FIRST AMENDMENT
TO
AMENDED AND RESTATED
LICENSE AND BINDER PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LICENSE AND BINDER
PURCHASE AGREEMENT (the "Amendment"), is made and entered into as of March 31,
1999, by and between PC Virginia Synthetic Fuel #1, L.L.C., a Delaware limited
liability company (the "Licensee") and Covol Technologies, Inc., a Delaware
corporation (the "Licensor").
WHEREAS, Licensor and Licensee are party to the Amended and Restated
License and Binder Purchase Agreement (the "License Agreement"), dated as of
February 3, 1998; and
WHEREAS, Licensor and Licensee desire to amend the License Agreement as
set forth herein.
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 are hereby acknowledged,
Licensor and Licensee agree as follows:
Section 1. Defined Terms. Capitalized terms used herein and not
otherwise defined have the meaning assigned to such terms in the License
Agreement.
Section 2. Amendments to License Agreement. From and after the date
hereof the License Agreement is hereby amended as follows:
(a) Amendment to Section 1. The following new definitions are added to
Section 1 of the License Agreement in the appropriate alphabetical order:
"Allocated Advance Contribution Amount" has the meaning specified in
the Partnership Agreement.
"Allocation Percentage" means, for each Quarter, the result (expressed
as a percentage) of (i) the Estimated Project Tax Credits for the Project,
divided by (ii) the Estimated Tax Credits.
"Annual Adjustment Amount" has the meaning specified in the Partnership
Agreement.
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** This Exhibit contains material which has been omitted pursuant to a
Confidential Treatment Request. The omitted information has been filed
separately with the Securities and Exchange Commission.
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"Cash Expenditures" means, for any period, an amount equal to the
Allocation Percentage of the sum, without duplication, of (a) all disbursements
of cash by the Common Licensees in such period, including, but not limited to,
payments of operating, maintenance and management expenses and payments of
principal and interest on indebtedness, but not including (i) distributions to
the Partnership by the Common Licensees and (ii) payments of Earned Royalties or
Deferred Earned Royalties under the Common License Agreements, plus (b) the
Common Licensees' normal operating accruals and amounts retained by the Common
Licensees for working capital purposes in such period, plus (c) amounts set
aside as reserves by the Partnership or the Common Licensees in such period,
plus (d) any Construction Management Fee paid by the Partnership in such period,
plus (e) payments of principal and interest by the Partnership on indebtedness
in such period, plus (f) the Allocated Advance Contribution Amount for such
period, plus (g) the Reserve Withholding Amount for such period, plus (h) all
other cash expenditures of the Partnership (and not otherwise set forth above)
in such period (other than amounts payable by the Partnership in respect of (i)
Contingent Payments and Deferred Contingent Payments under the Purchase
Agreement and (ii) Sales Compensation and Deferred Sales Compensation under the
Placement Agreement).
"Cash Receipts" means, for any period, an amount equal to the
Allocation Percentage of the sum, without duplication, of (a) all receipts of
cash by the Common Licensees or the Partnership in such period as a result of
the operation of the Projects or related facilities and any other cash received
from operations or assets, but not including contributions to the Common
Licensees by the Partnership or to the Partnership by any partner in the
Partnership, plus (b) any amounts released from reserves by the Partnership or
the Common Licensees in such period, plus (c) loan proceeds to be applied to
items that qualify as Cash Expenditures.
"Common License Agreements" means, collectively, the four Amended and
Restated License and Binder Purchase Agreements, dated as of February 3, 1998,
between Covol and each of the Common Licensees separately, as amended as of
March 31, 1999 and as each may be amended or otherwise modified from time to
time thereafter.
"Common Licensees" means, collectively, each of Licensee, PC West
Virginia Synthetic Fuel #1, L.L.C., PC West Virginia Synthetic Fuel #2, L.L.C.
and PC West Virginia Synthetic Fuel #3, L.L.C. The term "Licensees" shall also
apply to any successor entity or permitted assign of any of the Licensees.
"Construction Management Fee" has the meaning specified in the
Partnership Agreement.
"Contingent Payments" has the meaning specified in the Partnership
Agreement.
"Deferred Contingent Payments" has the meaning specified in the
Partnership Agreement.
"Deferred Sales Compensation" means Sales Compensation under the
Placement Agreement, the payment of which has been deferred pursuant to the
terms thereof.
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"Estimated Project Tax Credits" for any Quarter has the meaning
specified in the Partnership Agreement, except that such Estimated Project Tax
Credits for the Quarter first ending after the Adjustment Amount (as defined in
the Partnership Agreement) is finalized in each year shall be increased or
decreased by an amount equal to the Allocation Percentage of the Annual
Adjustment Amount.
"Estimated Tax Credits" for any Quarter has the meaning specified in
the Partnership Agreement, except that such Estimated Tax Credits for the
Quarter first ending after the Adjustment Amount (as defined in the Partnership
Agreement) is finalized in each year shall be increased or decreased by the
Annual Adjustment Amount.
"First Amendment" means the First Amendment to Amended and Restated
License and Binder Purchase Agreement, made and entered into as of March 31,
1999, by and between Licensee and Licensor.
"Operating Deficit" means, for any Quarter, the excess (if any) of Cash
Expenditures over Cash Receipts.
"Operating Surplus" means, for any Quarter, the excess (if any) of Cash
Receipts over Cash Expenditures.
"Partnership Agreement" means the Second Amended and Restated Agreement
of Limited Partnership of the Partnership, dated as of March 3 1, 1999.
"Placement Agent" has the meaning specified in the Partnership
Agreement.
"Placement Agreement" has the meaning specified in the Partnership
Agreement.
"Projects" means, collectively, the agglomeration facilities
individually owned by each of the Licensees.
"Purchase Agreement" has the meaning specified in the Partnership
Agreement.
"Quarter" means, in each calendar year, each three-month period
beginning January 1, April 1, July 1 and October 1.
"Relevant Percentage" means (i) ****% until the date that the Placement
Agent has received aggregate Sales Compensation of $**** under the Placement
Agreement, as certified by the Licensee, and (ii) ****% thereafter.
"Reserve Withholding Amount" has the meaning specified in the
Partnership Agreement.
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"Sales Compensation" has the meaning specified in the Partnership
Agreement.
"Seller" means Pace Carbon Synfuels, L.L.C., a Delaware limited
liability company.
"Subordination Amount" means, for any Quarter, the positive difference,
if any, of (i) an amount equal to the Relevant Percentage of the Operating
Deficit for such Quarter, minus (ii) if the Relevant Percentage is ****%, an
amount equal to ****% of the Estimated Project Tax Credits for such Quarter, and
if the Relevant Percentage is ****%, an amount equal to ****% of the Estimated
Project Tax Credits for such Quarter; provided, that the Subordination Amount
shall not exceed the Earned Royalty for such Quarter.
(b) Amendment to Section 3.3. Section 3.3 of the License Agreement is
deleted in its entirety and the following substituted in lieu thereof:
"3.3 Earned Royalty. Licensee shall pay to Licensor quarterly earned
royalty payments ("Earned Royalty") in an amount equal to the product of (a)
$****, multiplied by (b) the number of MMBtu' S of Product qualifying for the
Section 29 Tax Credit that was sold by Licensee during the immediately preceding
Quarter. Beginning on January 1, 1999, and each year thereafter, the amounts in
clause (a) above shall be adjusted by the percentage increase or decrease in the
dollar amount of the inflation adjustment as provided in Section 29 of the
Internal Revenue Code. Licensor and Licensee agree that the aggregate Earned
Royalty payable to Licensor for Product produced and sold for the quarter ending
June 1, 1998 through and including the quarter ending March 31, 1999 is $****,
the full amount of which shall be considered a "Deferred Earned Royalty"
governed by the terms of Section 3.4(b) hereof."
(c) Amendment to Section 3.4. Section 3.4 of the License Agreement is
deleted in its entirety and the following substituted in lieu thereof:
"3.4 Payment Terms. (a) Subject to subsection (b) below, Earned Royalty
payments shall be due within ten (10) days after Licensee (or the Partnership)
receives its payment for the corresponding period, but no later than forty-five
(45) days after the end of the Quarter to which the payment relates; provided,
however, that such payment shall not be due until any disputes among the
partners of the Partnership (or the Partnership and the Seller) have been
resolved as provided in the agreements among such parties. Payments shall be
made by Licensee to Licensor and shall be deemed to be paid upon receipt by
Licensor.
(b) For each Quarter, that portion of the Earned Royalty equal to the
Subordination Amount, if any, shall be subordinated and deferred. Any amount
deferred pursuant to this Section 3.4(b) (together with interest thereon as
hereafter provided) is referred to herein as a "Deferred Earned Royalty." The
amount of any Earned Royalty which is deferred shall continue as an obligation
of the Licensee and shall bear interest at the rate of six percent per annum,
compounded annually, until paid. If for any Quarter, the Licensee has an
Operating Surplus, the Licensee shall pay to the Licensor the lesser of (i) the
Relevant Percentage of such Operating Surplus and (ii) the aggregate amount of
any outstanding but unpaid Deferred Earned Royalties (including accrued and
unpaid interest). Any
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payments made with respect to Deferred Earned Royalties shall be credited first
to accrued and unpaid interest, and then to the principal amount thereof. All
Deferred Earned Royalties not paid as of January 2, 2009 shall become due and
payable and shall be paid to the Licensor on such date."
Section 3. Retention of Rights. The parties hereto agree that they are
entering into this Amendment solely in order to implement certain changes to the
License Agreement, including, but not limited to, revising the payment terms in
respect of the Earned Royalty thereunder, and that the act of entering into this
Amendment shall not be construed as evidence of any satisfaction or
dissatisfaction with the use or efficacy of the Coal Briquetting Technology.
Section 4. Representations and Warranties. Each of Licensor and
Licensee represents and warrants that (a) the execution, delivery and
performance of this Amendment and the consummation of the transactions
contemplated hereby have been duly authorized on its behalf by all requisite
action, corporate or otherwise, (b) it has the full right, power and authority
to enter into this Amendment and to carry out the terms of this Amendment, (c)
it has duly executed and delivered this Amendment, (d) this Amendment is a valid
and binding obligation of it enforceable in accordance with its terms, and (e)
the execution and delivery of this Amendment and the performance by it of the
License Agreement, as amended by this Amendment, does not and will not (i)
require any consent or approval of any party which has not been obtained, (ii)
conflict with or violate any provision of its organizational documents, (iii)
conflict with or violate any provision of any applicable law, regulation or
order of any governmental or regulatory authority, or (iv) conflict with,
violate or result in a breach of or constitute a default under or result in the
imposition or creation of a security interest under any contract, agreement or
other undertaking to which it is a party or by which it or any of its properties
or assets are bound.
Section 5. Other Provisions Unaffected. All of the terms, covenants and
provisions of the License Agreement shall continue in full force and effect,
unamended and unmodified except as specifically set forth in this Amendment.
Section 6. Effectiveness. This Amendment shall be effective, and shall
be binding on the parties hereto, on the date first above written.
Section 7. Further Assurances. Each party agrees, at the request of the
other party, at any time and from time to time, to execute and deliver all such
further documents, and to take and to forbear from all such action, as may be
reasonably necessary or appropriate in order to more effectively carry out the
provisions of this Amendment.
Section 8. Governing Law. This Amendment shall be governed in
accordance with the laws of the State of Utah, exclusive of its conflict of laws
rules.
Section 9. Counterparts. This Amendment may be executed in two or more
counterparts, each which shall be deemed an original, but all of which together
shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of Licensor and Licensee has caused its duly
authorized representative to execute and deliver this Amendment on the date and
year first above written.
LICENSOR LICENSEE
COVOL TECHNOLOGIES, INC P.C VIRGINIA SYNTHETIC
FUEL #1, L.L.C. by PACE CARBON SYNFUELS
INVESTORS, L.P.,
Its sole member
By: PACE CARBON FUELS, L.L.C.,
Its general partner
By: /s/ Stanley M. Kimball By: /s/ James R. Treptow
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Name: Stanley M. Kimball Name: James R. Treptow
Title: Sr. Vice President Title: President
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