not assign this Agreement
without the written consent of the other party, which consent shall not be
unreasonably withheld, except that Covol shall have the right to assign its
rights and obligations under this Agreement to any entity of which Covol or its
partners and affiliates together own, directly or indirectly, at least eighty
percent (80%) of each class of the entity's outstanding securities.
Executed by the duly authorized representative of the parties on the
date and year first above written.
COALTECH NO. 1 L.P.
By: /s/ Xxxxx X. X'Xxxxx
Name: Xxxxx X. X'Xxxxx
Title: Manager of the General Partner
UTAH SYNFUEL #1 LTD.
By: /s/ Xxxxxx X. Xxxxxxxx
Name: Xxxxxx X. Xxxxxxxx
Title: V.P. Covol Technologies, Inc.
COVOL TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
Name: Xxxxxx X. Xxxxxxxx
Title: V.P.
AJG FINANCIAL SERVICES, INC.*
By: /s/ Xxxx X. Xxxxxxxxx
Name: Xxxx X. Xxxxxxxxx
Title: Vice President
SQUARE D COMPANY*
By: /s/ Dick O'Xxxxxx
Name: Dick O'Xxxxxx
Title: V.P., Treasurer
________________________________
*Solely as to Section 4.8 above.
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