MOHAVE AGREEMENT
This Mohave Agreement is made and entered into this 6th day of November
1996 by and between Covol Technologies Inc., a Delaware corporation ("Covol")
and Savage Industries Inc., a Utah corporation ("Savage").
RECITALS:
A. On March 19, 1996, the parties executed a written agreement
(the "Initial Agreement").
B. On May 17, 1985, Flyash Haulers, Inc., an Arizona corporation
("Flyash") and Southern California Edison Company, a California utility ("Cal
Edison") entered into a written agreement (the "Mohave Underflow Sales
Contract") which provides Flyash with the right to purchase and remove coal
fines underflow (the "Coal Fines") from impoundment ponds 1 and 5 at Cal
Edison's Mohave Generating Station near Laughlin, Nevada (the "Station").
C. In conjunction with this Mohave Agreement, Savage and Flyash intend
to execute a written agreement (the "Business Agreement") (i) to form a Utah
limited liability company ("Mohave"), (ii) to upgrade an existing facility (the
"Facility") and place the Facility into operation at the Station, and (iii) to
produce and sell a "Qualified Fuel" pursuant to Section 29(c)(1)(C) of the
Internal Revenue Code (the "Code") which will result in "Tax Credits" for Mohave
pursuant to Section 29 of the Code.
D. Savage and Flyash intend for Mohave to execute a written agreement
with Flyash (the "Management Agreement") for Flyash to manage and operate the
Facility in the production of a Qualified Fuel.
E. Covol is willing to license to Mohave, the "Covol Process" using the
"Patents" and the "Covol Binder" as described in the Initial Agreement.
AGREEMENT:
1. Term. The term of this Mohave Agreement is effective as of
the date hereof and shall continue until December 31, 2009.
2. License Agreement. At Savage's request, Covol will execute a written
license agreement with Mohave (the "License Agreement") which will (i) allow
Mohave to use the Covol Process in conjunction with the Patents in return for a
monthly license fee (the "License Fee") to be paid by Mohave to Covol for each
ton (2,000 lbs.) of Qualified Fuel produced from the Coal Fines by Flyash at the
Facility and sold by Mohave to a third party purchaser during each calendar
quarter calculated on the basis of *** for each BTU contained within the
*** Missing information may be available upon request to the Company
Qualified Fuel [for example, one (1) ton of Qualified Fuel containing *** BTU's
will generate a License Fee of ***.
3. Covol Binder ***. At Mohave's request, Covol shall provide to
Mohave for use with the Coal Fines, at ***, such quantities of the Covol Binder
as required by the Facility to produce Qualified Fuel.
4. Technical Assistance. Covol agrees to provide technical assistance
and field support to Mohave as may be reasonably necessary and as may be
requested by Mohave from time-to-time in the production of Qualified Fuel by the
Facility. Mohave agrees to reimburse Covol for its reasonable out-of-pocket
expenses incurred in providing such technical assistance and field support.
5. Reimbursement Fee. To induce Savage to participate in the formation
of and to invest capital in Mohave, Covol agrees that it will reimburse (the
"Reimbursement Fee") Savage from the License Fees received by Covol from Mohave,
an amount equal to *** of the cash capital required to (i) initially upgrade
and place the Facility into operation at *** and (ii) to thereafter upgrade the
Facility from time-to-time as determined by Mohave to efficiently and
economically produced a Qualified Fuel. The basis for the Reimbursement Fee
shall be documented. At Savage's request, Covol agrees to request and authorize
Mohave to deduct from the License Fees due to Covol and pay directly to Savage,
the amount thus deducted which will be treated as a credit against the
Reimbursement Fee owing by Covol to Savage.
6. Secure Performance. To secure Covol's performance in the event of a
failure on the part of Covol to produce and deliver the Covol Binder to Mohave
pursuant to the License Agreement, Covol agrees to place in escrow at Zions
First National Bank, Main Office in Salt Lake City, Utah (the "Escrow Holder"),
all documents, written specifications and instructions necessary and required
for Mohave or a third party designated by Mohave to formulate, mix, prepare and
produce the Covol Binder as required by the terms and provisions of this Mohave
Agreement. Covol agrees to cooperate with Mohave and the Escrow Holder, in the
preparation and execution of appropriate escrow instructions concerning the
documents to be placed in escrow and how, when and for what purposes the
documents may be released to Mohave or its designee.
7. Other Documents. Savage and Covol each agree to execute such
documents and take such action as is reasonably required and appropriate to
carry out the intent of this Mohave Agreement.
8. Entire Understanding. This Mohave Agreement has been
negotiated and prepared with the assistance and participation of each of the
parties and their respective counsel and contains the entire understanding and
agreement between the parties with respect to the subject matter set forth
herein.
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Executed in duplicate as of the date first above set forth.
Savage Industries Inc.
By: /s/ H. Benson Lewis
Executive Vice President
Covol Technologies Inc.
By: Brent M. Cook
President
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