MARKETING, DISTRIBUTION AND TRANSPORTATION LOGISTICS SERVICES AGREEMENT By and Between KFx, Inc. And DTE Coal Services, Inc. Dated as of June 6, 2006
Exhibit
10.79
MARKETING,
DISTRIBUTION AND TRANSPORTATION
LOGISTICS
SERVICES AGREEMENT
By
and Between
KFx,
Inc.
And
DTE
Coal Services, Inc.
Dated
as of
June
6, 2006
THIS
MARKETING, DISTRIBUTION AND TRANSPORTATION LOGISTICS SERVICES AGREEMENT
(the
“Agreement”) is entered into and made as of June 6, 2006 (the “Effective Date”),
by and between KFx
Inc.,
a Delaware corporation (“KFx”), and DTE
Coal Services, Inc.,
a Michigan corporation (“DTECS”). KFx and DTECS are also referred to herein
individually as a “Party” and collectively as the “Parties”.
RECITALS
A. KFx
produces a beneficiated coal product known as K-Fuel™ and wishes to engage DTECS
to provide marketing, transportation, logistical and other services related
thereto.
B. DTECS
desires to provide such marketing, distribution and transportation, logistical,
and other services to KFx pursuant to the terms of this Agreement.
AGREEMENT
NOW
THEREFORE, for and in consideration of the premises, the mutual covenants and
promises set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are acknowledged by the Parties, and in
reliance upon the recitals, representations, warranties, covenants, terms and
conditions set forth herein, the Parties, intending to be legally bound, agree
as follows:
ARTICLE
1 - DEFINITIONS
OF TERMS
1.1 Definitions.
As used in this Agreement, the following terms shall have the respective
meanings set forth below.
“Affiliate”
shall mean:
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(i)
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any
other Person directly or indirectly owning, controlling or holding
with
power to vote 50% or more of the outstanding voting securities of
the
specified Person;
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(ii)
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any
other Person 50% or more of whose outstanding voting securities are
directly or indirectly owned, controlled or held with power to vote
by the
specified Person;
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(iii)
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any
other Person directly or indirectly controlling, controlled by or
under
common control with the specified Person;
or
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(iv)
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any
officer, director, partner or member of the specified Person or of
any
other Person described in clause (iii)
above.
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“Agreement”
shall mean this Agreement, including all Schedules attached hereto, as it may
be
amended, modified or restated from time to time.
“Applicable
Laws”
shall mean all laws, rules, regulations, ordinances, judgments, decrees,
injunctions, writs, orders or interpretations of any court, arbitrator or
governmental agency or authority or of any federal, state, county, municipal,
regional, local or other Governmental Authority having jurisdiction over the
matter in question including, without limitation, those laws, rules,
regulations, orders or interpretations relating to the protection of human
health, safety and the environment.
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“Base
Price”
shall initially be set at thirty three dollars ($33.00) per ton which the
Parties intend to represent the lowest price at which KFx would sell K-Fuel™ in
the open market as of the date of this Agreement and such price may be annually
renegotiated upward or downward to be effective as of the start of a Contract
Year based on, inter alia, market conditions and prices of competing fuels.
It
is the further intention of the Parties that any adjustments to the “Base Price”
shall approximate the market price for K-Fuel™ at the time of the annual
adjustment. Failure of the Parties to agree upon a Base Price for any Contract
Year shall be subject to arbitration pursuant to Section 10.2.
“Business
Day”
shall mean a day commercial banks in Detroit, Michigan are open for business;
and a Business Day shall begin at 8:00 a.m. and end at 5:00 p.m. prevailing
Eastern Time.
“Claims”
shall mean all claims or actions, threatened or filed and whether groundless,
false or fraudulent, that directly or indirectly relate to the subject matter
of
an indemnity, and the resulting losses, damages, expenses, fees of attorneys,
experts and consultants, and court costs, whether incurred by settlement or
otherwise, and whether such claims or actions are threatened or filed prior
to
or after the termination of this Agreement.
“Contract
Year”
shall mean January 1 through December 31 of each year during the Term of this
Agreement; except contract Year 2006 shall begin on June 6, 2006.
“DTECS”
shall have the meaning assigned in the introductory paragraph, and its
successors and permitted assigns.
“DTECS
Confidential Information”
shall have the meaning assigned in Section 17.1(b).
“DTECS
Events of Default”
shall have the meaning assigned in Section 8.2.
“DTECS
Indemnitees”
shall have the meaning assigned in Section 8.3(b).
“Default
Rate”
shall mean 15% per annum.
“Dollars”
and “$”
shall mean lawful money of the United States of America.
“Effective
Date”
shall have the meaning assigned in the introductory paragraph.
“Expiration
Date”
shall have the meaning assigned to it in Section 2.1.
“Fee”
shall have the meaning assigned to it in Section 5.1.
“Fee
Ton”
as used in Section 5.1 shall mean each Ton of K-Fuel™ produced at any K-Fuel™
Facility, but excluding K-Fuel™ Direct Tons (as defined hereinbelow) that in any
month, is marketed by KFx or its Marketing Representatives, DTECS or the K-Fuel™
Facility owner, or (ii) sold by the K-Fuel™ facility owner; and such tons are
transported pursuant to any transportation contract arranged by, or in railcars
leased by or from, DTECS in fulfillment of its obligations
hereunder.
“Force
Majeure”
shall have the meaning assigned in Section 6.1.
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“Governmental
Authority”
shall mean any nation or government, any state or other political subdivision
thereof, and any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government.
“Incentive
Fee”
shall have the meaning assigned to it in Section 5.2.
“Indemnified
Party”
shall have the meaning assigned in Section 8.3(c).
“Indemnitor”
shall have the meaning assigned in Section 8.3(c).
“Intellectual
Property”
shall have the meaning assigned in Section 7.1(g).
“Invoice”
shall have the meaning assigned in Section 5.1.
“K-Fuel™
Direct Tons”
shall mean K-Fuel™ manufactured on a customer's site for the exclusive use of
such customer using feedstock which is transported to the customer's site
without the use of DTECS' transportation services provided under this
Agreement.
“K-Fuel™”
shall mean K-Fuel™ beneficiated coal product processed by temperature and
pressure by KFx or one of KFx's Affiliates.
“KFx”
shall have the meaning assigned in the introductory paragraph, and its
successors and permitted assigns.
“KFx
Confidential Information”
shall have the meaning assigned in Section 17.1(a).
“KFx
Events of Default”
shall have the meaning assigned in Section 8.1.
“KFx
Facility No.1”
shall mean the first K-Fuel™ production facility at the Fort Union Mine near
Gillette, Wyoming, which is designed to produce approximately 750,000 Tons
of
K-Fuel™ per year.
“KFx
Indemnitees”
shall have the meaning assigned in Section 8.3(a).
“KFx
Marketing Representatives”
mean those Persons designated by KFx who shall assist and participate in the
overall marketing efforts of K-Fuel™ pursuant to this Agreement. The KFx
Marketing Representatives shall not be considered employees of DTECS for any
purposes whatsoever.
“Month”
shall mean a period of time beginning at midnight (12:00 a.m.) prevailing
Eastern Time on the first (1st)
day of any calendar month and ending at 11:59 p.m. prevailing Eastern Time
on
the last day of such calendar month.
“Party”
and “Parties”
shall have the respective meanings assigned in the introductory
paragraph.
“Person”
shall mean any individual, a partnership, a corporation, a limited liability
company, a trust, an unincorporated organization, any other type of legal entity
or a government or any department or agency thereof.
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“Services”
shall mean the provision of marketing, distribution, logistical, transportation
and other services by performed by DTECS and the KFx Marketing Representatives
pursuant to this Agreement.
“Specifications”
shall have the meaning assigned in Section 4.1.
“Tax
Credits”
shall have the meaning assigned in Section 3.7.
“Term”
shall have the meaning assigned in Section 2.1.
“Ton”
shall mean a short ton of two thousand (2,000) pounds (avoirdupois).
ARTICLE
2 - TERM
2.1 Term.
The term of this Agreement (“Term”) shall commence on the Effective Date, and
unless extended in accordance with Section 2.2 or terminated pursuant to Section
2.3 or 2.4, shall terminate on December 31, 2010 (the “Expiration Date”) unless
otherwise earlier terminated as provided elsewhere herein.
2.2 Term
Extension.
The Term of this Agreement may be extended beyond the Expiration Date by mutual
agreement of the Parties. Failure of the Parties to agree is not subject to
arbitration as set forth in Article 10.2.
2.3 Termination
by KFx.
KFx may terminate this Agreement at any time upon sixty (60) days written notice
if DTECS has failed to obtain rail transportation services for the shipment
of
K-Fuel™ including commercially reasonable rates for such transportation
services. Notwithstanding the foregoing, during Contract Year 2006 the Parties
recognize that it may not be possible to obtain commercially reasonable rates,
railcars and a suitable transportation agreement because of the uncertainties
concerning the volume of K-Fuel™ to be produced, the locations of customers and
the availability of railroad capacity and cars. Accordingly, if DTECS' efforts
to obtain same do not result in suitable transportation arrangements in Contract
Year 2006, such failure may not be the basis of termination hereunder during
such Contract Year. The Parties further agree and acknowledge that “commercially
reasonable rates” may not be the lowest rates available but rates that
reasonably allow K-Fuel™ to be competitively delivered to the desired markets.
Factors which may affect the rail rates which can be obtained for the shipment
of K-Fuel™ include but are not limited to the then current market for such rail
rates and transportation services the volumes of K-Fuel™ to be shipped, location
of potential customers and K-Fuel™ production facilities and the train loading
capacity and conditions at such facilities. Notwithstanding any other provision
of this Agreement to the contrary, the termination of this Agreement by KFx
is
the sole and exclusive remedy for DTECS failure to obtain transportation
services as provided in this Agreement.
2.4 Termination
by DTECS.
DTECS may terminate this Agreement upon sixty (60) days written notice to KFx
in
the event KFx fails to produce, or be capable of producing upon reasonable
notice, marketable quantities of K-Fuel™ including but not limited to, the
failure to produce the volume of K-Fuel™ to fully load unit trains in any
Contract Year after Contract Year 2006; fails to reach sustained reliable
production of K-Fuel™; or fails to cooperate with DTECS in the overall
marketing, distribution, transportation, and logistical services efforts
relating to the sale of K-Fuel™ under this Agreement. Quantities of K-Fuel™ that
might otherwise be considered not to be “marketable quantities” for purposes of
this Section 2.4 that are sold as test ▇▇▇▇▇ shall not be a basis for
termination under this Section 2.4.
2.5 Obligations
Not Affected.
The termination of this Agreement pursuant to this Article shall not in any
way
affect the obligations of either KFx or DTECS with respect to contractual
agreements
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entered
into by KFx or DTECS with other Persons prior to the date of termination,
including but not limited to customers and end users, rail and other carriers
and rail car lessors or sublessors; and DTECS shall be entitled to a Fee (as
hereinafter defined) due on contracts and commitments to Persons that continue
in effect beyond the termination or Expiration Date of this
Agreement.
2.6 No
Liability.
If a Party terminates pursuant to Section 2.3 or 2.4, as the case may be,
neither Party shall have any further obligations under this Agreement, except
as
provided in Section 2.5. Notwithstanding the foregoing, this Section 2.6 shall
not be construed so as to relieve either Party from any liability for any breach
or default of their duties under this Agreement.
ARTICLE
3 - SERVICES
BY DTECS
3.1 Joint
Marketing Efforts.
Within fifteen (15) days after the Effective Date, the Parties shall meet to
commence development of a marketing plan for K-Fuel™. DTECS and KFx Marketing
Representatives shall review current marketing conditions, KFx long and short
term sales strategies and identify customers. Such plan shall also set forth
the
specific services to be performed by DTECS and the KFx Marketing Representatives
in order to avoid duplication of efforts and to maximize the Parties' resources.
The Parties may perform the marketing services singly or jointly, but at all
times coordinating their efforts to achieve the marketing objectives agreed
to
by the Parties. All costs associated with the efforts of the KFx Marketing
Representatives shall be born by KFx.
3.2 Market
Studies and Services.
DTECS agrees to use commercially reasonable efforts to market on behalf of
KFx
the K-Fuel™ production, in amounts consistent with the marketing plan, which
meets the Specifications and at a price determined as set forth in this
Agreement. Within thirty (30) days following the Effective Date, DTECS shall
provide KFx with a market study of potential utility markets for K-Fuel™. Sixty
(60) days after the delivery of the utility study, DTECS shall deliver to KFx
a
study of industrial coal markets for K-Fuel™.
3.3 Contracts
and Commitments.
The Parties shall discuss the terms and conditions, including price, of any
potential sale of K-Fuel™ to any Person prior to entering into any binding
commitments. Notwithstanding any other provision of this Agreement to the
contrary, KFx shall have the right to approve or reject any contract for the
sale of K-Fuel™. In the event DTECS or KFx marketing efforts result in a
potential sale of K-Fuel™ to a customer, the Parties shall review such offer(s)
and discuss the terms and conditions of such offer(s), including the price
per
ton, volumes and the cost and conditions of transportation. The final decision
to enter into binding contracts for the transportation of the K-Fuel™ shall be
by mutual agreement.
3.4 Product
Volume Commitments.
DTECS and KFx will agree to specific maximum product volumes, delivery
schedules, timing and other material terms and conditions that are normal and
standard considerations in sales contracts prior to DTECS consummating any
proposed transaction for the sale of K-Fuel™ on behalf of KFx. Once KFx consents
to such sale on its behalf, DTECS shall have the right to enter into any such
transactions on behalf of KFx. KFx shall abide by and fully perform all of
the
terms and conditions of any contracts or commitments presented by DTECS to
KFx
for execution or executed by DTECS on behalf of KFx.
3.5 Rail
Transportation.
DTECS represents that it has the requisite personnel, skills and expertise
in
the negotiation of rail transportation contracts, including rates, and in
railroad and other transportation logistics. DTECS shall use good faith and
commercially reasonable efforts to obtain rail transportation services to
support the volume commitments resulting from the marketing efforts of the
Parties. KFx acknowledges that the current contract rates DTECS has in place
with various rail carriers may not be used for the transportation of K-Fuel™
sold under this Agreement. DTECS, if so requested by KFx, shall
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use
commercially reasonable and good faith efforts to obtain rail cars and sets
for
the transportation of K-Fuel™ sold under this Agreement on a cost pass through
basis, provided however, DTECS does not warrant or guaranty that such rail
transportation services, rail cars or car sets can be obtained at any particular
cost, or any cost, for transporting K-Fuel™.
3.6 DTECS
Not a Party.
Unless expressly agreed to by DTECS and KFx in writing, DTECS shall not be
or
deemed to be a party to any of the contracts and other binding commitments
for
the sale of K-Fuel™ made pursuant this Agreement. Accordingly, DTECS shall have
no liability with respect to the performance, or lack thereof under any such
contract or commitment entered into pursuant to this Agreement.
3.7
Section
45 Tax Credits.
If at any time during the term of this Agreement the production and/or sale
of
K-Fuel™ becomes eligible for certain tax credits under Section 45 of the United
States Tax Code (the “Tax Credits”) the Parties shall determine an appropriate
means to insure eligibility (if possible) for such credits, as well as to
maximize the application of such credits to production and sales of K-Fuel™
under this Agreement. KFx agrees that, in those instances, where (i) it sells
K-Fuel™, at a price below the market price for K-Fuel™ at the time of the
proposed sale; (ii) DTECS would otherwise be entitled to a Fee (as defined
in
Section 5.1); and (iii) the reason KFx proposes to sell such K-Fuel™ below
market is that KFx expects Tax Credits to make up the difference, the Fee
calculated in accordance with Section 5.1(b) shall be based upon the market
price and not the sale price. If the Parties fail to agree as provided above,
either Party may demand arbitration pursuant to Section 10.2. DTECS shall fully
cooperate with KFx with respect to obtaining Tax Credits for the transactions
contemplated herein. Further, DTECS shall not intentionally market or transport
the K-Fuel™ in such a manner so as to jeopardize KFx's ability to obtain Tax
Credits, provided KFx fully informs DTECS as to the requirements of obtaining
Tax Credits as well as actions that may jeopardize the application of Tax
Credits. The Parties also agree that DTECS shall have no claim to, or interest
in any Tax Credits obtained by KFx.
ARTICLE
4 - K-FUEL™
SPECIFICATIONS
4.1 Specifications.
KFx shall cause all K-Fuel™ to be marketed pursuant to this Agreement to comply
with the specifications set forth on the attached Schedule 4.1.
4.2 Sampling
and Analysis.
KFx shall cause K-Fuel™ to be periodically sampled and analyzed at its own cost
and shall promptly provide DTECS with copies of such analysis for use in its
marketing and transportation efforts.
ARTICLE
5 - FEES,
BILLING AND PAYMENT
5.1 Fees
for DTECS Services.
KFx shall pay DTECS a fee (“Fee”) for each Fee Ton of K-Fuel™ which shall be the
greater of:
| (a) |
$20,000
per Month plus $2.00 per Ton for each Fee Ton of K-Fuel™ sold during each
month; or
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| (b) |
$1.00
per Ton for each Fee Ton of K-Fuel™ sold during each month plus the
Incentive Fee.
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5.2 Incentive
Fee.
As used in Section 5.1, the Incentive Fee shall be the amounts determined
pursuant to Schedule 5.2, attached hereto and incorporated herein by reference.
All prices shall be FOB rail car at KFx's production facility net of DTECS's
Fees.
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5.3 Tons
Included.
The Fee shall be due and payable to DTECS on all Fee Tons of K-Fuel™ whether
such tons are sold through the individual or joint efforts of DTECS, KFx or
the
KFx Marketing Representatives but shall exclude K-Fuel™ Direct
Tons.
5.4 Invoices;
Payments.
On or before the 15th day following the end of each Month during the Term,
DTECS
shall invoice KFx for all Fees payable for the preceding Month (each an
“Invoice”). The Invoice shall contain the information set forth in Section 5.4
and be provided in accordance with the notice provisions of Article 10. In
the
event of a dispute regarding any amounts shown on any Invoice that the Parties
have been unable to resolve by the date payment is due, KFx shall pay all
undisputed amounts when due. Assuming that DTECS has timely delivered an Invoice
and such related information to KFx, the payment by KFx of all undisputed
amounts reflected in such Invoice shall be made on or before the 25th day of
the
Month following the most current Month to which such Invoice relates and shall
be accompanied by a statement setting forth in reasonable detail all amounts
disputed by KFx, the reason for the dispute, and a request for any additional
documentation believed to be necessary to support the disputed amounts or to
resolve the dispute. Payment shall be made to DTECS, by wire, pursuant to the
wire instructions in Schedule 5.4, attached hereto and incorporated herein
by
reference.
5.5 Invoices;
Contents.
Each Invoice required by this Article 5 shall include, without limitation:
5.5.1
The aggregate Fees owed to DTECS for the applicable Month;
5.5.2
Any interest at the Default Rate on any late payments, together with a statement
showing the net amount payable from the prior Invoice, the amount and date
of
any payments received, any amounts outstanding from prior Invoices, and any
amounts in dispute;
5.5.3
Any other payments, charges, or amounts claimed by DTECS under any other
provision of this Agreement; and
5.5.4
The net amount payable by KFx.
5.6 Interest
on Late Payments.
In the event either Party shall not make any payment when due under the
provisions of this Agreement, except for those payments which are disputed
in
good faith and unless the payment is made within a grace period of two (2)
days
after the due date, the Party not making the payment when due shall pay interest
to the other Party on all such late amounts from the date originally due until
paid at the Default Rate.
ARTICLE
6 - FORCE
MAJEURE
6.1 Force
Majeure.
The term “Force Majeure” as used herein shall be events beyond the reasonable
control and without the fault or negligence of the Party claiming a Force
Majeure event and which by the exercise of due diligence of such Party claiming
the Force Majeure event such Party is unable to overcome and shall include,
but
is not limited to, strikes, lockouts, labor disturbances, acts of the public
enemy, wars, blockades, insurrections, riots, acts of God, epidemics,
landslides, lightning, earthquakes, fires, violent storms, floods, washouts,
environmental catastrophes, civil disturbances, explosions, acts or failures
to
act on the part of any governmental entity, failure of utility services,
sabotage, failure or inability to obtain transportation or any other similar
causes which are not reasonably within the control, and without the fault or
negligence, of the Party claiming the same. Financial inability shall not be
considered an event of Force Majeure for purposes of this
Agreement.
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6.2 Procedure.
If either Party is unable, wholly or in part, by reason of a Force Majeure
to
carry out its obligations hereunder, other than obligations to make payments
of
amounts due hereunder, then on such Party's giving prompt notice of full
particulars of such Force Majeure situation in writing to the other Party,
the
obligations of the Party giving such notice, so far as they are affected by
such
Force Majeure, shall be suspended during the Force Majeure period. Such cause
shall be remedied with due diligence and all reasonable dispatch.
6.3 Mitigation.
The Parties shall use commercially reasonable efforts to mitigate any adverse
effects of a Force Majeure situation. However, the exercise of due diligence
shall not require the settlement of labor disputes against the better judgment
of the Party having the dispute.
6.4 No
Change in Obligations.
In no event shall this Article 6 be construed to relieve either Party of any
obligation hereunder solely because of increased costs or other adverse economic
consequences that may be incurred through the performance of such obligation
of
the Parties hereto.
ARTICLE
7 - REPRESENTATIONS
AND WARRANTIES; COVENANTS AND AGREEMENTS
7.1 Representations
and Warranties of KFx.
KFx hereby represents, warrants and covenants to DTECS as follows:
(a)
KFx is a business corporation duly organized and existing and in good standing
under the laws of the State of Delaware and is qualified to do business in
all
jurisdictions where such qualification is necessary to perform all of its
obligations under this Agreement.
(b)
KFx possesses all requisite corporate power and authority to enter into and
perform this Agreement and to carry out the transactions contemplated
herein.
(c)
KFx's execution, delivery, and performance of this Agreement have been duly
authorized, and this Agreement has been duly executed and delivered and
constitutes KFx's legal, valid, and binding obligation, enforceable against
KFx
in accordance with its terms, except as may be limited by bankruptcy, insolvency
and other legal and equitable principles pertaining to creditor's
rights.
(d)
No suit, action or arbitration, or legal, administrative or other proceeding
is
pending or, to KFx's knowledge, threatened against KFx that would affect the
validity or enforceability of this Agreement or the ability of KFx to fulfill
its obligations and commitments hereunder.
(e)
No consents or approvals are required in connection with the execution, delivery
and performance by KFx of this Agreement.
(f)
The execution, delivery and performance by KFx of this Agreement will not (i)
violate any law, rule or regulation applicable to KFx, (ii) result in any breach
of, or constitute any default under, any contractual obligation of KFx, or
(iii)
result in, or require, the creation or imposition of any lien or other
encumbrance on any of the properties or revenues of DTECS.
(g)
KFx represents and warrants to DTECS that a) KFx has all necessary and required
United States and foreign patents, licenses, rights and other intellectual
property (“Intellectual Property”) to produce, market, sell and advertise
K-Fuel™; b)
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KFx
production, sale, marketing and advertising of K-Fuel™ does not infringe or
otherwise impair any Intellectual Property of any Person; and c) KFx has
not
received any notice of any infringement or misappropriation of any Person's
Intellectual Property.
7.2 Covenants
and Agreements of KFx.
KFx hereby covenants to DTECS as follows:
KFx
shall not take any action or cause any other Person to take any action not
authorized or permitted by this Agreement that shall materially interfere or
materially adversely affect DTECS's ability to comply with the terms and
conditions of this Agreement.
7.3 Representations
and Warranties of DTECS.
DTECS hereby represents and warrants to KFx as follows:
(a)
DTECS is a corporation duly organized and existing and in good standing under
the laws of the State of Michigan and is qualified to do business in all
jurisdictions where such qualification is necessary to perform all of its
obligations under this Agreement.
(b)
DTECS possesses all requisite power and authority to enter into and perform
this
Agreement and to carry out the transactions contemplated herein.
(c)
DTECS' execution, delivery, and performance of this Agreement have been duly
authorized, and this Agreement has been duly executed and delivered and
constitutes DTECS' legal, valid, and binding obligation, enforceable against
DTECS in accordance with its terms, except as may be limited by bankruptcy,
insolvency and other legal and equitable principles pertaining to creditors'
rights.
(d)
No suit, action or arbitration, or legal, administrative or other proceeding
is
pending or, to DTECS's knowledge, threatened against DTECS that would affect
the
validity or enforceability of this Agreement or the ability of DTECS to fulfill
its obligations and commitments hereunder.
(e)
No consents or approvals are required in connection with the execution, delivery
and performance by DTECS of this Agreement.
(f)
The execution, delivery and performance by DTECS of this Agreement will not
(i)
violate any law, rule or regulation applicable to DTECS, (ii) result in any
breach of, or constitute any default under, any contractual obligation of DTECS,
or (iii) result in, or require, the creation or imposition of any lien or other
encumbrance on any of the properties or revenues of KFx.
7.4 Covenants
and Agreements of DTECS.
DTECS hereby covenants to KFx as follows:
DTECS
shall not take any action or cause any other Person to take any action not
authorized or permitted by this Agreement that shall materially interfere or
materially adversely affect KFx's ability to comply with the terms and
conditions of this Agreement.
ARTICLE
8 - DEFAULT;
REMEDIES
8.1 Default
by KFx.
In the event of the occurrence of any of the following acts or events (“KFx
Events of Default”):
(a)
KFx fails to pay any sum due and owing by it hereunder;
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(b)
KFx breaches any material representations, warranties, covenants or agreements
contained in this Agreement in any material respect;
(c)
KFx shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall consent
to any such relief or to the appointment of or taking possession by any such
official in any involuntary case or other proceeding commenced against it,
or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any action to
authorize any of the foregoing; or
(d)
An involuntary case or other proceeding shall be commenced against KFx seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a
period of sixty (60) consecutive days; or an order for relief shall be entered
against KFx under the federal bankruptcy laws as now or hereafter in
effect;
then,
(i) upon the occurrence of any KFx Event of Default under this Section 8.1(a)
and the continuation of such KFx Event of Default for more than three (3)
Business Days after receipt by KFx of written notice thereof from DTECS', (ii)
upon the occurrence of any KFx Event of Default under Section 8.1(b), 8.1(c)
or
8.1(d) and the continuation of such KFx Event of Default for more than twenty
(20) days after receipt by KFx of written notice thereof from DTECS, provided,
if such KFx Event of Default cannot be reasonably cured within such twenty
(20)
day period, such longer period of time which is reasonable under the
circumstances (not to exceed a total of sixty (60) days so long as cure is
initiated within such twenty (20) day period and is diligently and continuously
prosecuted to completion thereafter), then DTECS may terminate this Agreement
at
any time thereafter during the continuation of such KFx Event of Default by
written notice to KFx.
8.2 Default
by DTECS.
In the event of the occurrence of any of the following acts or events (“DTECS
Events of Default”):
(a)
DTECS fail to pay any sum due and owing by it hereunder;
(b)
DTECS breaches any material representations, warranties, covenants or agreements
contained in this Agreement in any material respect;
(c)
DTECS shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall consent
to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its
10
debts
as they become due, or shall take any action to authorize any of the foregoing;
or
(d)
An involuntary case or other proceeding shall be commenced against DTECS seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a
period of sixty (60) consecutive days; or an order for relief shall be entered
against DTECS under the federal bankruptcy laws as now or hereafter in
effect;
then,
(i) upon the occurrence of any DTECS Event of Default under Section 8.2(a)
and
the continuation of such DTECS Event of Default for more than three (3) Business
Days after receipt by DTECS of written notice thereof from KFx; (ii) upon the
occurrence of any DTECS Event of Default under Section 8.2(b), 8.2(c), or 8.2(d)
and the continuation of such DTECS Event of Default for more than twenty (20)
days after receipt by DTECS of written notice thereof from KFx, if such DTECS
Event of Default cannot be reasonably cured within such twenty (20) day period,
such longer period of time which is reasonable under the circumstances (not
to
exceed a total of sixty (60) days so long as cure is initiated within such
twenty (20) day period and is diligently and continuously prosecuted to
completion thereafter), KFx may terminate this Agreement at any time thereafter
during the continuation of such DTECS Event of Default by written notice to
DTECS.
8.3 Indemnities.
(a) DTECS
Indemnity.
DTECS shall indemnify, defend and hold harmless KFx and its partners, joint
venturers, officers, agents, employees, successors and assigns (collectively,
the “KFx Indemnitees”) from and against any and all suits, actions, legal or
administrative proceedings, claims, demands, penalties, losses, liabilities,
costs and expenses (including attorneys' fees, court costs and all costs or
expenses related of any nature whatsoever arising out of or resulting from
any
misrepresentation, breach of warranty, or nonfulfillment of any covenant or
agreement on the part of DTECS under this Agreement. Notwithstanding the
foregoing, DTECS's liability to the KFx Indemnitees pursuant to this Section
8.3(a) shall be net of any insurance proceeds actually received by the KFx
Indemnitees or any of their respective affiliates from any third Person with
respect to or on account of the damage or injury which is the subject of the
indemnification claim. KFx agrees that it shall (and it shall cause each of
the
other KFx Indemnitees to) (i) use commercially reasonable efforts to pursue
the
collection of all insurance proceeds to which any of the KFx Indemnitees are
entitled with respect to or on account of any such damage or injury, (ii) notify
DTECS of all potential claims against any Person for any such insurance
proceeds, and (iii) keep the DTECS fully informed of the efforts of the KFx
Indemnitees in pursuing collection of such insurance proceeds.
(b) KFx
Indemnity.
KFx shall indemnify, defend and hold harmless DTECS and its directors, officers,
agents, employees, successors and permitted assigns (collectively, the “DTECS
Indemnitees “) from and against any and all suits, actions, legal or
administrative proceedings, claims, demands, penalties, losses, liabilities,
cost, and expenses (including attorneys' fees, court costs and all costs or
expenses related to environmental clean-up, containment, remediation or removal
of hazardous waste or pollution to property of DTECS or other Persons) of any
nature whatsoever arising out of
11
or
resulting from any misrepresentation (including but not limited to any breach
of
a warranty or representation with respect to Intellectual Property), breach
of
warranty or nonfulfillment of any covenant or agreement on the part of KFx
under
this Agreement. Notwithstanding the foregoing, KFx's liability to the DTECS
Indemnitees pursuant to this Section 8.3(b) shall be net of any insurance
proceeds actually received by the DTECS Indemnitees or any of their respective
affiliates from any third Person with respect to or on account of the damage
or
injury which is the subject of the indemnification claim. DTECS agrees that
it
shall (and it shall cause each of the other DTECS Indemnitees to) (i) use
commercially reasonable efforts to pursue the collection of all insurance
proceeds to which any of the DTECS Indemnitees are entitled with respect to
or
on account of any such damage or injury, (ii) notify KFx of all potential claims
against any other Person for any such insurance proceeds, and (iii) keep the
KFx
fully informed of the efforts of the DTECS Indemnitees in pursuing collection
of
such insurance proceeds.
(c) Claims.
If a claim by a Person is made against one of the KFx Indemnitees or one of
the
DTECS Indemnitees (an “Indemnified Party”), and if such Party intends to seek
indemnity with respect thereto under this Article 8, such Indemnified Party
shall promptly notify DTECS or KFx, as the case may be (the “Indemnitor”), of
such claims. The Indemnitor shall have thirty (30) days after receipt of such
notice to undertake, conduct and control, through counsel of its own choosing
and at its own expense, the settlement or defense thereof, and the Indemnified
Party shall cooperate with it in connection therewith; provided that the
Indemnitor shall permit the Indemnified Party to participate in such settlement
or defense through counsel chosen by such Indemnified Party, however, the fees
and expenses of such counsel shall be borne by such Indemnified Party. So long
as the Indemnitor, at Indemnitor's cost and expense, (1) has undertaken the
defense of, and assumed full indemnification responsibility with respect to,
such claim, (2) is reasonably contesting such claim in good faith, by
appropriate proceedings, and (3) has taken such action (including the posting
of
a bond, deposit or other security) as may be necessary to prevent any action
to
foreclose a lien against or attachment of the property of the Indemnified Party
for payment of such claim, the Indemnified Party shall not pay or settle any
such claim. Notwithstanding compliance by the Indemnitor with the preceding
sentence, the Indemnified Party shall have the right to pay or settle any such
claim, provided that in such event it shall waive any right to indemnity
therefor by the Indemnitor for such claim. If, within thirty (30) days after
the
receipt of the Indemnified Party's notice of a claim of indemnity hereunder,
the
Indemnitor does not notify the Indemnified Party that it elects, at Indemnitor's
cost and expense, to undertake the defense thereof and assume full
responsibility for all liabilities with respect thereto imposed on it by this
Article 8, or gives such notice and thereafter fails to contest such claim
in
good faith or to prevent action to foreclose a lien against or attachment of
the
Indemnified Party's property as contemplated above, the Indemnified Party shall
have the right to contest, settle or compromise the claim but shall not thereby
waive any right to indemnity therefor pursuant to this Agreement.
(d) Limitation.
NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN ANY OTHER PROVISION OF
THIS AGREEMENT, KFX AND DTECS AGREE THAT THE RECOVERY BY EITHER PARTY OF ANY
DAMAGES SUFFERED OR INCURRED BY IT AS A RESULT OF ANY BREACH BY THE OTHER PARTY
OF ANY OF ITS REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS UNDER THIS
AGREEMENT SHALL BE LIMITED TO THE ACTUAL DAMAGES SUFFERED OR INCURRED BY THE
NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE
12
BREACHING
PARTY OF ITS REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS HEREUNDER
AND
IN NO EVENT SHALL THE BREACHING PARTY BE LIABLE TO THE NON-BREACHING PARTY
FOR
ANY INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES SUFFERED OR INCURRED
BY THE NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE BREACHING PARTY
OF
ANY OF ITS REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS HEREUNDER.
WITHOUT IN ANYWAY LIMITING THE FOREGOING, DTECS SHALL NOT BE LIABLE TO KFX
OR
ANY OTHER PERSON WITH RESPECT TO THE LOSS OF, OR INABILITY TO OBTAIN ANY TAX
CREDITS, WHETHER UNDER SECTION 45, OR OTHERWISE. THIS PROVISION SHALL SURVIVE
THE TERMINATION OR EXPIRATION OF THIS AGREEMENT.
(e) Duty
to Mitigate.
Each Party agrees that it has a duty to mitigate damages and covenants that
it
will use commercially reasonable efforts to minimize any damages it may suffer
or incur as a result of the breach by the other Party of any of its
representations, warranties, covenants or agreements under this
Agreement.
ARTICLE
9 - NOTICES
Every
notice, approval, request, demand, statement or ▇▇▇▇ required or permitted
to be
given under this Agreement shall be in writing and shall be deemed sufficiently
given when deposited in the mail, registered or certified, postage prepaid,
and
addressed to the Party to whom given as follows:
If
to DTECS:
DTE
Coal Services, Inc.
Suite
201, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
President
If
to KFx:
▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
President
or
to such other address as such Parties shall from time to time designate by
notice in writing. Written notice given by any other method shall be deemed
effective when actually received by the Party.
ARTICLE
10 - GOVERNING
LAW AND DISPUTE RESOLUTION
10.1 Governing
Law.
This Agreement shall be governed by and construed in accordance with the laws
of
the State of Colorado without giving effect to the conflict of laws principles
thereof.
10.2 Dispute;
Arbitration.
If the Parties (i) fail to agree upon a Base Price for a Contract Year; or
(ii)
fail to agree as provided in Section 3.7 with respect to the impact of Tax
Credits on the price of K-Fuel™ and such dispute cannot be resolved by means of
good faith negotiation the dispute shall be resolved by arbitration pursuant
to
the Commercial Arbitration Rules of the American Arbitration Association
(“AAA Rules”) but not under the administration of the American Arbitration
Association;
13
provided,
however, in the event the arbitrator or arbitration panel cannot obtain
jurisdiction over a Person deemed by the arbitrator or arbitration panel to
be
an “indispensable party” within the meaning of Rule 19 of the Federal Rules of
Civil Procedure, any Party to this Agreement prejudiced thereby may avoid the
effect of this Section 9.1 and have resort to any State or Federal court having
jurisdiction of the controversy or claim, by giving written notice to the other
Party thereto. Unless the Parties agree otherwise, there will be three competent
and disinterested arbitrators, one selected by each Party within thirty (30)
days after one Party requests resolution by arbitration and the third selected
by the other two within sixty (60) days after first two arbitrators are
selected. The arbitration hearings will take place in Chicago, Illinois. If
either Party fails to select its arbitrator or the Parties' arbitrators are
unable to agree on the selection of the third arbitrator within the above time
limits, the open arbitrator positions will be filled in accordance with the
AAA
Rules. In addition to the AAA Rules, the Federal Rules of Evidence shall apply
to the conduct of the arbitration proceedings, and the Federal Rules of Civil
Procedure shall apply to the conduct of any discovery in connection therewith.
The decision and award of the arbitrator will be binding on the Parties.
Judgment on the award may be entered in any court having jurisdiction and shall
be enforceable in any court of competent jurisdiction. To the extent a dispute
between the Parties is not specifically arbitrable pursuant to Section 10.2,
the
Parties may resolve such dispute in any court of competent jurisdiction WHEREIN
THE PARTIES SPECIFICALLY AND IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY THAT
THEY MAY HAVE.
ARTICLE
11 - ENTIRE
AGREEMENT
This
Agreement constitutes the entire agreement between the Parties relating to
the
subject matter hereof and supersedes and replaces all prior and contemporaneous
agreements and understandings not incorporated herein by reference thereto,
whether written or oral and sets forth all the representations, covenants,
agreements and warranties upon which the Parties rely in entering into this
Agreement.
ARTICLE
12 - ASSIGNMENT
AND BINDING EFFECT
This
Agreement shall be binding upon, and shall inure to the benefit of, KFx and
its
successors and assigns. Either Party shall have the right, without the prior
written consent of the other Party, to assign this Agreement to an Affiliate
which, as a result of a corporate reorganization or restructuring, performs
substantially the same function as DTECS performs hereunder. Other than with
respect to assignments to Affiliates as set forth in the immediately preceding
sentence, no Party shall have the right to assign this Agreement without the
written consent of the other Party which shall not unreasonable withheld,
delayed or conditioned. This Agreement shall be binding upon, and shall inure
to
the benefit of, DTECS and its successors and assigns.
ARTICLE
13 - NO
PARTNERSHIP, THIRD PARTY BENEFICIARY
Nothing
contained in this Agreement shall be construed or constitute any Party as the
employee, agent, partner, joint venturer or contractor of any other Party.
This
Agreement is made and entered into for the sole protection and legal benefit
of
the Parties, and their successors and permitted assigns, and, except for the
DTECS Indemnitees and the KFx Indemnitees, no other Person shall be a direct
or
indirect legal beneficiary of, or have any direct or indirect cause of action
or
claim in connection with, this Agreement.
ARTICLE
14 - SURVIVAL
All
indemnities shall survive the termination of this Agreement. All rights and
obligations provided in this Agreement shall remain in effect for the purpose
of
complying herewith. To the extent that any payments made by a Party hereunder
are subsequently invalidated, declared to be fraudulent or
14
preferential,
set aside or required to be repaid to a trustee, debtor in possession, receiver
or other Person under any bankruptcy law, common law or equitable cause, then
to
such extent, such Party shall remain liable for such amounts as if such payment
or proceeds had not been received.
ARTICLE
15 - SEVERABILITY
Every
provision of this Agreement is intended to be severable such that if any term
or
provision hereof is illegal or invalid for any reason, such provision shall
be
severed from this Agreement and shall not affect the validity of the remainder
of this Agreement.
ARTICLE
16 - CAPTIONS;
SCHEDULES
The
captions contained in this Agreement are for convenience and reference only
and
in no way define, describe, extend or limit the scope or intent of this
Agreement or the intent of any provision contained herein. Any and all Schedules
referred to in this Agreement are, by such reference, incorporated
herein.
ARTICLE
17 - CONFIDENTIALITY
17.1 Confidential
Information.
(a)
DTECS agrees to keep confidential and not to disclose to any Person the terms
of
this Agreement or any written or other information concerning or relating to
this Agreement (collectively, “KFx Confidential Information”); provided,
however, that any information which is in the public domain other than through
the actions of DTECS in violation of this Agreement shall not be considered
KFx
Confidential Information. Notwithstanding the foregoing, DTECS shall be entitled
to disclose KFx Confidential Information:
(i) To
its directors, officers, employees, Subcontract Operator, agents or professional
advisors to the extent necessary for the performance of its obligations under
this Agreement, provided that it first obtains from any such Person to whom
the
disclosure is to be made an agreement of confidentiality with respect to the
KFx
Confidential Information in question substantially on the terms of this Section
17.1(a); provided, however, in the case of employees, DTECS need not obtain
a
confidentiality agreement from such employees, but shall make such employees
aware of, and require that such employees comply with, the confidentiality
obligations contained herein;
(ii) When
required to do so by Applicable Law or Governmental Authority, provided that
DTECS shall immediately inform KFx of the demand for the disclosure of such
KFx
Confidential Information so that KFx can seek a protective order or other
equitable relief to prevent or limit disclosure of such KFx Confidential
Information or ensure confidential treatment thereof; and
(iii) To
any Person with the prior written consent of KFx.
(b)
KFx agrees to keep confidential and not to disclose to any Person the terms
of
this Agreement or any written or other information concerning or relating to
this Agreement (collectively, “DTECS Confidential Information”); provided,
however, that any information which is in the public domain other than through
the actions of KFx in violation of this Agreement shall not be considered DTECS
Confidential Information.
15
Notwithstanding
the foregoing, KFx shall be entitled to disclose DTECS Confidential
Information:
(i) To
its partners, directors, officers, employees, agents or professional advisors
or
to other Persons in connection with any potential sale or financing involving
KFx or the Facility, provided that it first obtains from any such Person to
whom
the disclosure is to be made an agreement of confidentiality with respect to
the
DTECS Confidential Information in question substantially on the terms of this
Section
17.1(b);
provided, however, in the case of partners, directors, officers, employees,
agents or professional advisors, KFx need not obtain a confidentiality agreement
from such Persons, but shall make such Persons aware of, and require that such
Persons comply with, the confidentiality obligations contained
herein;
(ii) When
required to do so by Applicable Law or Governmental Authority, provided that
KFx
shall immediately inform DTECS of the demand for the disclosure of such DTECS
Confidential Information so that DTECS can seek a protective order or other
equitable relief to prevent or limit disclosure of such DTECS Confidential
Information or ensure confidential treatment thereof; and
(iii) To
any Person with the prior written consent of DTECS.
17.2 Return
of Confidential Information.
Upon the termination of this Agreement, DTECS shall return to KFx the KFx
Confidential Information (including all copies within its possession or
control).
17.3 Continuation
of Confidentiality Obligations.
The obligations under this Article 17 shall survive the termination of this
Agreement.
17.4 Ownership
of Confidential Information.
All KFx Confidential Information shall be the property of KFx. All DTECS
Confidential Information shall be the property of DTECS.
ARTICLE
18 - COUNTERPARTS
This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original for all purposes, but all of which shall constitute one
and
the same instrument.
ARTICLE
19 - MISCELLANEOUS
19.1 Amendments.
No amendment or modification hereof shall be valid or binding upon the Parties
unless evidenced in writing and signed by a duly authorized representative
of
KFx and DTECS.
19.2 Waiver.
No failure by either Party to insist upon the strict performance of any term,
covenant, condition or agreement of this Agreement, or to exercise any right
or
remedy upon breach of any provision, and no acceptance of payment or performance
during the continuation of any such breach, shall constitute a waiver of any
term, covenant or condition herein or a waiver of any subsequent breach or
default in the performance of any term, covenant, condition or agreement
herein.
THE
REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
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IN
WITNESS WHEREOF,
KFx and DTECS have entered into this Agreement as of the Effective
Date.
DTE COAL SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇
Title: Chief Operating Officer
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
17