SUPPLY AGREEMENT
This Supply Agreement (the "Agreement") effective the 11th day of September,
1996, is between K-Lee Processing, Inc., an Alabama corporation ("K-Lee"),
Concord Coal Recovery Limited Partnership, an Alabama limited partnership
("Concord") (K-Lee and Concord collectively referred to herein as the "Seller")
and Covol Technologies. Inc., a Delaware corporation ("Buyer"). Buyer and Seller
are sometimes jointly referred to herein as the "Parties." The Parties,
intending to be legally bound, mutually agree as follows:
ARTICLE 1
Scope and Term of Agreement
1.1 SCOPE OF AGREEMENT: Buyer desires to assure a continuous supply of
appropriate coal fines ("Fines") for its facility ("Facility ") and
Seller is willing and able to provide such Fines. The Parties agree
that all purchases of Fines by Buyer from Seller during the term of
this Agreement shall be subject to and in accordance with the
provisions of the Agreement, which shall supersede and take precedence
over any contrary or additional terms stated in Seller's
acknowledgment, invoice or other document unless the Parties expressly
agree by written modification to this Agreement, in accordance with
Section 4.5 hereof, that the provisions of this Agreement shall not
apply.
1.2 TERM OF AGREEMENT: This Agreement shall become effective on December 1,
1996 and, unless sooner terminated as provided herein, shall remain in
full force and effect until December 1, 2001, inclusive, at which time
it shall terminate without notice or other action by the Parties.
ARTICLE 2
Sale of Fines
2.1 DESCRIPTION OF FINES AND PRICE SCHEDULE: In accordance with the terms
of this Agreement Seller agrees to transfer ownership and deliver to
Buyer, and Buyer agrees to accept and pay Seller for washed Fines
produced or located at Seller's Plant located in Jefferson County,
Alabama. The coal specifications shall be approximately 12,500 Btu per
ton, not to exceed 14% moisture, not to exceed 10.5% dry ash. The price
which Buyer will pay for the Fines during the first year of this
Agreement is $29.00 per ton. If moisture content varies from the 14%
level the price per ton shall be weight adjusted to reflect a higher or
lower moisture. A per ton premium or penalty will apply for variances
in ash content at the rate of $0.75 per percentage point (or fraction
thereof) above or below 10.5%. A price escalation of 5% may be enacted
by the Seller after January 1, 1998, and an additional price escalation
of 5% may be enacted by the Seller after January 1, 1999. After January
1, 2000, annual price escalations shall be the greater of 5% per year
or the average market price of coal fines of the same specification as
outlined in this agreement, sold in the Alabama area.
2.2 QUANTITY: Buyer shall be obligated as outlined in Section 3.1 to
purchase from Seller a minimum of twenty thousand tons of Fines per
month at the prices contained herein. Buyer may purchase additional
Fines from Seller at a mutually agreed upon price. Both parties
acknowledge the existence of the contract between K-Lee and Drummond
Coal Sales Inc., dated March 16, 1996, and will cooperate to see such
terms are met until March 31, 1997. If more than 2,500 tons of Fines
accumulates at Seller's Plant without Buyer notifying Seller as to
Buyer's intent to purchase, Seller shall have the right to market fines
to third parties prior to the 20,000 ton limit, the qantity of fine
specified herein. If Buyer's facility is in operation producing
briquettes and Buyer does not purchase Fines from Seller for two
consecutive months, Seller may give 30 day notice and terminate this
Agreement.
2.3 WEIGHING AND SAMPLING: Weights shall be determined via certified truck
certificates at Buyer's facility. Buyer's scales shall be certified
quarterly and subject to review by Seller. Quality of Fines for
purposes of determining premiums or penalties as outlined in Section
2.1 shall be determined using an average of Buyer's and Seller's daily
sampling utilizing generally accepted standards and sampling techniques
(using ASTM certified laboratories). Any discrepancies or disputes
shall be settled by third party sampling at Buyer's expense.
2.4 SELLER'S OBLIGATION TO PERFORM: Seller shall immediately notify Buyer
when Seller has reason to believe that it will not be able to operate
the Plant or that it will not be able to supply sufficient Fines to
meet the quantity requirements of this Agreement. Notwithstanding the
foregoing, Seller shall not take any action or fail to take any action
during the term of this Agreement with the intent of jeopardizing
Seller's ability to fulfill the requirements of this Agreement. Seller
shall in good faith use its best efforts to keep the Plant in operation
and to operate the Plant such that it can consistently and
substantially produce the purchase quantities required by this
Agreement. Notwithstanding any clause to the contrary, Seller cannot
guarantee its' ability to produce the quality of Fines designed herein
given the variance in feed stock which may occur in the USSM
impoundments.
ARTICLE 3
Orders, Shipment and Payment
3.1 ORDER PROCEDURE: Buyer shall be required to submit all Purchase Orders
at least 30 days in advance of the first day of the month in which said
deliveries are made. Buyer shall be obligated to take and pay for the
tonnage specified in the Purchase Order at the price agreed upon
herein. (For example, Buyer shall issue a Purchase Order for December
delivery by no later than November 1st). Buyer shall pick up coal fines
on a continuous daily haul basis until such time as they have removed
20,000 tons each month; thereafter orders for Fines shall be made on
signed Purchase Orders or orally by telephone by an authorized agent of
Buyer. Orders shall be sent to Seller at the address listed in Section
3.2, or such other address as Seller shall direct.
3.2 NOTICES: All notices given pursuant to this Agreement shall be sent to
the following addresses or facsimile numbers:
SELLER BUYER
K-Lee Processing, Inc. Covol Technologies, Inc.
Attn: Tom Bryan Attn: Brent M. Cook
P.O. Box 19127 3280 North Frontage Road
Birmingham, AL 35219 Lehi, UT 84043
Fax: (205) 491-7598 Fax: (801) 768-4483
3.3 F.O.B. POINT AND SHIPPING INSTRUCTIONS: Prices are F.O.B. Seller's
Plant. Buyer will provide trucks and Seller will load the trucks. Buyer
will arrange for transportation of the Fines from Seller's loadout
facility to Buyer's plant. Trucks will be tarped and hauling of product
will be subject to Seller guidelines while on USS Mining property.
3.4 PAYMENT TERMS: Payment in full by Buyer is due on or before the seventh
day following receipt by Buyer of an invoice that conforms to the terms
of this Agreement. Invoices shall be submitted weekly and any
adjustments to the price as outlined in Section 2.1 shall be invoiced
monthly. A premium of two (2) percent will be paid by Buyer for payment
sent after seven (7) days following such receipt. All invoices
submitted by Seller to Buyer shall the date and tonnage weight of each
shipment covered by the invoice. Buyer will pay a late fee of 1.5% per
month for invoices delinquent 30 days or longer. If unpaid in excess of
90 days Seller shall have the right to exercise Buyer's letter of
credit or other financial arrangement and shall have the right to
terminate this Agreement.
Payment shall be sent to Seller's address listed in Section 3.2 of this
Agreement.
3.5 MUTUAL OBLIGATION TO NOTIFY: Seller shall promptly notify Buyer if
Seller plans to shut down its Plant for any reason beyond routine
maintenance. Likewise, Buyer shall promptly notify Seller if Buyer
intends to buy less than twenty thousand tons of Fines in any calendar
month due to plant shutdown for any reason beyond routine maintenance.
Buyer shall not be obligated to purchase the 20,000 ton monthly
quantity if the construction of the buyers plant is delayed or fails to
occur.
3.6 LETTER OF CREDIT: On or before December 1, 1996 Buyer shall obtain a
letter of credit from an institution acceptable to Seller in the amount
of $580,000, or other financial backing on terms satisfactory to seller
to adequately assure Seller of Seller's ability to collect all proceeds
due Seller pursuant to a binding Purchase Order issued under this
Agreement as specified in Section 3.1.
ARTICLE 4
Miscellaneous
4.1 ADVERTISING AND PUBLICIZING AGREEMENT: Neither Party will advertise,
circularize or release any information regarding this Agreement to any
person, entity, organization, news agency or media without written
permission from the other Party. This Section will not prevent either
Party from disclosing such information as said Party in good faith
believes is reasonably required in order to comply with state and
federal governmental regulations or in compliance with a court order.
Either Party may also disclose such information to business partners
and potential investors as said Party in good faith believes is
reasonably required to carry out the purposes of this Agreement.
4.2 APPLICABLE LAW: This Agreement shall be governed by the laws of the
State of Alabama.
4.3 CONSENT TO JURISDICTION: The Parties hereby irrevocably submit to the
nonexclusive jurisdiction of any court of the State of Alabama or the
United States of America, in any action or proceeding arising out of or
relating to this Agreement, and the Parties hereby irrevocably agree
that all claims in respect of such action or proceeding may be heard
and determined in any such court. The Parties hereby irrevocably waive,
to the fullest extent they may effectively do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding. The
Parties agree that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law.
4.4 ASSIGNABILITY: In the event this Agreement is assigned, it shall not
relieve the assigning Party from any of the obligations of this
Agreement. Any assignee shall be considered an agent of the assigning
Party and the assigning Party shall remain liable to the same extent as
if no such agreement had been made. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the
respective successors and assignees of the Parties hereto.
4.5 COMPLETE CONTRACT; NO ORAL MODIFICATION: This Agreement is
intended by the Parties as a final expression of their agreement and
supersedes all prior communications, representations and agreements,
oral or written, between the Parties with respect to the subject matter
contained herein. The Parties also intend this Agreement to be a
complete and exclusive statement of the terms of their Agreement. This
Agreement may not be modified or terminated orally, and no claimed
modification, rescission or waiver shall be binding on Buyer or the
Seller unless in writing signed by a duly authorized representative of
Buyer or Seller.
In witness whereof, the Parties have signed this Agreement on the dates
shown below:
SELLER BUYER
K-LEE PROCESSING, INC. COVOL TECHNOLOGIES, INC.
By: /s/Thomas B. Bryan By: /s/Brent M. Cook
Its: President Its: Chief Financial Officer
Date: September 13, 1996 Date: September 11, 1996
CONCORD COAL RECOVERY, L.P.
By: /s/Thomas M. Ellbogen By: /s/ Ken Young
Its: Partner CCRLP Its: Chief Executive Officer
Date: September 12, 1996 Date: September 11, 1996