AGREEMENT CONCERNING ADDITIONAL FACILITIES
This Agreement concerning additional facilities ("the Agreement"), is
made and entered into as of December 27, 1996 by and between AJG Financial
Services, Inc., a Delaware corporation ("AJG"), and Covol Technologies, Inc., a
Delaware corporation ("Covol").
Whereas, Covol has represented that it has developed a proprietary
process to produce synthetic coal fuel extrusions and briquettes from waste coal
dust, coal fines, and other coal derivatives.
Whereas, AJG proposes to enter into four (4) separate standard Form of
Agreements (individually referred to as a "Facility Agreement" and collectively
referred to as the "Facility Agreements") between Owner and Design/Builder with
Gencor Industries, Inc. ("Contractor") for the construction of four (4)
agglomeration facilities within the United States, each to have a production
capacity of approximately 30,000 tons per month (individually referred to as a
"Facility" and collectively referred to as the "Facilities").
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, AJG
and Covol agree as follows:
Section 1 Definitions.
"Coal Briquetting Technology" means intellectual property, inventor's
certificates 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, disks,
algorithms and other scientific or technical information relating to or used in
the proprietary process to produce synthetic coal fuel extrusions and briquettes
from waste coal dust, coal fines, and other similar coal derivatives, and the
proprietary binder material used in manufacturing synthetic coal fuel extrusions
and briquettes from waste coal dust, coal fines and other similar coal
derivatives, in each case owned or controlled by Covol; provided, however, that
the defined term "Coal Briquetting Technology" shall not include the proprietary
process developed by Covol to produce synthetic coke extrusions and briquettes
from coke breeze or any technology other than the processing and production of
synthetic coal fuel extrusions or briquettes.
"Commercial Use" means any usage of the Coal Briquetting Technology for
commercial exploitation and any other usage to which Covol grants prior written
consent.
"Covol" has the meaning set forth in the preamble.
"Contractor" has the meaning set forth in the preamble.
"Facility" and "Facilities" have the meanings set forth in the
preamble.
"Facility Agreement" and "Facility Agreements" have the meanings set
forth in the preamble.
"Facility Assignment" has the meaning set forth in section 12 hereof.
"Improvements" has the meaning set forth in section 2.3 hereof.
"AJG" has the meaning set forth in the preamble.
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* Confidential material has been omitted from this Exhibit and filed separately
with the Securities and Exchange Commission (the "Commission").
"Royalty" has the meaning set forth in section 3.2 hereof.
Section 2 License Grant.
2.1 General. Subject to the terms and conditions of this
Agreement, Covol hereby grants to AJG a license to use the Coal Briquetting
Technology for Commercial Use with each Facility, including a license to make,
have made, use, and sell or otherwise transfer products which embody, use, or
have been developed or manufactured with the Coal Briquetting Technology. AJG
may propose the general location for each Facility, and Covol will then have
thirty (30) days to approve or disapprove of the general area for each Facility,
which approval shall not unreasonably be withheld, taking into account other
facilities in the area utilizing Covol's technology, any noncompetition
agreements, and like factors.
2.2 Know-How and Assistance. To enable AJG to benefit fully
from the license of the Coal Briquetting Technology, Covol shall provide
reasonable access to documentation, drawings, engineering specifications, and
other know-how in its possession that Covol determines is necessary to carry out
the purposes of this Agreement; reasonable access to its employees or agents who
are familiar with the Coal Briquetting Technology and Improvements to the Coal
Briquetting Technology, as defined in section 2.3; and technical advice with
regard to the Coal Briquetting Technology as is reasonably requested by AJG.
Covol reserves the right to deny access to documentation and other forms of
information it deems unnecessary to carry out the purposes of this Agreement.
2.3 Improvements. Covol may develop improvements, variations,
or modifications ("Improvements") to the Coal Briquetting Technology. The term
"Improvements" shall include changes that reduce production costs, improve
performance, or increase marketability. Covol hereby grants to AJG a license to
utilize the Improvements made by it for Commercial Use, including to make, have
made, use, and sell or otherwise transfer products that utilize any such
Improvements subject to the terms of this Agreement. It is mutually understood
and agreed that all Improvements provided to AJG by Covol shall remain the sole
and exclusive property of Covol.
2.4 Confidentiality. AJG hereby agrees not to disclose the
Coal Briquetting Technology except to its agents, employees, directors, or
representatives that have a need to know about the Coal Briquetting Technology
in connection with the operation and maintenance of the Facilities and the sale
of coal briquettes or extrusions produced by the Facilities.
Section 3 License Fees and Royalty.
3.1 License Fees. AJG shall pay a base license fee to Covol
equal to * for each Facility at the commencement of construction of each
Facility.
3.2 Royalty Amount. As to each Facility, on or before the 15th
of the month following the end of each fiscal quarter, AJG shall pay to Covol
royalty payments ("Royalty") in an amount equal to the product of (i) *
multiplied by (ii) the MM Btu of the extrusions and briquettes sold by AJG
during the immediately preceding quarter. If unpaid by the date due, the Royalty
shall accrue simple interest at the rate of one (1) percent per month. Beginning
on January 1, 1997 and each year thereafter, the Royalty shall be adjusted by *
of the increase or decrease in the inflation adjustment provided in Section 29
of the Internal Revenue Code.
Section 4 Binder.
4.1 Sales of Binder.
4.1.1 Sale and Purchase. Upon the request of AJG,
from time-to-time, Covol shall sell to AJG a sufficient quantity of proprietary
binder material manufactured by Covol as is required to operate
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* Confidential material omitted and filed separately with the Commission.
each Facility. Covol shall deliver the proprietary binder material to each
Facility, at such times and in such amounts as reasonably requested by AJG.
Payments for proprietary binder material delivered by Covol during any calender
month shall be due and payable to Covol on the 10th business day of the
immediately succeeding month. If unpaid by the due date, the payment shall
accrue simple interest at the rate of one (1) percent per month.
4.1.2 Price. The price which AJG shall pay for the
proprietary binder material delivered by Covol during any calender year shall be
an amount equal to (i) Covol's direct and actual costs (direct material and
labor costs and a percentage of the total overhead costs of Covol reasonably
reflecting the ratio of the administrative costs incurred in connection with the
manufacture and sale of the proprietary binder material to the total overhead
costs of Covol) reasonably incurred to manufacture the proprietary binder
material plus (ii) * of the amount determined pursuant to clause (i).
Section 5 Records; Inspection; Confidentiality. Each party hereto shall
keep accurate records containing all data reasonably required for the
computation and verification of the amounts to be paid by the respective parties
under this Agreement, and shall permit each other party or an independent
accounting firm designated by such other party to inspect and/or audit such
records during normal business hours upon reasonable advance notice. All costs
and expenses incurred by a party in connection with such inspection shall be
borne by it. Each party agrees to hold confidential from all third parties all
information contained in records examined by or on behalf of it pursuant to this
section 5.
Section 6 Development and Construction of Facilities.
6.1 Assistance from Covol. Upon the reasonable request of AJG,
Covol agrees to provide assistance from time to time in the development and
construction of each of the Facilities. Covol shall also provide, from time to
time upon the reasonable request of AJG, assistance to AJG in connection with
presentations to potential investors in any of the Facilities.
6.2 Reimbursement of Expenses. AJG shall reimburse, on demand,
the travel and other similar out-of-pocket expenses of Covol in performing
services requested under Section 6.1; provided, however, that Covol shall obtain
the prior written approval of AJG for any expenditures in excess of $5,000.
Section 7 Representations and Warranties.
7.1 Authority. Each of Covol and AJG represents and warrants
that (i) the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been or will be duly
authorized on its behalf by all requested 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.
7.2 No Consent. Each of Covol and AJG represents and warrants
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 the transactions contemplated
under this Agreement.
7.3 Intellectual Property Matters. Covol warrants that it (i)
owns intellectual property, inventor's certificates 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, disks, algorithms, and
other scientific or technical information relating to or used in the proprietary
process to produce synthetic coal fuel extrusions and briquettes from waste coal
dust, coal fines, and other similar coal derivatives, and, the proprietary
binder material used
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* Confidential material omitted and filed separately with the Commission.
in manufacturing synthetic coal fuel extrusions and briquettes from waste coal
dust, coal fines and other similar coal derivatives, and (ii) has the right and
power to grant to AJG the licenses granted herein.
Section 8 Term. This Agreement and the license granted hereunder shall
be for the period from the Closing Date to and including January 1, 2008, or the
corresponding date under Section 29 of the 1986 Code in the event of an
extension of the tax credits available under Section 29 of the 1986 Code.
Section 9 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 10 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 11 Notices. All notices required or permitted to be given under
this Agreement shall be in writing. Notices may be served by certified or
registered mail, postage paid with return receipt requested; by private courier,
prepaid; by telex, facsimile, or other telecommunication device capable of
transmitting or creating a written record; or personally. Mailed notices shall
be deemed delivered five days after mailing, property addressed. Couriered
notices shall be deemed delivered when delivered as addressed, or if the
addressee refuses delivery, when presented for delivery notwithstanding such
refusal. Telex or telecommunicated notices shall be deemed delivered when
receipt is either confirmed by confirming transmission equipment or acknowledged
by the addressee or its office. Personal delivery shall be effective when
accomplished. Unless a party changes its address by giving notice to the other
party as provided herein, notices shall be delivered to the parties at the
following address:
Covol: Covol Technologies, Inc.
3280 North Frontage Road
Lehi, Utah 84084
Telephone: (801) 768-4481
Telecopier: (801) 768-4483
Attn.: Mr. Brent M. Cook
With a copy to: Ballard Spahr Andrews & Ingersoll
201 South Main Street, Suite 1200
Salt Lake City, Utah 84111-2215
Telephone: (801) 531-3000
Telecopier: (801) 531-3001
Attn.: Mr. William Marsh
Buyer: AJG Financial Services, Inc.
The Gallagher Centre
Two Pierce Place
Itasca, IL 60143-3141
Telephone: (312) 285-3500
Telecopier: (312) 285-3483
Attn.: Mr. David R. Long
With a copy to: Rudnick & Wolfe
203 North LaSalle Street
Chicago, IL 60601-1293
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Telephone: (312) 368-4000
Telecopier: (312) 236-7516
Attn.: Mr. John R. Mannix, Jr.
Section 12 Assignment; Sublicenses. This Agreement may be assigned by
Covol to any of its wholly-owned subsidiaries. After the payment of the base
license fee contemplated under section 3.1 for a Facility, AJG may assign its
rights under this Agreement relating to that Facility to persons or entities
approved by Covol (a "Facility Assignment").
Section 13 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 forbear from all such action, as may be
reasonably necessary or appropriate in order more effectively to carry out the
provisions of this Agreement.
Section 14 Entire Agreement. This Agreement constitutes the entire
agreement of the parties relating to the subject matter hereof. There are no
promises, terms, conditions, obligations, or warranties other than those
contained herein. This Agreement supersedes all prior communications,
representations, or agreements, verbal or written, among the parties relating to
the subject matter hereof. This Agreement may not be amended except in writing
signed by the parties hereto.
Section 15 Governing Law. This Agreement shall be governed in
accordance with the laws of the State of Utah.
Section 16 Counterparts. This Agreement 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized representatives the day and year first above written.
COVOL TECHNOLOGIES, INC.
By: /s/ Brent M. Cook
-------------------------
Name: Brent M. Cook
Title: President
AJG FINANCIAL SERVICES, INC.
By: /s/ Mark Strauch
----------------------
Name: Mark Strauch
Title: Treasurer
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