UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report July 15, 1998
(Date of earliest event reported) June 30, 1998
THE BEARD COMPANY
(Exact name of registrant as specified in its charter)
OKLAHOMA 0-12396 73-0970298
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
ENTERPRISE PLAZA
5600 N. MAY AVENUE
SUITE 320
OKLAHOMA CITY, OKLAHOMA 73112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (405) 842-2333
N/A
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OF ASSETS.
On June 17, 1998, The Beard Company (the "Company") formed a new subsidiary,
Beard Mining, L.L.C., an Oklahoma limited liability company ("BMLLC") which, on
June 30, 1998, acquired certain Coal Fines Extraction and Beneficiation
Equipment (the "Beneficiation Equipment") located at six coal slurry
impoundment sites (the "Pond Sites") for a total purchase price of
approximately $24,000,000. The purchase price for the Beneficiation Equipment
consists of the cost of component parts, the cost of design, construction and
installation of the Beneficiation Equipment, and a profit component payable to
Brown & Root, Inc. ("B&R"), the general contractor for the coal fines projects.
The Beneficiation Equipment will be utilized to recover particles of coal that
are a wasted by-product of previous coal mining operations and to deliver the
particles, consisting of coal fines, to briquetting plants (the "Briquetting
Plants") located in the vicinity of the Pond Sites. The Briquetting Plants
will chemically process the coal fines to create briquettes for sale in
existing coal markets. The Briquetting Plants are owned by six separate
Delaware limited liability companies, (collectively, the "LLC's"), each of
which is a subsidiary of MCNIC Pipeline & Processing Company, a Michigan
corporation ("MCNIC").
The Beneficiation Equipment was designed, built and installed by B&R and other
third party vendors at Pond Sites located, respectively, in Bishop, Humphrey
and Arkwright, West Virginia, Hamilton and Corbin, Kentucky, and Dickerson,
Ohio, and consists of approximately $4,000,000 of equipment located at each
site.
BMLLC is financing the purchase of the Beneficiation Equipment with an interim
loan from MCNIC. Principal payments on the promissory note approximate
$136,000 a month through July 1, 1999, at which time the remaining balance
becomes due. The repayment of the indebtedness evidenced by the promissory
note is secured by the Beneficiation Equipment and bears interest at a per
annum rate of 8%. BMLLC and MCNIC intend to discuss alternative permanent
financing arrangements this month, which could involve either a long-term loan
from a third party or conversion to a third-party leasing arrangement. In
either event, it is possible that the transaction will be structured in a
manner that results in an entity unrelated to the Company owning the
Beneficiation Equipment.
As respects the loan to BMLLC, MCNIC has released the Company and BTI in
connection with any claim resulting from the inaccuracy of any representation
or warranty made by BMLLC in any loan document, or BMLLC's breach or failure to
perform or satisfy any covenant, agreement, obligation or condition in any loan
document.
BMLLC will lease the Beneficiation Equipment to Beard Technologies, Inc.
("BTI"), another subsidiary of the Company, which is operating and maintaining
the Beneficiation Equipment and the Briquetting Plants for the six LLC's. The
monthly lease payments will equal the monthly payments due under the promissory
note (except the final balloon payment), and are reimbursed costs by the LLC's
under BTI's operating agreements with the LLC's.
ITEM 5. OTHER EVENTS.
Concurrently with the execution of the financing agreements, BTI entered into a
Coal Fines Extraction and Beneficiation Agreement (the "Beneficiation
Agreement") with the six LLC's pursuant to which it will dredge, extract,
beneficiate and deliver coal. Pursuant to a separate Operation and Maintenance
Agreement (the "O&M Agreement") entered into among BTI and the six LLC's, BTI
will also operate, manage and maintain the coal briquetting facilities that
will produce briquettes from the coal fines at the six sites. For providing
such services BTI is being compensated under a cost-plus arrangement pursuant
to which it will receive a minimum profit of $100,000 per month for operating
the plants so long as the contracts remain in effect. The initial term of the
operating agreements expires on December 31, 1998, but will be automatically
extended for unlimited successive one year periods unless terminated by either
party at least 60 days prior to the expiration of any such period.
The Company has guaranteed the performance of BTI's obligations under the
Beneficiation Agreement and the O&M Agreement, but the Company has no liability
under its guaranty unless BTI's failure to perform resulted from BTI's gross
negligence, willful misconduct, improper handling or disbursement of funds, or
failure to refund any overpayment to BTI by the six LLC's.
The Beneficiation Agreement and the O&M Agreement state that, solely for
determining BTI's compensation thereunder, such Agreements are deemed to have
been effective April 1, 1998, and that BTI is entitled to compensation as
provided above for the months of April, May and June, 1998.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
The following unaudited pro forma financial information of the Company is based
upon and should be read in conjunction with the historical financial statements
of the Company which are included in the Company's Form 10-Q for the three
months ended March 31, 1998. The unaudited pro forma financial information as
of March 31, 1998, reflects the purchase of the Beneficiation Equipment as if
it had occurred on March 31, 1998.
Giving effect to the purchase of the Beneficiation Equipment as of March 31,
1998, the Company's net property, plant and equipment would have increased
$24,000,000 to approximately $28,100,000. Current maturities of long-term debt
would have increased $1,630,000 to approximately $1,780,000 and long-term debt
less current maturities would have increased by $22,370,000 to approximately
$24,570,000. Pro forma operating results of the Company for the three months
ended March 31, 1988, and the year ended December 31, 1997, have been omitted
because the acquired Beneficiation Equipment had only been used for testing
purposes prior to the date of the purchase of the equipment. Therefore, prior
commercial operating results are not available.
(c) Exhibits.
The following exhibits are filed with this Form 8-K and are identified by the
numbers indicated:
EXHIBIT NO. DESCRIPTION
10.1 Coal Fines Extraction and Beneficiation Agreement among CRC NO.
1 LLC, CRC NO.2 LLC, CRC NO.3 LLC, CRC NO. 4 LLC, CRC NO. 5 LLC,
CRC NO. 6 LLC (the "Six LLC's") and Beard Technologies, Inc.
("BTI"), dated as of June 24, 1998.
10.2 Operation and Maintenance Agreement among the Six LLC's and BTI,
dated as of June 24, 1998.
10.3 Guaranty Agreement among Registrant and the Six LLC's, dated as of
June 24, 1998.
10.4 Guaranty Agreement between MCNIC Pipeline & Processing Company
("MCNIC") and BTI, dated as of June 24, 1998.
10.5 Loan Agreement between MCNIC and Beard Mining, L.L.C. ("BMLLC"),
dated as of June 24, 1998.
10.6 Promissory Note from BMLLC to MCNIC, dated June 24, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE BEARD COMPANY
HERB MEE, JR.
Herb Mee, Jr., President
Dated: July 15, 1998
<PAGE>
THE BEARD COMPANY
EXHIBIT INDEX
Forming a Part of Form 8-K Current Report
to the Securities and Exchange Commission
<TABLE>
<CAPTION>
EXHIBIT
NUMBER BRIEF DESCRIPTION METHOD OF FILING
<S> <C> <C>
10.1 Coal Fines Extraction and Filed herewith electronically
Beneficiation Agreement
10.2 Operation and Maintenance Filed herewith electronically
Agreement
10.3 Guaranty Agreement Filed herewith electronically
10.4 Guaranty Agreement Filed herewith electronically
10.5 Loan Agreement Filed herewith electronically
10.6 Promissory Note Filed herewith electronically
</TABLE>
COAL FINES EXTRACTION AND BENEFICIATION AGREEMENT
AMONG
CRC NO. 1 LLC
CRC NO. 2 LLC
CRC NO. 3 LLC
CRC NO. 4 LLC
CRC NO. 5 LLC
CRC NO. 6 LLC
AND
BEARD TECHNOLOGIES, INC.
June 24, 1998
<PAGE>
TABLE OF CONTENTS
Page
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE I RETENTION OF OPERATOR . . . . . . . . . . . . . . . . . . . . .2
ARTICLE II DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE III SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . .8
3.1 Responsibilities of Operator. . . . . . . . . . . . . . . . . .8
3.2 Personnel Matters . . . . . . . . . . . . . . . . . . . . . . .9
3.3 Compliance with the Lease . . . . . . . . . . . . . . . . . . 10
3.4 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5 Operating Records and Reports . . . . . . . . . . . . . . . . 10
3.6 Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7. Responsibilities of the Company.. . . . . . . . . . . . . . . 11
ARTICLE IV ITEMS TO BE FURNISHED BY COMPANY. . . . . . . . . . . . . . . 11
4.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Equipment and Supplies. . . . . . . . . . . . . . . . . . . . 11
4.3 Information . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 Control of the Beneficiation Equipment. . . . . . . . . . . . 11
4.5 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6 Repairs, Maintenance, and Capital Improvements. . . . . . . . 12
ARTICLE V PROCEDURES, PLANS AND REPORTING . . . . . . . . . . . . . . . 12
5.1 Representatives . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.4 Officers' Certificate . . . . . . . . . . . . . . . . . . . . 14
5.5 Audits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Other Information . . . . . . . . . . . . . . . . . . . . . . 14
5.7 Accounting Procedures . . . . . . . . . . . . . . . . . . . . 14
5.8 Millennium Bug Issues . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VI LIMITATIONS ON AUTHORITY. . . . . . . . . . . . . . . . . . . 15
6.1 General Limitations . . . . . . . . . . . . . . . . . . . . . 15
6.2 Execution of Documents. . . . . . . . . . . . . . . . . . . . 16
6.3 Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VII COMPENSATION OF OPERATOR. . . . . . . . . . . . . . . . . 17
ARTICLE VIII TERM AND TERMINATION. . . . . . . . . . . . . . . . . . . 18
8.1 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.2 Termination by the Company for Cause. . . . . . . . . . . . . 18
8.3 Termination by Operator for Cause; Resignation;
Deemed Offer to Resign. . . . . . . . . . . . . . . . . . . . 19
8.4 Termination if Briquetting Plant Moved. . . . . . . . . . . . 20
8.5 Termination upon Agreement. . . . . . . . . . . . . . . . . . 20
8.6 Demobilization Costs. . . . . . . . . . . . . . . . . . . . . 20
8.7 [Intentionally omitted] . . . . . . . . . . . . . . . . . . . 20
8.8 Termination Payment . . . . . . . . . . . . . . . . . . . . . 20
8.9 Continuation and Cooperation. . . . . . . . . . . . . . . . . 20
8.10 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IX INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.1 Operator Policies . . . . . . . . . . . . . . . . . . . . . . 21
9.2 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . 22
ARTICLE X INDEMNIFICATION; DAMAGES. . . . . . . . . . . . . . . . . . . 22
10.1 Indemnification by Operator . . . . . . . . . . . . . . . . . 22
10.2 Indemnification by the Company. . . . . . . . . . . . . . . . 22
ARTICLE XI TITLE, DOCUMENTS, AND DATA. . . . . . . . . . . . . . . . . . 22
11.1 Materials and Equipment . . . . . . . . . . . . . . . . . . . 23
11.2 Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XII ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . 23
12.1 Submission to Arbitration . . . . . . . . . . . . . . . . . . 23
12.2 Initiation of Arbitration and Selection of
Arbitrators . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.3 Arbitration Procedures. . . . . . . . . . . . . . . . . . . . 24
12.4 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . 24
12.5 Fees and Costs. . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE XIII MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . 25
13.1 Representations and Warranties. . . . . . . . . . . . . . . . 25
13.2 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
13.3 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 26
13.4 Construction of Agreement.. . . . . . . . . . . . . . . . . . 26
13.5 Integration; Amendment. . . . . . . . . . . . . . . . . . . . 27
13.6 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 27
13.7 Public Announcements. . . . . . . . . . . . . . . . . . . . . 27
13.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 27
13.9 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . 27
13.10 No Third Party Beneficiary Rights . . . . . . . . . . . . . . 27
13.11 Statement of Performance. . . . . . . . . . . . . . . . . . . 27
13.12 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 28
List of Schedules
Schedule 2.1 Beneficiation Equipment
Schedule 2.2 Leases
Schedule 2.3 Letter Rulings
Schedule 3.1(f) Annual Operating Plan Criteria
Schedule 4.2 Equipment to be Furnished by Company
Schedule 4.6 Spare Parts Inventory
Schedule 5.3 Form of Monthly Operations and Financial Report
<PAGE>
COAL FINES EXTRACTION AND BENEFICIATION
AGREEMENT
THIS COAL FINES EXTRACTION AND BENEFICIATION AGREEMENT (this
"Agreement"), dated as of June 24, 1998, is among CRC NO. 1 LLC,
CRC NO. 2 LLC, CRC NO. 3 LLC, CRC NO. 4 LLC, CRC NO. 5 LLC, and
CRC NO. 6 LLC, each a Delaware limited liability company
(individually, a "Company" and collectively, the "Companies"),
and BEARD TECHNOLOGIES, INC., an Oklahoma corporation
("Operator"). The Companies and Operator are collectively
referred to as the "Parties," and each is individually referred
to as a "Party."
Recitals
A. A coal briquetting facility (the "Briquetting Plant")
is being constructed for each Company on its Plant Site which is
adjacent to or near its Pond Site;
B. Each Company has separately retained Operator
(referred to herein in such capacity as "Beard") to operate,
manage, and maintain the Briquetting Plant to produce Briquettes
pursuant to the terms and conditions of an Operation and
Maintenance Agreement dated as of June 24, 1998 (the "O&M
Agreement"); and
C. Each Company desires to retain Operator to extract
and beneficiate coal fines using the Beneficiation Equipment,
which Operator will lease from Beard Mining, L.L.C. ("Beard
Mining"), an Affiliate of Operator, and deliver the beneficiated
coal fines to the Briquetting Plant pursuant to the terms and
conditions of this Agreement, and Operator is willing to do so.
Agreement
For convenience, the Parties desire that all of the
Companies enter into this Agreement but that this Agreement be
construed and enforced as constituting six separate agreements,
each of which is between Operator and a different Company. Any
breach or default by a Company under its agreement with Operator
or by Operator under its agreement with any Company shall not
affect any of the agreements between Operator and the other
Companies except as expressly provided herein. References to the
"Company" or "the Company" shall be deemed to refer to the
applicable Company and references to the "Beneficiation
Equipment," "Briquetting Plant," "Company Representative,"
"Lease," "Letter Ruling," "Plant Site," "Pond Site," and other
defined terms shall be deemed to refer to the applicable
Company's Beneficiation Equipment, Briquetting Plant, Company
Representative, Lease, Letter Ruling, Plant Site, Pond Site, or
other defined term applicable to the applicable Company.
In consideration of the foregoing, the mutual benefits to
the Parties under this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
ARTICLE I
RETENTION OF OPERATOR
The Company hereby retains Operator as an independent
contractor to recover, excavate, dredge, extract, and remove Mine
Waste contained in the Impoundment using the Beneficiation
Equipment; operate, manage, make approved modifications to and
maintain the Beneficiation Equipment for the processing,
beneficiation, washing, and drying of Mine Waste to produce coal
fines that Operator will deliver to Beard for further processing
by Beard to produce Briquettes pursuant to the O&M Agreement; and
to operate, manage, and maintain the Pond Site; all according to
the terms and conditions of this Agreement. Nothing in this
Agreement shall be construed to create a joint venture,
partnership, mining partnership, or any other similar arrangement
between the Company and Operator, nor to authorize either Party
to act as agent for the other Party, except as expressly set
forth in this Agreement. Operator hereby accepts such engagement
and responsibilities and agrees that it shall perform the
obligations and duties described herein as an independent
contractor in accordance with the authority granted to Operator
herein and the terms and conditions of this Agreement.
ARTICLE II
DEFINITIONS
The following defined terms have the meanings specified in
this Article II:
"AAA" means the American Arbitration Association.
"Affiliate" means, with respect to any designated Person,
any other Person that, directly or indirectly, controls, or is
controlled by or is under common control with, such designated
Person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means
the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of the Person,
whether through the ownership of voting securities or by contract
or otherwise.
"Agreement" means this Coal Fines Extraction and
Beneficiation Agreement, as it may be amended, restated,
supplemented, or modified from time to time pursuant to its
provisions.
"Annual Operating Plan" has the meaning stated in
Section 3.1(f).
"Beard" has the meaning stated in Recital B and includes the
successors and assigns of Beard Technologies, Inc.
"Beard Mining" has the meaning stated in Recital C and
includes the successors and assigns of Beard Mining, L.L.C.
"Beneficiation Equipment" means the equipment owned by
Operator located on the Pond Site, including, without limitation,
the equipment described in Schedule 2.1 hereto, for dredging and
receiving Mine Waste from the Impoundment and processing,
beneficiating, washing, and drying Mine Waste to produce coal
fines for further processing to produce Briquettes pursuant to
the O&M Agreement.
"Briquettes" means briquettes, pellets, extrudates, and
other agglomerates produced from coal fines by the Briquetting
Plant.
"Briquetting Plant" has the meaning stated in Recital A.
"Business Day" means any day other than a Saturday, Sunday,
or other day on which banks are closed in the State.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601 et seq.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time. Any reference herein to a specific section or
sections of the Code is deemed to include a reference to any
corresponding provision of future law.
"Company" and "Companies" have the meanings stated in the
preamble to this Agreement.
"Company Representative" has the meaning stated in Section
5.1(b).
"Costs" means all costs and expenses prudently incurred by
Operator, as agent for the Company, after the date of this
Agreement in the start-up, operation, management, approved
modification and maintenance of the Beneficiation Equipment and
the Pond Site, and the performance of the Services in accordance
with this Agreement (but not including Labor and G&A Costs),
including, but not limited to the following:
(a) [Intentionally omitted]
(b) All costs of Environmental Compliance;
(c) all costs for consultants and subcontractors and
other outside services reasonably necessary for the
performance of the Services;
(d) the cost of purchasing all materials, consumables,
and supplies used or consumed in the performance of
the Services;
(e) all costs of modifications or non-routine repairs of
the Beneficiation Equipment;
(f) all costs of utilities provided to the Beneficiation
Equipment and Pond Site or otherwise used in
connection with the performance of the Services;
(g) all ad valorem and personal property taxes imposed by
any political or taxing subdivision with respect to
the Beneficiation Equipment and the Pond Site or any
equipment owned or leased by or on behalf of Operator
and used in connection therewith;
(h) the costs of obtaining and maintaining any necessary
Permits, approvals and consents in connection with
the Services;
(i) insurance premiums paid by Operator for the insurance
maintained pursuant to Section 9.1 and in the event
of property damage or personal injury covered by such
insurance, applicable policy deductibles; and
(j) Equipment lease payments made by Operator to Beard
Mining for the lease of the Beneficiation Equipment,
not to exceed in any calendar month an amount equal
to the portion of the amount of the scheduled monthly
payment of principal and interest for such month
required to be paid by Beard Mining on or before
June 1, 1999 to MCNIC Pipeline & Processing Company,
a Michigan corporation ("MCNIC"), pursuant to section
2.3(b) of the Loan Agreement attributable to amounts
borrowed by Beard Mining pursuant to the Loan
Agreement to pay the purchase price of the
Beneficiation Equipment for the Pond Site, but not
including (x) any payment of principal or interest
due on the Maturity Date (as such term is defined in
the Loan Agreement), and (y) any prepayments of
principal or interest under the Loan Agreement.
"Environmental Compliance" means all actions performed
during or after operations at the Pond Site to comply with the
requirements of Environmental Laws or commitments or obligations
related to reclamation of the Pond Site or compliance with
Environmental Laws.
"Environmental Laws" means Laws aimed at reclamation or
restoration of the Pond Site, abatement of pollution; protection
of the environment; protection of wildlife, including endangered
species; ensuring public safety from environmental hazards;
protection of cultural or historic resources; management,
storage, or control of hazardous materials and substances;
releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic, or hazardous substances or
hazardous wastes into the environment, including ambient air,
soil, surface water, and groundwater; and all other Laws relating
to the manufacturing, processing, distribution, use, treatment,
storage, disposal, handling or transport of pollutants,
contaminants, chemicals or industrial, toxic or hazardous
substances or wastes, including CERCLA and RCRA. As used
herein,"release" has the meaning specified in CERCLA, and
"disposal" or "disposed" has the meaning specified in RCRA
If CERCLA, RCRA, or any other applicable Environmental Law
is amended so as to broaden the meaning of any terms defined
thereby, such broader meaning shall apply subsequent to the
effective date of such amendment; and to the extent that the laws
of any state in which the Pond Site is located establish a
meaning for "hazardous substance," "release," "solid waste,"
"hazardous wastes," or "disposal" that is broader than that
specified in either CERCLA or RCRA, such broader meaning shall
apply.
"Hazardous Substances" means any and all (a) "hazardous
substances," as defined by CERCLA; (b) crude oil or any fraction
thereof, natural gas, natural gas liquids, liquefied natural gas,
or synthetic gas usable for fuel (or mixtures of natural gas and
such synthetic gas); (c) "solid wastes" and "hazardous wastes,"
as defined by RCRA; (d) any pollutant, contaminant or hazardous,
dangerous or toxic chemicals, materials or substances within the
meaning of any Environmental Law; (e) any radioactive material,
including any source, special nuclear, or by-product material as
defined by the Atomic Energy Act of 1954, as amended; and
(f) asbestos in any form or condition.
"Impoundment" means the coal slurry impoundment of Mine
Waste located on the Pond Site.
"Labor and G&A Costs" means (i) the actual wages and
salaries paid by Operator to its employees who perform the
Services, plus (ii) the cost of the health, unemployment,
retirement and other burdens actually incurred by Operator in
connection with such employees including, without limitation,
costs required to be incurred by Operator under the NBCWA of 1998
and costs incurred by Operator as a result of terminating any
employee (and Operator shall use its good faith efforts to
mitigate any such termination and post-termination costs)
(provided that the items described in "(i)" and "(ii)" with
respect to any employee who does not devote his full working time
to performance of the Services shall be pro rated to reflect the
portion of his time devoted to performing the Services), plus
(iii) a fairly allocable share of Operator's general office
administrative overhead as mutually agreed by the parties. The
aggregate of the amounts in "(ii)" and "(iii)" shall not exceed
[90%] of the amount in "(i)," and shall be substantiated by
Operator in a manner reasonably satisfactory to the Company;
provided, however, the Company shall consider in good faith a
request by Operator to increase such percentage if the Operator
can substantiate to the Company's reasonable satisfaction that
the costs in "(ii)" and "(iii)" reasonably exceed such percentage
of the amount in "(i)."
"Laws" means all applicable federal, state, and local laws
(statutory or common), rules, ordinances, regulations, grants,
concessions, franchises, licenses, orders, directives, judgments,
decrees, and other governmental restrictions, including Permits
and other similar requirements, whether legislative, municipal,
administrative, or judicial in nature.
"Lease" means the instrument indicated with respect to each
Company in Schedule 2.2 hereto. MCNIC Pipeline & Processing
Company will (i) grant its rights under the Lease, insofar as it
covers the Plant Site, to the Company and (ii) grant Operator
rights of access and the right to occupy the Pond Site to remove
Mine Waste from the Impoundment, to maintain Environmental
Compliance consistent with this Agreement and to perform its
other obligations and responsibilities provided in this
Agreement.
"Letter Ruling" means Internal Revenue Service Private
Letter Ruling indicated with respect to each Company in
Schedule 2.3 hereto.
"Loan Agreement" means the Loan Agreement of even date
between MCNIC Pipeline & Processing Company and Beard Mining.
"Loan Documents" means the Loan Agreement and all documents
and instruments executed and delivered pursuant thereto,
including, without limitation, the documents and instruments
securing Beard Mining's obligations under the Loan Agreement and
the related promissory note(s).
"Losses" means all claims, demands, suits, causes of action,
losses, damages, liabilities, fines and sanctions, punitive and
exemplary damages, costs and expenses (including reasonable
attorney's, consultant's and expert's fees and expenses and court
costs); provided, however, that "Losses" shall not include any
lost Tax Credits, lost profits, lost sales, business
interruption, lost business opportunities, or consequential
damages.
"Mine Waste" means all coal, coal slurry, coal fines, coarse
coal and other coal materials, and all other minerals of
whatsoever nature mixed with or contained in the foregoing that
have been mined and deposited in the Impoundment.
"MSHA" means the Mine Safety and Health Act, as amended,
30 U.S.C. Section 801 et seq.
"NBCWA of 1998" has the meaning stated in Section 3.2.
"Non-Company Indemnified Parties" has the meaning stated in
Section 10.2.
"Non-Operator Indemnified Parties" has the meaning stated in
Section 10.1.
"O&M Agreement" has the meaning stated in Recital B.
"Operating Profit" has the meaning stated in Article VII.
"Operation and Maintenance Procedures Manual" means a manual
prepared by Operator, subject to the review and approval by the
Company, providing operation and maintenance procedures for the
Beneficiation Equipment and the Pond Site (which, unless
otherwise approved by the Company, shall in all respects be
consistent with manufacturer s operation and maintenance
procedures). These procedures include information regarding:
(a) equipment operating procedures;
(b) maintenance programs;
(c) safety, OSHA, and MSHA programs;
(d) Environmental Compliance and mitigation
programs;
(e) Permit operating and reporting requirements;
(f) programs for complying with reporting
requirements contained in this Agreement; and
(g) other applicable regulatory reporting
requirements.
"Operator" has the meaning stated in the preamble to this
Agreement.
"Operator Representative" has the meaning stated in Section
5.1(a).
"OSHA" means the Occupational Safety and Health Act, as
amended, 29 U.S.C. Section 651 et seq.
"Penalty" means any final, nonappealable environmental or
regulatory civil penalty, criminal penalty, fine, or similar
assessment imposed by any governmental authority that did not
result from any Pre-Existing Condition at the Premises and
(a) either (i) relates to Operator's operation of the
Beneficiation Equipment or the Pond Site or (ii) arises by reason
of Operator's conduct and (b) is levied against the Company or
Operator.
"Permits" means all licenses, permits, orders, approvals,
and consents of governmental authorities that are required to
operate the Beneficiation Equipment in accordance with this
Agreement.
"Person" means an individual, natural person, corporation,
joint venture, partnership, limited partnership, limited
liability company, trust, estate, business trust, association,
governmental authority, or any other entity.
"Plant Site" means that portion of the area covered by the
Lease that MCNIC Pipeline & Processing Company assigns or
subleases to the Company and on which the Plant will be located.
"Pond Site" means the area covered by the Lease, less and
except the Plant Site, on which the Impoundment is located and
the Beneficiation Equipment will be located.
Pre-Existing Condition means any condition, circumstance
or matter at, on, under or affecting the Pond Site or any
adjoining lands prior to the date that Operator obtains
operational control of the Pond Site.
"RCRA" means the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Sections 6901 et seq.
"Section" refers to a section in this Agreement, unless
specifically stated otherwise.
"Services" means the services to be rendered by Operator
under this Agreement.
"State" means the State where the Pond Site is located.
"Tax Credits" means the credit against federal income tax
under section 29 of the Code available to the Company (and its
members) attributable to the production and sale of Briquettes
from the Briquetting Plant that constitute "qualified fuel" under
section 29 of the Code.
ARTICLE III
SERVICES
3.1 Responsibilities of Operator. Operator shall:
(a) operate and maintain the Beneficiation Equipment and
the Pond Site in accordance with the Annual Operating
Plan in a clean, safe, and efficient manner,
consistent with the Operation and Maintenance
Procedures Manual, the operating and maintenance
manuals for the Beneficiation Equipment and the Pond
Site, all applicable manufacturer's warranties, and
normal and customary industry standards for
industrial facilities similar to the Beneficiation
Equipment and the Pond Site so as, to the extent
possible using the Beneficiation Equipment, to supply
timely the Briquetting Plant with all of its coal
fines requirements for testing and start-up of the
Briquetting Plant and, thereafter, for commercial
operation of the Briquetting Plant at its maximum
optimum capacity, as such requirements may change
from time to time, and maintain sufficient
inventories of coal fines to ensure an uninterrupted
supply of the requirements of the Briquetting Plant,
and beneficiate the Mine Waste such that the
resulting coal fines supplied to the Briquetting
Plant, when processed by the Briquetting Plant, will
satisfy the chemical change conditions of the Letter
Ruling in order for the Briquettes to constitute
"qualified fuels" pursuant to section 29(c)(1)(C) of
the Code;
(b) perform the Services in an efficient manner and in
accordance with the Lease and this Agreement;
(c) except as otherwise specified in this Agreement,
obtain and maintain all Permits and approvals
necessary or useful for the operation of the
Impoundment and the Beneficiation Equipment and for
Operator to do business in the jurisdictions where
the Services are to be performed;
(d) use generally accepted industry practices (including
accepted practices regarding the safety of personnel
and equipment) and technology for industrial
equipment similar to the Beneficiation Equipment and
the Pond Site with the objective of properly
discharging its obligations under this Agreement,
protecting workers, minimizing the Costs (to the
extent reasonable under the circumstances), complying
in all material respects with all applicable Laws and
Permits, and preserving the useful life of the
Beneficiation Equipment;
(e) furnish the Company with information relating to the
Beneficiation Equipment and the Pond Site as
requested by the Company;
(f) at least 120 days prior to the beginning of each
calendar year prepare and furnish to the Chairman of
the Management Committee of the Company a draft of a
proposed Annual Operating Plan consistent with the
criteria described in Schedule 3.1(f) and cooperate
as requested by the Chairman to assist the Chairman
in revising such proposed plan;
(g) operate the Beneficiation Equipment and Pond Site in
material compliance with its Permits and all
applicable Laws, including Environmental Laws, and
report to the Company immediately any violations of
Environmental Laws that could result in material
liability to the Company or the existence of any
conditions known to Operator that may lead to such a
violation;
(h) minimize the occurrence of lost time events;
provided, however, that Operator shall make a
diligent effort to have no down time events; and
(i) supply personnel facilities (offices, change rooms,
lunch rooms, etc.); potable water; sanitation
facilities; and storage facilities; prior to
acquiring any capital item that will be included in
Costs or otherwise paid for by the Company and that
will cost in excess of $25,000, Operator shall obtain
the Company's prior written consent. The Parties
contemplate that to the extent possible such items
will be leased from third parties, and the Parties
will agree on such arrangements prior to the
acquisition or lease of such items.
3.2 Personnel Matters. On or before June 25, 1998,
Operator shall use its best efforts to employ, subject in all
respects to Article II of the National Bituminous Coal Wage
Agreement of 1998 (the "NBCWA of 1998"), labor and professional,
supervisory, and managerial personnel necessary to perform the
Services. Operator shall use reasonable efforts to ensure that
all such personnel shall be qualified when employed to perform
the duties to which they are assigned, without requiring any
training to perform such duties. All individuals engaged by
Operator to assist in performance of the Services shall, to the
extent reasonably practicable, be employees of Operator or its
Affiliates. Operator may, with the Company's prior written
consent, retain subcontractors to perform portions of the
Services, but retention of a subcontractor shall not relieve
Operator of any of its duties, liabilities, or obligations under
this Agreement. Operator shall comply in all material respects
with all applicable Laws relating to employment or health and
safety of workers, including OSHA, MSHA, and similar State and
local Laws, and shall exercise control over labor relations in a
reasonable manner consistent with this Agreement. Operator will
have sole authority, control, and responsibility with respect to
labor matters in connection with the performance of the Services.
3.3 Compliance with the Lease. Operator has reviewed the
Lease and, in addition to its other obligations hereunder, shall
comply with all terms and conditions of the Lease applicable to
the operation and maintenance of the Beneficiation Equipment and
the Pond Site while performing the Services.
3.4 Permits. In connection with performing the Services,
Operator shall:
(a) comply in all material respects with all applicable
Laws containing or establishing compliance
requirements for the Beneficiation Equipment and the
Pond Site;
(b) secure in the name of Operator and comply in all
material respects with, and thereafter maintain, as
appropriate, all Permits and nongovernmental
approvals (and renewals of the same) necessary to
perform the Services, including those relating to
water and sewer use, storage, and disposal of
chemicals and waste (including storage and disposal
of Hazardous Substances), emission monitoring and
testing, and safety;
(c) initiate and maintain procedures necessary to comply
with applicable provisions of all Laws, and Permits,
and other requirements, including Environmental Laws;
and
(d) prepare and deliver to the applicable governmental
authority all reports required by the Permits for the
Beneficiation Equipment and the Pond Site.
3.5 Operating Records and Reports. Operator shall
maintain operating logs, records, and reports documenting the
operation and maintenance of the Beneficiation Equipment and Pond
Site, consistent with customary industry standards for industrial
facilities similar to the Beneficiation Equipment and the Pond
Site, to the extent and as required to operate and maintain the
Beneficiation Equipment and the Pond Site, and maintain such
records as the Company may request Operator to keep and maintain
from time to time. The originals of such operating logs,
records, and reports shall be the property of the Company, as
provided in Section 11.2, and the Company shall have the right at
any time to obtain the originals (unless the originals are
required by Law to remain at the Beneficiation Equipment or the
Pond Site) or, at the Company's discretion, photocopies thereof.
3.6 Access. The Company and its representatives shall
have access to the Beneficiation Equipment and the Pond Site at
all reasonable times and upon reasonable notice to Operator, to
all documents, materials, records, and accounts relating to the
operation of the Beneficiation Equipment and the Pond Site for
purposes of inspection and review. During any such inspection or
review of the Beneficiation Equipment, the Company and its
representatives shall comply with all Operator's safety and
security procedures, and the Company and its representatives
shall conduct such inspections and reviews in such a manner as to
cause minimum interference with Operator's activities.
3.7. Responsibilities of the Company. The Company shall
use its reasonable efforts under applicable circumstances to:
(a) cooperate with Operator to facilitate and expedite
Operator s operation and maintenance of the
Beneficiation Equipment in accordance with Section
3.1 of this Agreement, and Operator s performance of
the Services in accordance with this Agreement; and
(b) provide Operator with full and complete access to all
pertinent records, instruments, drawings, schematics,
documents and other information in the Company s
possession or under the Company s control concerning
the Pond Site or the Beneficiation Equipment
reasonably necessary for Operator to perform the
Services.
ARTICLE IV
ITEMS TO BE FURNISHED BY COMPANY
4.1 General. The Company shall furnish to Operator, at
the Company's expense, the information, services, materials, and
other items described below in this Article IV. All such items
shall be made available at the times and in the manner reasonably
required for the expeditious and orderly performance of the
Services by Operator.
4.2 Equipment and Supplies. The Company shall furnish
or cause to be furnished to Operator the items of equipment
described in Schedule 4.2, and the Company shall furnish or cause
to be furnished to Operator (in such quantities and of such
quality as reasonably required by Operator to perform the
Services and operate and maintain the Beneficiation Equipment in
accordance with the terms of this Agreement) electricity, process
water, natural gas and diesel fuel reasonably necessary to
operate the Beneficiation Equipment, and process additives and
shall provide the initial stock of maintenance spare parts and
inventory.
4.3 Information. The Company shall make available for
Operator s inspection and copying all technical, operational, and
other information in its possession or to which it has access
relating to the Pond Site and necessary for performance of the
Services. Operator will maintain the confidentiality of all
information relating to the Beneficiation Equipment and the Pond
Site and all financial, sales, and production information in
accordance with Section 13.12.
4.4 Control of the Beneficiation Equipment. Operator
shall cause the Beneficiation Equipment to be in place and ready
for service as soon as reasonably possible and, subject to the
design limitations of the Beneficiation Equipment, so as to be
capable of supplying timely and continuously the coal fines
requirements of the Briquetting Plant for testing and start-up of
the Briquetting Plant and for commercial operation of the
Briquetting Plant at its maximum optimum capacity.
4.5 Permits. The Company shall provide Operator with a
completed Operator Information Mining Permit and shall
cooperate with Operator in securing and use its reasonable
efforts to secure all Permits necessary for operation of the
Beneficiation Equipment and the Pond Site.
4.6 Repairs, Maintenance, and Capital Improvements.
Subject to Section 5.2, the Company shall pay or reimburse
Operator for the cost of all necessary repairs, modifications and
maintenance of the Beneficiation Equipment and the Pond Site in
accordance with this Agreement. If Operator determines that
repairs, modifications or capital improvements are necessary,
Operator shall notify the Company in writing of the need for any
such repairs or maintenance, make written recommendations, and
shall receive the prior written consent of the Company to any
such required work for which the Company will be obligated to
reimburse Operator, and Operator shall be excused from any
failure to perform hereunder to the extent such failure is caused
by the Company's refusal to authorize requested repairs,
modifications or capital improvements. Operator shall at all
times maintain a reasonable spare parts inventory, a list of
which shall be developed by the Company and Operator and
subsequently attached to this Agreement as Schedule 4.6.
ARTICLE V
PROCEDURES, PLANS AND REPORTING
5.1 Representatives.
(a) Operator Representative. Operator shall appoint from
time to time an individual representative ("Operator
Representative") coincident with the execution of
this Agreement, who shall be authorized to act for
Operator on all matters concerning this Agreement and
the Services. Operator shall be bound by the written
communications, directions, requests, and decisions
made by the Operator Representative. Operator shall
notify the Company in writing before employment of
the Operator Representative (or any new Operator
Representative), informing the Company of his or her
identity and his or her qualifications to operate the
Beneficiation Equipment. Until the Company receives
notice of removal of the Operator Representative and
appointment of a new Operator Representative, the
Company may treat the appointed Operator
Representative as the authorized Operator
Representative.
(b) Company Representative. The Company shall appoint
from time to time an individual representative
("Company Representative") coincident with the
execution of this Agreement, who shall be authorized
to act for the Company on all matters concerning this
Agreement and the Services. The Chairman of the
Management Committee of the Company shall be the
initial Company Representative. The Company shall be
bound by the written communications, directions,
requests, and decisions made by the Company
Representative. The Company shall notify Operator in
writing of any new Company Representative. Until
Operator receives notice of removal of the Company
Representative and appointment of a new Company
Representative, Operator may treat the appointed
Company Representative as the authorized Company
Representative.
5.2 Expenditures.
(a) Non-Budgeted Items. Operator shall not incur any
single expenditures not budgeted for (on a line item
basis) in the Annual Operating Plan approved by the
Company in excess of $5,000 without the prior written
consent of the Company.
(b) Overruns. Operator shall not incur expenditures in
excess of 110% of the amount budgeted for the
expenditures (on a line item basis) in the Annual
Operating Plan, without the prior written consent of
the Company.
(c) Emergency Expenditures. Notwithstanding any
provision to the contrary in this Agreement, in an
emergency Operator may take any action it deems
reasonably necessary to protect life or property, to
protect the Beneficiation Equipment and the Pond Site
or to comply with Laws. Operator shall promptly
notify the Company of the emergency and shall be
entitled to reimbursement for all reasonable Costs of
responding to the emergency.
5.3 Reports. Operator shall submit to the Company the
following reports, in form and substance reasonably acceptable to
the Company, concerning operation and maintenance of the
Beneficiation Equipment:
(a) Monthly Reports. Within five days after the end of
each calendar month, Operator shall submit to the
Company an operations and financial report in the
form of Schedule 5.3 (a) attached hereto, covering
operations and maintenance conducted during the
calendar month in reasonable detail.
(b) Other Reporting. Promptly after an executive officer
of Operator obtains knowledge of any of the
following, Operator shall notify the Company of:
(i) any litigation or any material claims,
disputes, or actions, threatened or filed,
concerning the Beneficiation Equipment, the
Pond Site, or the Services;
(ii) any refusal of any governmental authority or
third party to grant, renew, or extend any
Permit, approval, authorization, or consent
concerning the Beneficiation Equipment, the
Pond Site, or the Services;
(iii) any significant dispute with any governmental
authority concerning the Beneficiation
Equipment, the Pond Site, or the Services;
(iv) any material damage to or destruction of the
Beneficiation Equipment or the Pond Site;
(v) death or serious injury of any employee or
other person at the Beneficiation Equipment
or the Pond Site or otherwise in connection
with the Services;
(vi) any equipment failure at the Beneficiation
Equipment or the Pond Site that would result
in a production disruption at the
Beneficiation Equipment of more than
12 consecutive hours;
(vii) any other production disruption at the
Beneficiation Equipment of more than
12 consecutive hours;
(viii) three successive days of production at the
Beneficiation Equipment that is 50% or less
than targeted levels; and
(ix) any release or threatened release of any
Hazardous Substance that would violate any
Law (including any Environmental Law) or any
Permit maintained by the Company or Operator
in connection with the Beneficiation
Equipment that could reasonably be expected
to subject the Company or Operator to any
liability or Penalty under any Environmental
Law.
5.4 Officers' Certificate. In connection with delivery
of the monthly report for the last month of each calendar quarter
pursuant to Section 5.3(a), Operator shall deliver a letter
addressed to the Company signed by the Chief Financial Officer of
Operator certifying whether any condition, act, or event has
occurred and is continuing that constitutes a violation, breach,
or default under this Agreement or the Lease to his or her best
knowledge and belief after due inquiry.
5.5 Audits. At the Company's option, the Company at its
expense may once during each calendar year conduct an operational
audit of the operations of the Beneficiation Equipment and the
Pond Site and of Operator's performance under this Agreement.
Generally, such an audit shall review operating, accounting,
safety, environmental, and personnel matters related to the
Beneficiation Equipment and the Pond Site and Operator's
compliance with, and level of performance under, this Agreement
and the Lease. The audit shall be conducted in such a manner as
to cause minimum interference with Operator s performance of the
Services.
5.6 Other Information. Operator shall promptly submit to
the Company any material information concerning new or
significant aspects of the operation of the Beneficiation
Equipment and the Pond Site and, as requested by the Company,
shall promptly submit any other information concerning the
Beneficiation Equipment, the Pond Site or the Services. Operator
shall permit representatives of the Company to have full access
to the records relating to the Beneficiation Equipment and the
Pond Site during normal business hours. Any review of such
records shall be conducted in such a manner as to cause minimum
interference with Operator's activities.
5.7 Accounting Procedures.
(a) Third Party Invoices. Operator shall receive,
examine, and, if acceptable, approve all invoices for
costs payable to third parties by the Company
relating to the operation and maintenance of the
Beneficiation Equipment and the Pond Site and the
other Services provided by Operator pursuant to this
Agreement. If Operator reasonably determines that
any amounts shown on these invoices are Costs,
Operator will submit such invoices to the Company for
payment in a timely fashion such that the Company has
a reasonable period of time in which to review the
invoices and underlying costs and pay all costs prior
to the time such invoices will become delinquent.
The Parties recognize that Operator will submit
invoices as received from third parties from time to
time and not on a fixed cycle. Operator shall
prepare and submit with the invoices a summary of all
the invoices submitted that identifies which items
are capital account items, expense items and other
categories requested by the Company using a format
acceptable to the Company.
(b) Labor and G&A Costs and Fees. Each month Operator
will invoice the Company for the amounts owed for
Labor and G&A Costs and the Operating Profit for the
preceding month. Each invoice will itemize in
reasonable detail the amounts owed and the total
amount due, and will be accompanied by information
reasonably sufficient for the Company to determine
the accuracy of the invoice. Invoices received by the
Company under this Section 5.7(b) shall be due and
payable to Operator within 15 days after the date
received by the Company, but no earlier than the last
day of the month in which the invoice is received.
5.8 Millennium Bug Issues. The computer problem known
as the millennium bug or the year 2000 problem," which can
arise because computer software, hardware, or other equipment may
recognize the year 2000 to be the year 1900, shall not be deemed
to be an act of force majeure or other excuse for nonperformance
under this Agreement. Operator represents and warrants to the
Company that its computer systems are designed to be used prior
to, during and after the calendar year 2000, and that such
computer systems will operate, and all data will be processed,
during each such time period without error. Operator
acknowledges that the Company has entered into this Agreement in
reliance on Operator s representations, warranties, and abilities
to perform the services described herein. The Company
acknowledges that Operator has entered into this Agreement in
reliance upon the Company's representations, warranties, and
abilities to perform its obligations described herein.
ARTICLE VI
LIMITATIONS ON AUTHORITY
6.1 General Limitations. Operator shall not take any of
the following actions without the prior written approval of the
Company:
(a) Disposition of Assets. The sale, lease, pledge,
mortgage, conveyance, license, exchange, or other
transfer or disposition of any property or assets of
the Company, including any tangible personal property
acquired by Operator on the Company s behalf under
this Agreement.
(b) Contracting. Making, entering into, executing,
amending, waiving any rights under, modifying, or
supplementing any contract or agreement on behalf of,
binding upon, or in the name of the Company, except
for contracts relating to approved Costs to be
incurred or expenditures provided for in this
Agreement.
(c) Lawsuits and Settlements. The settling,
compromising, assigning, pledging, transferring,
releasing, or consenting to the same, of any claim,
suit, debt, demand, or judgment against or due by the
Company or Operator on behalf of the Company, or
submitting any such material claim, dispute, or
controversy to arbitration or judicial process, or
stipulating to a judgment, or consent to do the same.
The Company shall retain control of any such claim,
suit, debt, or demand, and any other litigation
regarding the Beneficiation Equipment, except as to
Operator's individual liability.
(d) Transactions on Behalf of the Company. Engaging in
any other transaction on behalf of the Company,
except as set forth in this Agreement or the O&M
Agreement.
(e) Permits. Agreeing to waive compliance with any
Permit held in the name of the Company or agreeing to
any Penalty to be paid or charged to the Company for
violation of any Permit.
(f) No Assumption of Obligations Outside Authority.
Operator has no authority to act for or to assume any
obligation or liability on behalf of the Company
except for such authority or assumption as is
expressly conferred upon Operator by this Agreement
or the O&M Agreement or by the Company pursuant to
this Agreement or the O&M Agreement or by any other
written direction or authorization from the Company
to Operator; and Operator shall indemnify and hold
the Company, the Members, their respective successors
and assigns, and their respective directors,
officers, employees, and agents harmless from and
against any and all losses, claims, damages, and
liabilities arising out of any unauthorized act or
assumption of any obligation or liability by Operator
on behalf of the Company in bad faith or in
circumstances constituting willful misconduct by
Operator.
6.2 Execution of Documents. Any agreement, contract,
notice, approval, or other document that is permitted under this
Agreement to be executed for the Company by Operator shall be
executed by the Operator Representative. No other employee,
representative, or agent of Operator shall have signature
authority for purposes of binding the Company pursuant to this
Agreement, unless otherwise provided in writing from the Company
to Operator.
6.3 Affiliates. All Services performed by Affiliates of
Operator on behalf of Operator shall have been approved in
advance by the Company and shall be invoiced at rates and total
charges to the Company no higher than the Costs (without any
profit component) that would have been chargeable to the Company
if Operator had performed such Services.
ARTICLE VII
COMPENSATION OF OPERATOR
Operator's compensation for acting as Operator shall
be limited to (i) actual Costs incurred by Operator (provided
that Costs payable to third parties are, where possible, expected
to be paid by the Company directly to the third parties to which
such Costs are owed pursuant to Section 5.7 and the Operator
shall not receive such amounts so paid), plus (ii) Labor and G&A
Costs, plus (iii) 18% of the Labor and G&A Costs (excluding any
extraordinary costs incurred by Operator in connection or as a
result of the termination of any employee, required to be
incurred by Operator under the NBCWA of 1998, or otherwise, that
would otherwise constitute Labor & G&A Costs under this
Agreement) (the Operating Profit ). In addition to the
Operating Profit provided for in "(iii)," the Company shall pay
Operator each month a "Minimum Profit Payment" equal to the
amount, if any, by which (x) the number of months for which
Operator (and the operator designated under the O&M Agreement)
has rendered invoices during the calendar year that includes the
month covered by the most recent invoice multiplied by $16,666.66
is greater than (y) the total Operating Profit, plus the
Operating Profit under the O&M Agreement, previously paid or
payable by the Company in that calendar year including the most
recent invoice; provided that if this Agreement terminates before
the close of business on the last day of a calendar month, the
Minimum Profit Payment for that partial month shall be
proportionately reduced to reflect the ratio of the number of
days this Agreement was in effect during that month to the total
number of days in that month. Minimum Profit Payments shall be
paid half to Operator and half to the operator designated under
the O&M Agreement. If for any calendar year the aggregate
Operating Profits plus the Operating Profits under the O&M
Agreement plus the Minimum Profit Payments (collectively, the
"total payments") exceeds $200,000 (provided that in the case of
a partial year in the event this Agreement is terminated before
the end of a calendar year, this $200,000 figure shall be reduced
to an amount equal to $547.95 multiplied by the number of days
this Agreement is in effect during such calendar year), then
Operator shall refund to the Company the Minimum Profit Payments,
but not an amount in excess of the Minimum Profit Payments, to
the extent necessary to cause the total payments after giving
effect to such refund to equal $200,000 (or in the case of a
partial year, the reduced amount described above). It is the
intent of the parties that the Operating Profit and the Minimum
Profit Payments in the amount provided for above be paid by each
of the Companies with respect to the Plant Site owned by such
Company.
Company and Operator agree that solely for purposes of
determining Operator's compensation hereunder, this Agreement
shall be deemed to have been effective April 1, 1998 and Operator
shall be entitled to compensation in accordance with this
Agreement for the months of April, May and June, 1998.
ARTICLE VIII
TERM AND TERMINATION
8.1 Term. Unless sooner terminated as provided herein,
the term of this Agreement shall commence on the effective date
of this Agreement and shall expire on December 31, 1998 (the
"Initial Term"), which term shall be automatically extended for
unlimited successive one year periods, unless it is terminated
during the Initial Term or any such subsequent period by one
party furnishing the other with written notice, at least 60 days
prior to the expiration of the period, of an intent to terminate
this Agreement upon the expiration of the period.
8.2 Termination by the Company for Cause.
(a) This Agreement may be terminated by the Company at
any time for good cause. For purposes hereof,
"good cause" shall mean any of the following:
(a) Operator s repeated negligence; (b) Operator s
unremedied negligence; (c) Operator s willful
misconduct; (d) Operator s material breach of the
standards of operation contained in Section 3.1; or
(e) Operator s material failure to perform its
obligations under this Agreement. For purposes
hereof, "repeated negligence" shall occur if
(i) Operator is negligent in performing any of its
material obligations under this Agreement;
(ii) Operator receives a notice in writing from the
Management Committee specifying that the Management
Committee has reasonably determined that Operator has
failed to perform its duties as Operator, the basis
for such determination by the Management Committee,
and the action necessary to be undertaken by Operator
to remedy such failure; and (iii) Operator receives
such written notices more than two times in any six
month period (provided that after issuing a written
notice with respect to a failure by Operator to
perform, the Company shall not issue a second such
notice with respect to the same underlying
circumstances within a six-month period unless the
Operator fails to promptly commence and continue
diligent efforts to cure such failure). For purposes
hereof, "unremedied negligence" shall occur if
(i) Operator is negligent in performing any of its
material obligations under this Agreement;
(ii) Operator receives a notice in writing from the
Management Committee specifying that the Management
Committee has reasonably determined that Operator has
been negligent in the performance of its duties under
this Agreement as Operator, the basis for such
determination by the Management Committee, and the
action necessary to be undertaken by Operator to
remedy such failure; and (iii) Operator has not
remedied, or commenced diligent efforts to cure or
remedy within such period, its negligence within
seven calendar days after its receipt of the written
notice and does not continues to pursue such diligent
efforts until such matters are cured or remedied
after its receipt of the Management Committee's
notice.
(b) Termination of this Agreement as to any Company
pursuant to Section 8.2(a) or any other section of
this Agreement shall not in and of itself terminate
this Agreement as between Operator and any other
Company; provided, however, that each such other
Company shall have the right to terminate its
Agreement with Operator upon 30 days' notice to
Operator if it gives such notice within 60 days after
effective date of the termination by another Company
under Section 8.2(a).
8.3 Termination by Operator for Cause; Resignation;
Deemed Offer to Resign. This Agreement may be terminated by
Operator for cause if (i) the Company fails to perform its
obligations under this Agreement in any material respect, (ii)
the Company receives a notice in writing from Operator specifying
that Operator has reasonably determined that the Company has
failed to perform its obligations under this Agreement in any
material respect and the basis for such determination, and (iii)
the Company does not remedy or commence diligent efforts to
remedy its failure within seven calendar days after its receipt
of the written notice and continue to pursue such diligent
efforts until the failure is remedied. In any other event,
Operator may resign upon not less than 120 days prior notice to
the Company. If any of the following shall occur, Operator shall
be deemed to have resigned upon the occurrence of the event
described in each of the following subsections:
(a) A receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official for a substantial
part of Operator s assets is appointed and the
appointment is neither made ineffective nor
discharged within 60 days after the making thereof;
(b) Operator fails to pay or contest in good faith its
bills and business debts as they become due and such
failure would reasonably be expected to have a
material adverse effect on (i) the condition
(financial or otherwise), business, assets or results
of operations of Operator, or (ii) the ability of
Operator to perform its obligations under this
Agreement;
(c) Operator commences a voluntary case under any
applicable bankruptcy, insolvency, or similar Law now
or hereafter in effect; or consents to, requests, or
acquiesces in the entry of an order for relief in an
involuntary case under any such Law or to the
appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee,
sequestrator, or other similar official of any
substantial part of its assets; or makes a general
assignment for the benefit of creditors; or takes
corporate or other action in furtherance of any of
the foregoing; or
(d) A judgment, decree, or order for relief is entered
against Operator that materially affects its ability
to perform the Services in accordance with the terms
of this Agreement by a court of competent
jurisdiction in an involuntary case commenced under
any applicable bankruptcy, insolvency, or other
similar Law of any jurisdiction now or hereafter in
effect.
Under Subsections (b), (c), or (d) above, the appointment of a
successor Operator shall be deemed to pre-date the event causing
the deemed resignation.
8.4 Termination if Briquetting Plant Moved. This
Agreement shall terminate if the Company moves the Briquetting
Plant off the Plant Site, unless the Parties otherwise agree in
writing.
8.5 Termination upon Agreement. This Agreement may be
terminated at any time upon mutual written agreement of the
Parties.
8.6 Demobilization Costs. If this Agreement is
terminated pursuant to Section 8.1 or 8.4, or by Operator
pursuant to the first sentence Section 8.3, the Company shall
reimburse Operator for costs reasonably incurred in connection
with the demobilization, including, without limitation, costs of
Environmental Compliance; provided, however, in no circumstances
shall the Company be liable or obligated for any amounts due
under the Loan Documents.
8.7 [Intentionally omitted]
8.8 Termination Payment. In the event of a termination
of this Agreement by either Party for cause, the terminating
Party shall be entitled to recover any damages or Penalties it
incurs as a result of any breach or violation by the other Party.
8.9 Continuation and Cooperation. Operator shall
cooperate fully with the Company and any new Operator appointed
by the Company during the transition period from receipt of a
termination notice hereunder to the termination of this
Agreement, including training any new Operator appointed by the
Company. Operator will be entitled to the compensation provided
in Article VII of this Agreement and reimbursement for all
reasonable out-of-pocket expenses incurred during the transition
period. Operator shall also continue performing its duties
hereunder after the termination date until a new Operator assumes
its duties to operate the Beneficiation Equipment. During such
post-termination period Operator will be entitled to the
compensation provided at Article VII of this Agreement.
8.10 Force Majeure.
(a) Definition. "Force Majeure" means any cause
reasonably beyond the control of a Party that, wholly
or in substantial part, prevents the performance of
its obligations under this Agreement or the Lease.
Examples of Force Majeure are the following: acts of
God; acts of the public enemy; insurrections; riots,
strikes; labor disputes; work stoppages; fires;
explosions; floods; electric power failures;
breakdowns of or damage to the Beneficiation
Equipment; interruptions to or contingencies of
transportation; embargoes; and orders or acts of
civil or military authority (including a city or
county ordinance, an act of a state legislature, or
an act of the United States Congress); provided,
however, that for purposes of this Agreement, Force
Majeure shall not include, and neither Party shall be
excused from performance because of, the development
or existence of economic conditions that may
adversely affect the anticipated profitability of the
Party's activities hereunder, acts or omissions of
the Party that constitute mismanagement or fraud on
its part, or reduced productivity of labor employed
by that Party in its activity hereunder.
(b) Effect. If because of an event of Force Majeure
either Party is unable to carry out its obligations
under this Agreement, and if the affected Party gives
the other Party notice of the Force Majeure, the
obligations and liabilities of the affected Party and
the corresponding obligations of the other Party
shall be suspended to the extent made necessary by
and during the continuance of the Force Majeure;
provided, however, that the disabling effects of the
Force Majeure shall be eliminated as soon as and to
the extent possible.
ARTICLE IX
INSURANCE
9.1 Operator Policies. Operator shall obtain, on its own
behalf, and keep in force during the term of this Agreement, at
least the following types and amounts of insurance:
(a) Workers' Compensation Insurance for statutory
requirements, including Occupational Disease
Insurance, covering location of all work places.
(b) Employer s Liability Insurance with limits of Five
Hundred Thousand Dollars ($500,000) covering location
of all work places.
(c) Comprehensive General Liability Insurance including
Products Completed Operations Coverage and Blanket
Contractual Coverage with Full Defense Coverage for
Company, with a Limit of not less than Ten Million
Dollars ($10,000,000) Combined Single Limit covering
injuries to or death of one or more persons and
property damage liability.
(d) Comprehensive Automobile Liability Insurance covering
owned, non-owned and hired vehicles with limits of
not less than One Million Dollars ($1,000,000)
Combined Single Limit covering injuries to or death
of one or more persons and property damage liability.
(e) Pollution liability insurance coverages in such
amounts as the parties shall reasonably agree on or
before June 30, 1998.
All such insurance of Operator shall specifically refer to and
cover Operator s liability under this Agreement, including
Section 10.1 and shall name the Company as an Additional Named
Insured. Operator shall deliver to the Company a certificate of
insurance evidencing the existence of all such insurance and,
upon request, the original or certified copy of each policy of
insurance and evidence. All policies providing coverage
hereunder shall contain provisions that no cancellation or
material changes in the policies shall become effective except on
30 days advance written notice thereof to the Company at its
offices in Detroit, Michigan.
9.2 Waiver of Subrogation. All insurance policies
maintained by a Party pursuant to Section 9.1 shall expressly
waive any right on the part of the insurer to assert any claims
against the other Party. The Parties agree that all policies
will include such waiver clause or endorsement, and each Party
waives any claims against the other Party for perils to be
insured against by such insurance policies, including any
deductible amounts unless such waiver is prohibited by the
policies or Law.
ARTICLE X
INDEMNIFICATION; DAMAGES
10.1 Indemnification by Operator. Operator shall defend,
indemnify, and save and hold harmless the Company and its
Affiliates, and their respective shareholders, directors,
members, managers, partners, officers, employees, agents,
contractors and operators (the "Non-Operator Indemnified
Parties") for, from, and against, and shall promptly reimburse
each Non-Operator Indemnified Party with respect to, any and all
Losses (including Losses arising in connection with violations of
Environmental Laws or for Environmental Compliance) paid,
incurred or suffered by such Non-Operator Indemnified Party, but
only to the extent the same arise from or are attributable to the
breach of any representation, warranty, covenant or agreement of
Operator contained in this Agreement or Operator's gross
negligence or willful misconduct in performing the Services and
its other obligations under this Agreement. The indemnification
by Operator pursuant to this Section 10.1 shall not include or
cover any Losses to the extent same are attributable to any Pre-
Existing Condition or the negligence, gross negligence or willful
misconduct of the Company.
10.2 Indemnification by the Company. The Company shall
defend, indemnify, and save and hold harmless Operator and its
Affiliates and their respective shareholders, directors, members,
managers, partners, officers, employees, agents, contractors and
operators (the "Non-Company Indemnified Parties") for, from, and
against, and shall promptly reimburse each Non-Company
Indemnified Party with respect to, any and all Losses (including
Losses arising in connection with violations of Environmental
Laws or for Environmental Compliance) paid, incurred, or suffered
by such Non-Company Indemnified Party, but only to the extent
that the same arise from or are attributable to (i) any Pre-
Existing Condition, (ii) the breach of any representation,
warranty, covenant or agreement of the Company contained in this
Agreement, or (iii) the breach by the Company (or by any Person,
other than Operator or an Affiliate of Operator, designated by
the Company to assume) any contract, agreement, Permit or other
obligation assumed by the Company or its designee pursuant to
Section 8.7, or (iv) any breakage cost obligation assumed by the
Company pursuant Section 8.7. The indemnification by the Company
pursuant to this Section 10.2 shall not include or cover any
Losses to the extent the same are attributable to the negligence,
gross negligence or willful misconduct of Operator.
ARTICLE XI
TITLE, DOCUMENTS, AND DATA
11.1 Materials and Equipment. Title to all materials,
equipment, supplies, consumables, spare parts, and other items
purchased or obtained by Operator and paid for by the Company
pursuant to Section 5.7 shall pass immediately to and vest in the
Company upon the passage of title from the vendor or supplier
thereof; provided, however, that such transfer of title shall in
no way affect Operator's obligations as set forth in the other
provisions of this Agreement.
11.2 Documents. All materials and documents prepared or
developed by Operator or its employees, representatives, or
contractors in connection with the Beneficiation Equipment or the
performance of the Services, including all manuals, data,
designs, drawings, plans, specifications, reports, and accounts,
will automatically become the property of the Company when
prepared or developed; provided, however, that any patentable
invention, process or system previously or hereafter developed by
Operator independently of the Beneficiation Equipment or the
performance of the Services, shall remain and be the property of
Operator and Operator shall use the same during the term of this
Agreement in connection with the operation of the Beneficiation
Equipment, any replacement or relocated Beneficiation Equipment
or performance of the Services at a reasonable charge to the
Company to be agreed upon by the Parties prior to any such use.
All these materials and documents, together with any materials
and documents furnished to Operator or to its contractors by the
Company, shall be delivered to the Company upon expiration or
termination of this Agreement and before final payment is made to
Operator; provided, however, that Operator may retain copies of
all such materials and documents, subject to the confidentiality
provisions hereof.
ARTICLE XII
ARBITRATION
12.1 Submission to Arbitration. The Parties hereby shall
submit all unresolved controversies, claims, and matters of
difference arising under this Agreement to binding arbitration.
Without limiting the generality of the foregoing, the following
shall be considered controversies for this purpose: (a) all
disputes relating to the interpretation or breach of this
Agreement or the Parties performance thereunder, (b) all
questions relating to any representations, negotiations, and
other proceedings leading to the execution hereof, and (c) all
disputes as to whether the right to arbitrate any such question
exists.
12.2 Initiation of Arbitration and Selection of
Arbitrators. The Party desiring arbitration shall so notify the
other party, identifying in reasonable detail the matters to be
arbitrated and the relief sought. Within 14 Business Days after
receipt of such notification, the parties shall attempt (acting
with the utmost good faith and commercial reasonableness) to
resolve the matters detailed and the relief sought in the notice.
If the Parties are unable to resolve the matters specified in the
notice, the matters shall be submitted for arbitration in
accordance with the terms hereof. Arbitration hereunder shall be
before a three-person panel of neutral arbitrators, consisting of
one person from each of the following categories: (1) an
attorney with at least ten years experience in mining law;
(2) an attorney with at least ten years experience in general
commercial law, including mining matters; and (3) a person with
at least ten years experience in the coal mining industry. The
AAA shall submit a list of persons meeting the criteria outlined
above for each category of arbitrator, and the Parties shall
select one person from each category in the manner established by
the AAA. If any Party or the arbitrators fail to select
arbitrators as required above, the AAA shall select such
arbitrators. The arbitrators shall be entitled to a fee
commensurate with their fees for professional services requiring
similar time and effort. If the arbitrators so desire, they
shall have the authority to retain the services of a neutral
judge or attorney (whose fees shall be treated as an arbitrator s
fees) to assist them in administering the arbitration and
conducting any hearings and taking evidence at such hearings or
otherwise.
12.3 Arbitration Procedures. All matters arbitrated
hereunder shall be arbitrated in Detroit, Michigan pursuant to
Michigan Law, and shall be conducted in accordance with the
Commercial Arbitration Rules of the AAA, except to the extent
such rules conflict with the express provisions of this Article
XII (which shall prevail in the event of such conflict);
provided, however, that all substantive law issues relating to
the rights and obligations of the parties under this Agreement
shall be governed by Section 12.4 below. The arbitrators shall
conduct a hearing no later than 45 days after submission of the
matter to arbitration, and a decision shall be rendered by the
arbitrators within 10 days of the hearing. At the hearing, the
Parties shall present such evidence and witnesses as they may
choose, with or without counsel. Adherence to formal rules of
evidence shall not be required, but the arbitration panel shall
consider any evidence and testimony that it determines to be
relevant, in accordance with procedures that it determines to be
appropriate. Any award entered in an arbitration shall be made
by a written opinion stating the reasons for the award made.
12.4 Enforcement. This submission and agreement to
arbitrate shall be specifically enforceable. Arbitration may
proceed in the absence of any Party if notice of the proceedings
has been given to such party. The Parties agree to abide by all
awards rendered in such proceedings. Such awards shall be final
and binding on all parties to the extent and in the manner
provided by Michigan Law. All awards may be filed with the clerk
of one or more courts, state, federal, or foreign, having
jurisdiction over the Party against which the award is rendered
or its property, as a basis of judgment and of the issuance of
execution for its collection. No Party shall be considered in
default hereunder during the pendency of arbitration proceedings
specifically relating to such default.
12.5 Fees and Costs. The arbitrators fees and other
costs of the arbitration and the reasonable attorney fees, expert
witness fees and costs of the prevailing Party shall be borne by
the non-prevailing Party. In its written opinion, the
arbitration panel shall, after comparing the respective positions
asserted in the arbitration claim and answer thereto, declare as
the prevailing party that Party whose position was closest to the
arbitration award (not necessarily the Party in favor of which
the award on the arbitration claim is rendered) and declare the
other Party to be the non-prevailing Party. The arbitration
award shall include an award of the fees and costs provided by
this Section 12.5 against the non-prevailing Party.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Representations and Warranties.
(a) Operator represents that it is a corporation
organized and validly existing in good standing under
the laws of [Oklahoma], is qualified to do business
in the State, and has full power and authority to
enter into this Agreement.
(b) Operator represents that the person executing and
delivering this Agreement on Operator's behalf is
acting pursuant to proper authorization and that this
Agreement is the valid and binding obligation of
Operator, enforceable in accordance with its terms,
subject, however, to the effects of bankruptcy,
insolvency, reorganization, moratorium, and similar
laws for the protection of creditors, as well as to
general principles of equity, regardless of whether
enforceability is considered in a proceeding in
equity or at law.
(c) The Company represents that it is a limited liability
company organized and validly existing in good
standing under the laws of Delaware, is qualified to
do business in the State, and has full power and
authority to enter into this Agreement.
(d) The Company represents that the person executing and
delivering this Agreement on the Company's behalf is
acting pursuant to proper authorization and that this
Agreement is the valid and binding obligation of the
Company, enforceable in accordance with its terms,
subject, however, to the effects of bankruptcy,
insolvency, reorganization, moratorium, and similar
laws for the protection of creditors, as well as to
general principles of equity, regardless of whether
enforceability is considered in a proceeding in
equity or at law.
(e) The Company represents that it has the lawful right
to occupy and operate, and to allow Operator to
occupy and operate the Pond Site and the Impoundment
for the purposes contemplated by this Agreement.
13.2 Notices. All notices and other required
communications hereunder shall be in writing, addressed as
follows:
If to the Company (specifying the applicable
Company):
150 West Jefferson Avenue
Suite 1700
Detroit, Michigan 48226
Attention: William Kraemer
Facsimile Number: (313) 256-6918
If to Operator:
Beard Technologies, Inc.
355 William Pitt Way
Pittsburgh, Pennsylvania 15238
Attention: Philip Jamison
Facsimile Number: (412) 826-5399
with copy to:
Beard Technologies, Inc.
5600 North May Avenue
Suite 320
Oklahoma City, Oklahoma 73112
Attention: Herb Mee, Jr.
Facsimile Number: (405) 842-9901
Notices shall be given (a) by personal delivery to the other
Party, (b) by facsimile, with confirmation sent by registered or
certified mail, return receipt requested, or (c) by registered or
certified mail, return receipt requested. All notices shall be
effective and deemed delivered (i) if by personal delivery, on
the date of delivery if during business hours, otherwise the next
business day, (ii) if by facsimile, on the date the facsimile is
received if received during business hours, otherwise the next
Business Day and (iii) if solely by mail, upon receipt by the
addressee. A Party may change its address by notice to the other
Party.
13.3 Assignment. Operator shall not assign all or any
portion of its interests under this Agreement without the prior
written consent of the Company; provided that Operator may assign
all of its rights hereunder to an Affiliate of Operator for so
long as such entity remains an Affiliate of Operator and on the
condition that the Guaranty of even date from Operator's parent
corporation guarantying the obligations of Operator under this
Agreement shall remain in effect. The Company shall be free to
assign its rights and interests under this Agreement to any
Person without the consent of Operator on the condition that the
Guaranty of even date from MCNIC Pipeline & Processing Company to
Operator guarantying the Companies' payment obligations under
Article VII shall remain in effect or be substituted by a
guaranty from an entity with a credit or debt rating of BBB+ or
better from Standard and Poor's or an equivalent rating from any
recognized rating agency.
13.4 Construction of Agreement. In construing this
Agreement:
(a) no consideration shall be given to the captions of the
Articles, Sections, subsections, or clauses, which are
inserted for convenience in locating the provisions of
this Agreement and not as an aid in its construction;
(b) no consideration shall be given to the fact or
presumption that one Party had a greater or lesser
hand in drafting this Agreement;
(c) examples shall not be construed to limit, expressly
or by implication, the matter they illustrate;
(d) the word "including" means including by way of
example and not by way of limitation;
(e) unless the context requires otherwise, the plural
shall be deemed to include the singular, and vice
versa; and
(f) unless the context requires otherwise, each gender
shall be deemed to include any other gender.
13.5 Integration; Amendment. This Agreement constitutes
the entire agreement of the Parties relating to the subject
matter hereof. There are no promises, terms, conditions,
obligations, or warranties made by the Parties other than those
contained herein that relate to the subject matter of this
Agreement. This Agreement supersedes all prior communications,
representations, and 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.
13.6 Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of the
prohibition or unenforceability without invalidating the
remaining provisions of this Agreement, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or
render the provision unenforceable in any other jurisdiction.
13.7 Public Announcements. Except as required by Law,
Operator shall not make any press release or other public
announcement or public disclosure relating to this Agreement, the
subject matter hereof, or performance of the Services without the
written consent of the Company, which consent shall not be
unreasonably withheld.
13.8 Governing Law. This Agreement shall in all respects
be governed by and construed in accordance with the Laws of the
State of Michigan, without regard to its choice of law rules.
13.9 Multiple Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original, and it will not be necessary in making proof
of this Agreement or its terms to produce or account for more
than one of these counterparts, if the counterpart produced bears
the signature of the Party sought to be bound.
13.10 No Third Party Beneficiary Rights. Nothing in this
Agreement shall be deemed to grant any third party beneficiary or
similar rights to any Person not a signatory to this Agreement.
13.11 Statement of Performance. Upon request by the
Company, Operator shall deliver to the Company, for the benefit
of and which may be relied upon by the Company, its members, and
any potential purchaser of the Briquetting Plant, from time to
time within ten days after the Company's request therefor, a
statement certifying, to the extent such statements are true when
made, that:
(a) this Agreement is in full force and effect;
(b) this Agreement is unmodified or if modified, stating
any such modifications;
(c) to its knowledge, the Company is not in default
hereunder and no events or conditions then exist
which, with the passage of time or the giving of
notice, or both, would constitute a default on the
Company's part or specifying such defaults, events or
conditions if any are claimed;
(d) such further information about this Agreement as may
reasonably be requested by the Company.
13.12 Confidentiality. Operator shall keep confidential
and not use, reveal, provide or transfer to any third party any
Confidential Information it obtains or has obtained concerning
the Company, the Briquetting Plant, the Plant Site or the Pond
Site, or the terms of this Agreement, except as follows:
(a) to the extent that disclosure to a third party is
required by applicable law, court order, or
regulation, including those promulgated by the United
States Securities and Exchange Commission;
(b) to the extent disclosure is necessary or advisable,
to its employees, consultants or advisors, in each
case for the purpose of carrying out its duties
hereunder, or to its Lenders;
(c) to the extent necessary, disclosure to third parties
to enforce this Agreement;
provided, however, that in each case of disclosure pursuant to
(b) the persons to whom disclosure is made agree to be bound by
this confidentiality provision. The obligation of Operator not
to disclose Confidential Information except as provided herein
shall not be affected by the termination of this Agreement. As
used in this paragraph, the term "Confidential Information" shall
mean information concerning this Agreement the Company, the
Briquetting Plant, the Pond Site or the properties, operations,
business, trade secrets, technical know-how and other non-public
information and data of or relating to the Company.
EXECUTED by the duly authorized representatives of the
Parties as of the date first above written.
CRC NO. 1 LLC,
CRC NO. 2 LLC,
CRC NO. 3 LLC,
CRC NO. 4 LLC,
CRC NO. 5 LLC, and
CRC NO. 6 LLC,
each a Delaware limited liability
company
By: JOSEPH L. ROBERTS
Name: Joseph L. Roberts
Title: Chairman
BEARD TECHNOLOGIES, INC.,
an Oklahoma corporation
By: HERB MEE, JR.
Name: Herb Mee, Jr.
Title: Vice President
OPERATION AND MAINTENANCE AGREEMENT
AMONG
CRC NO. 1 LLC
CRC NO. 2 LLC
CRC NO. 3 LLC
CRC NO. 4 LLC
CRC NO. 5 LLC
CRC NO. 6 LLC
AND
BEARD TECHNOLOGIES, INC.
June 24, 1998
<PAGE>
TABLE OF CONTENTS
Page
Recitals
Agreement
ARTICLE I RETENTION OF OPERATOR
ARTICLE II DEFINITIONS
ARTICLE III SERVICES
3.1 Responsibilities of Operator
3.2 Personnel Matters
3.3 Compliance with the Lease
3.4 Permits
3.5 Operating Records and Reports
3.6 Access
3.7. Responsibilities of the Company
ARTICLE IV ITEMS TO BE FURNISHED BY COMPANY
4.1 General
4.2 Equipment and Supplies
4.3 Information
4.4 Control of the Plant
4.5 Permits
4.6 Repairs, Maintenance, and Capital Improvements
ARTICLE V PROCEDURES, PLANS AND REPORTING
5.1 Representatives
5.2 Expenditures
5.3 Reports
5.4 Officers' Certificate
5.5 Audits
5.6 Other Information
5.7 Accounting Procedures
5.8 Millennium Bug Issues
ARTICLE VI LIMITATIONS ON AUTHORITY
6.1 General Limitations
6.2 Execution of Documents
6.3 Affiliates.
ARTICLE VII COMPENSATION OF OPERATOR
ARTICLE VIII TERM AND TERMINATION
8.1 Term
8.2 Termination by the Company for Cause
8.3 Termination by Operator for Cause; Resignation;
Deemed Offer to Resign
8.4 Termination if Plant Moved
8.5 Termination upon Agreement
8.6 Demobilization Costs
8.7 Plant Condition at End of Term
8.8 Termination Payment
8.9 Continuation and Cooperation
8.10 Force Majeure
ARTICLE IX INSURANCE
9.1 Operator Policies
9.2 Waiver of Subrogation
ARTICLE X INDEMNIFICATION; DAMAGES
10.1 Indemnification by Operator
10.2 Indemnification by the Company
ARTICLE XI TITLE, DOCUMENTS, AND DATA
11.1 Materials and Equipment
11.2 Documents
ARTICLE XII ARBITRATION
12.1 Submission to Arbitration
12.2 Initiation of Arbitration and Selection of
Arbitrators
12.3 Arbitration Procedures
12.4 Enforcement
12.5 Fees and Costs
ARTICLE XIII MISCELLANEOUS PROVISIONS
13.1 Representations and Warranties
13.2 Notices
13.3 Assignment
13.4 Construction of Agreement
13.5 Integration; Amendment
13.6 Severability
13.7 Public Announcements
13.8 Governing Law
13.9 Multiple Counterparts
13.10 No Third Party Beneficiary Rights
13.11 Statement of Performance
13.12 Confidentiality
<PAGE>
OPERATION AND MAINTENANCE AGREEMENT
THIS OPERATION AND MAINTENANCE AGREEMENT (this "Agreement"),
dated as of June 24, 1998, is among CRC NO. 1 LLC, CRC NO. 2 LLC,
CRC NO. 3 LLC, CRC NO. 4 LLC, CRC NO. 5 LLC, and CRC NO. 6 LLC,
each a Delaware limited liability company (individually, a
"Company" and collectively, the "Companies"), and BEARD
TECHNOLOGIES, INC., an Oklahoma corporation ("Operator"). The
Companies and Operator are collectively referred to as the
"Parties," and each is individually referred to as a "Party."
Recitals
A. A coal briquetting facility (the "Plant," as defined
more fully in Article II) is being constructed for each Company on
its Plant Site;
B. Each Company desires to retain Operator to operate,
manage, and maintain its Plant and its Plant Site pursuant to the
terms and conditions of this Agreement, and Operator is willing to
do so; and
C. Operator will extract, beneficiate and deliver coal
fines pursuant to that Coal Fines Extraction and Beneficiation
Agreement (the "Beneficiation Agreement") of even date herewith
between Operator and each Company.
Agreement
For convenience the Parties desire that all of the Companies
enter into this Agreement but that this Agreement be construed and
enforced as constituting six separate agreements, each of which is
between Operator and a different Company. Any breach or default by
a Company under its agreement with Operator or by Operator under
its agreement with any Company shall not affect any of the
agreements between Operator and the other Companies except as
expressly provided herein. References to the "Company" or "the
Company" shall be deemed to refer to the applicable Company and
references to the "Company Representative," "Lease," "Letter
Ruling," "Plant," "Plant Site," and other defined terms shall be
deemed to refer to the applicable Company's Company Representative,
Lease, Letter Ruling, Plant, Plant Site, or other defined term
applicable to the applicable Company.
In consideration of the foregoing, the mutual benefits to the
Parties under this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
ARTICLE I
RETENTION OF OPERATOR
The Company hereby retains Operator as an independent
contractor to operate, manage and maintain the Plant and Plant
Site according to the terms and conditions of this Agreement.
Nothing in this Agreement shall be construed to create a joint
venture, partnership, mining partnership, or any other similar
arrangement between the Company and Operator, nor to authorize
either Party to act as agent for the other Party, except as
expressly set forth in this Agreement. Operator hereby accepts
such engagement and responsibilities and agrees that it shall
perform the obligations and duties described herein as an
independent contractor in accordance with the authority granted to
Operator herein and the terms and conditions of this Agreement.
ARTICLE II
DEFINITIONS
The following defined terms have the meanings specified in
this Article II:
"AAA" means the American Arbitration Association.
"Affiliate" means, with respect to any designated Person, any
other Person that, directly or indirectly, controls, or is
controlled by or is under common control with, such designated
Person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means
the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of the Person,
whether through the ownership of voting securities or by contract
or otherwise.
"Agreement" means this Operation and Maintenance Agreement, as
it may be amended, restated, supplemented, or modified from time to
time pursuant to its provisions.
"Annual Operating Plan" has the meaning stated in
Section 3.1(f).
"Beneficiation Agreement" has the meaning stated in Recital C.
"Briquettes" means briquettes, pellets, extrudates, and other
agglomerates produced from coal fines by the Plant.
"Business Day" means any day other than a Saturday, Sunday, or
other day on which banks are closed in the State.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C.
Sections 9601 et seq.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time. Any reference herein to a specific section or
sections of the Code is deemed to include a reference to any
corresponding provision of future law.
"Company" and "Companies" have the meanings stated in the
preamble to this Agreement.
"Company Representative" has the meaning stated in Section
5.1(b).
"Costs" means all costs and expenses prudently incurred by
Operator, as agent for the Company, after the date of this
Agreement in the start-up, operation, management, and maintenance
of the Plant and the Plant Site, and the performance of the
Services in accordance with this Agreement (but not including Labor
and G&A Costs), including, but not limited to the following:
(a) the cost of purchasing or leasing all parts, tools,
and equipment, accessories, and other personal
property reasonably necessary or useful in the
performance of the Services;
(b) the cost of maintaining, repairing, and replacing
all parts, tools, and equipment, accessories, and
other personal property reasonably necessary or
useful in the performance of the Services;
(c) all costs for consultants and subcontractors and
other outside services reasonably necessary for the
performance of the Services;
(d) the cost of purchasing all materials, consumables,
and supplies used or consumed in the performance of
the Services;
(e) all costs of modifications or non-routine repairs
of the Plant approved by the Company;
(f) all costs of utilities provided to the Plant and
Plant Site or otherwise used in connection with the
performance of the Services;
(g) all ad valorem and personal property taxes imposed
by any political or taxing subdivision with respect
to the Plant and the Plant Site or any equipment
owned or leased by or on behalf of the Company and
used in connection therewith;
(h) the costs of obtaining and maintaining any
necessary Permits, approvals and consents in
connection with the Services;
(i) the costs incurred in connection with the testing
required under Section 3.1(i);
(j) insurance premiums paid by Operator for the
insurance maintained pursuant to Section 9.1, and
in the event of property damage or personal injury
covered by such insurance, applicable policy
deductibles; and
(k) all costs of Environmental Compliance.
"Environmental Compliance" means all actions performed
during or after operations at the Plant Site and the Plant to
comply with the requirements of Environmental Laws or
commitments or obligations related to reclamation of the Plant
Site or compliance with Environmental Laws.
"Environmental Laws" means Laws aimed at reclamation or
restoration of the Plant Site, abatement of pollution;
protection of the environment; protection of wildlife,
including endangered species; ensuring public safety from
environmental hazards; protection of cultural or historic
resources; management, storage, or control of hazardous
materials and substances; releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic, or
hazardous substances or hazardous wastes into the environment,
including ambient air, soil, surface water, and groundwater;
and all other Laws relating to the manufacturing, processing,
distribution, use, treatment, storage, disposal, handling or
transport of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes, including
CERCLA and RCRA. As used herein,"release" has the meaning
specified in CERCLA, and "disposal" or "disposed" has the
meaning specified in RCRA
If CERCLA, RCRA, or any other applicable Environmental
Law is amended so as to broaden the meaning of any terms
defined thereby, such broader meaning shall apply subsequent
to the effective date of such amendment; and to the extent
that the laws of any state in which the Plant Site is located
establish a meaning for "hazardous substance," "release,"
"solid waste," "hazardous wastes," or "disposal" that is
broader than that specified in either CERCLA or RCRA, such
broader meaning shall apply.
"Hazardous Substances" means any and all (a) "hazardous
substances," as defined by CERCLA; (b) crude oil or any
fraction thereof, natural gas, natural gas liquids, liquefied
natural gas, or synthetic gas usable for fuel (or mixtures of
natural gas and such synthetic gas); (c) "solid wastes" and
"hazardous wastes," as defined by RCRA; (d) any pollutant,
contaminant or hazardous, dangerous or toxic chemicals,
materials or substances within the meaning of any
Environmental Law; (e) any radioactive material, including any
source, special nuclear, or by-product material as defined by
the Atomic Energy Act of 1954, as amended; and (f) asbestos in
any form or condition.
"Labor and G&A Costs" means (i) the actual wages and
salaries paid by Operator to its employees who perform the
Services, plus (ii) the cost of the health, unemployment,
retirement and other burdens actually incurred by Operator in
connection with such employees including, without limitation,
costs required to be incurred by Operator under the NBCWA of
1998 and costs incurred by Operator as a result of terminating
any employee (and Operator shall use its good faith efforts to
mitigate any such termination or post-termination costs)
(provided that the items described in "(i)" and "(ii)" with
respect to any employee who does not devote his full working
time to performance of the Services shall be pro rated to
reflect the portion of his time devoted to performing the
Services), plus (iii) a fairly allocable share of Operator's
general office administrative overhead as mutually agreed by
the parties. The aggregate of the amounts in "(ii)" and
"(iii)" shall not exceed [90]% of the amount in "(i)," and
shall be substantiated by Operator in a manner reasonably
satisfactory to the Company; provided, however, the Company
shall consider in good faith a request by Operator to increase
such percentage if the Operator can substantiate to the
Company's reasonable satisfaction that the costs in "(ii)" and
"(iii)" reasonably exceed such percentage of the amount in
"(i)."
"Laws" means all applicable federal, state, and local
laws (statutory or common), rules, ordinances, regulations,
grants, concessions, franchises, licenses, orders, directives,
judgments, decrees, and other governmental restrictions,
including Permits and other similar requirements, whether
legislative, municipal, administrative, or judicial in nature.
"Lease" means the instrument indicated with respect to
each Company in Schedule 2.1 hereto. MCNIC Pipeline &
Processing Company will grant its rights under the Lease,
insofar as it covers the Plant Site, to the Company.
"Letter Ruling" means Internal Revenue Service Private
Letter Ruling indicated with respect to each Company in
Schedule 2.2 hereto.
"Losses" means all claims, demands, suits, causes of
action, losses, damages, liabilities, fines and sanctions,
punitive and exemplary damages, costs and expenses (including
reasonable attorney's, consultant's and expert's fees and
expenses and court costs); provided, however, that "Losses"
shall not include any lost Tax Credits, lost profits, lost
sales, business interruption, lost business opportunities, or
consequential damages.
"MSHA" means the Mine Safety and Health Act, as amended,
30 U.S.C. Sections 801 et seq.
"NBCWA of 1998" has the meaning stated in Section 3.2.
"Non-Company Indemnified Parties" has the meaning stated
in Section 10.2.
"Non-Operator Indemnified Parties" has the meaning stated
in Section 10.1.
"Operating Profit" has the meaning stated in Article VII.
"Operation and Maintenance Procedures Manual" means a
manual prepared by Operator, subject to the review and
approval by the Company, providing operation and maintenance
procedures for the Plant and the Plant Site which, unless
otherwise approved by the Company, shall in all respects be
consistent with manufacturer s operation and maintenance
procedures. These procedures include information regarding:
(a) equipment operating procedures;
(b) maintenance programs;
(c) safety, OSHA, and MSHA programs;
(d) Environmental Compliance and mitigation
programs;
(e) Permit operating and reporting requirements;
(f) programs for complying with reporting
requirements contained in this Agreement; and
(g) other applicable regulatory reporting
requirements.
"Operator" has the meaning stated in the preamble to this
Agreement.
"Operator Representative" has the meaning stated in
Section 5.1(a).
"OSHA" means the Occupational Safety and Health Act, as
amended, 29 U.S.C. Sections 651 et seq.
"Penalty" means any final, nonappealable environmental or
regulatory civil penalty, criminal penalty, fine, or similar
assessment imposed by any governmental authority that did not
result from any Pre-Existing Condition at the Premises and
(a) either (i) relates to Operator's operation of the Plant or
the Plant Site or (ii) arises by reason of Operator's conduct
and (b) is levied against the Company or Operator.
"Permits" means all licenses, permits, orders, approvals,
and consents of governmental authorities that are required to
operate the Plant in accordance with this Agreement.
"Person" means an individual, natural person,
corporation, joint venture, partnership, limited partnership,
limited liability company, trust, estate, business trust,
association, governmental authority, or any other entity.
"Plant" means the facility or facilities located on the
Plant Site for the receiving, handling, recovering,
processing, separating, and briquetting or other beneficiation
of coal fines into Briquettes using the SCRS #2000 System.
"Plant Site" means the area depicted on Schedule 2.3
attached hereto, the legal description of which is set forth
in Schedule 2.3 attached hereto, on which the Plant is to be
located.
"Pre-Existing Condition" means any condition,
circumstance or matter at, on, under or affecting the Plant
(including, without limitation, design defects or other
defects in the construction, fabrication, or installation of
the Plant or components thereof) or the Plant Site or any
adjoining lands prior to the date that Operator obtains
operational control of the Plant and Plant Site.
"RCRA" means the Resource Conservation and Recovery Act,
as amended, 42 U.S.C. Sections 6901 et seq.
"Section" refers to a section in this Agreement, unless
specifically stated otherwise.
"Services" means the services to be rendered by Operator
under this Agreement.
"State" means the State where the Plant is located.
"Tax Credits" means the credit against federal income tax
under section 29 of the Code available to the Company (and its
members) attributable to the production and sale of Briquettes
from the Plant that constitute "qualified fuel" under section
29 of the Code.
ARTICLE III
SERVICES
3.1 Responsibilities of Operator. Operator shall:
(a) operate and maintain the Plant and the Plant Site
in accordance with the Annual Operating Plan in a
clean, safe, and efficient manner, consistent with
the Operation and Maintenance Procedures Manual,
the operating and maintenance manuals for the Plant
and the Plant Site, all applicable manufacturer's
warranties, and normal and customary industry
standards for industrial facilities similar to the
Plant and the Plant Site;
(b) perform the Services in an efficient manner and in
accordance with the Lease and this Agreement;
(c) except as otherwise specified in this Agreement,
obtain and maintain all Permits and approvals
necessary or useful for the operation of the Plant
and for Operator to do business in the
jurisdictions where the Services are to be
performed;
(d) use generally accepted industry practices
(including accepted practices regarding the safety
of personnel and equipment) and technology for
industrial facilities similar to the Plant and the
Plant Site with the objective of properly
discharging its obligations under this Agreement,
protecting workers, maximizing the Tax Credits
while also minimizing the Costs (to the extent
reasonable under the circumstances), complying in
all material aspects with all applicable Laws and
Permits, and preserving the useful life of the
Plant, while satisfying the chemical change
conditions of the Letter Ruling in order for the
Briquettes to constitute "qualified fuels" pursuant
to section 29(c)(1)(C) of the Code;
(e) furnish the Company with information relating to
the Plant and the Plant Site as requested by the
Company;
(f) at least 120 days prior to the beginning of each
calendar year prepare and furnish to the Chairman
of the Management Committee of the Company a draft
of a proposed Annual Operating Plan consistent with
the criteria described in Schedule 3.1(f) and
cooperate as requested by the Chairman to assist
the Chairman in revising such proposed plan;
(g) operate the Plant and Plant Site in material
compliance with its Permits and all applicable
Laws, including Environmental Laws, and report to
the Company immediately any violations of
Environmental Laws that could result in material
liability to the Company or the existence of any
conditions known to Operator that may lead to such
a violation;
(h) minimize the occurrence of lost time events;
provided, however, that Operator shall make a
diligent effort to have no down time events;
(i) cause the Briquettes to be tested by a reputable
independent third party if, as, and when requested
by the Company; and
(j) supply personnel facilities (offices, change
rooms, lunch rooms, etc.); potable water;
sanitation facilities; and storage facilities;
prior to acquiring any capital item that will be
included in Costs or otherwise paid for by the
Company and that will cost in excess of $25,000,
Operator shall obtain the Company's prior written
consent. The Parties contemplate that to the
extent possible such items will be leased from
third parties, and the Parties will agree on such
arrangements prior to the acquisition or lease of
such items.
3.2 Personnel Matters. On or before June 25, 1998,
Operator shall use its best efforts to employ, subject in all
respects to Article II of the National Bituminous Coal Wage
Agreement of 1998 (the "NBCWA of 1998"), labor and
professional, supervisory, and managerial personnel necessary
to perform the Services. Operator shall use reasonable
efforts to ensure that all such personnel shall be qualified
when employed to perform the duties to which they are
assigned, without requiring any training to perform such
duties. All individuals engaged by Operator to assist in
performance of the Services shall, to the extent reasonably
practicable, be employees of Operator or its Affiliates.
Operator may, with the Company's prior written consent, retain
subcontractors to perform portions of the Services, but
retention of a subcontractor shall not relieve Operator of any
of its duties, liabilities, or obligations under this
Agreement. Operator shall comply in all material respects
with all applicable Laws relating to employment or health and
safety of workers, including OSHA, MSHA, and similar State and
local Laws, and shall exercise control over labor relations in
a reasonable manner consistent with this Agreement. Operator
will have sole authority, control, and responsibility with
respect to labor matters in connection with the performance of
the Services.
3.3 Compliance with the Lease. Operator has reviewed
the Lease and, in addition to its other obligations hereunder,
shall comply with all terms and conditions of the Lease
applicable to the operation and maintenance of the Plant and
the Plant Site while performing the Services.
3.4 Permits. In connection with performing the
Services, Operator shall:
(a) comply in all material respects with all applicable
Laws containing or establishing compliance
requirements for the Plant and the Plant Site;
(b) secure in the name of Operator and comply in all
material respects with, and thereafter maintain, as
appropriate, all Permits and nongovernmental
approvals (and renewals of the same) necessary to
perform the Services, including those relating to
water and sewer use, storage, and disposal of
chemicals and waste (including storage and disposal
of Hazardous Substances), emission monitoring and
testing, and safety;
(c) initiate and maintain procedures necessary to comply
with applicable provisions of all Laws, and
Permits, and other requirements, including
Environmental Laws; and
(d) prepare and deliver to the applicable governmental
authority all reports required by the Permits for
the Plant and the Plant Site.
3.5 Operating Records and Reports. Operator shall
maintain operating logs, records, and reports documenting the
operation and maintenance of the Plant and Plant Site,
consistent with customary industry standards for industrial
facilities similar to the Plant and the Plant Site, to the
extent and as required to operate and maintain the Plant and
the Plant Site, and maintain such records as the Company may
request Operator to keep and maintain from time to time, which
may include (i) results of independent third party testing
evidencing the chemical change satisfying the chemical change
conditions of the Letter Ruling to constitute "qualified
fuels" pursuant to section 29(c)(1)(C) of the Code, (ii)
quantities and Btu content of the binder and any other
non-coal materials incorporated in the Briquettes, and (iii)
the Btu content of the Briquettes that is attributable to coal
fines and other coal material, excluding the binder and all
non-coal materials. The originals of such operating logs,
records, and reports shall be the property of the Company, as
provided in Section 11.2, and the Company shall have the right
at any time to obtain the originals (unless the originals are
required by Law to remain at the Plant or the Plant Site) or,
at the Company's discretion, photocopies thereof.
3.6 Access. The Company and its representatives shall
have access to the Plant and the Plant Site at all reasonable
times and upon reasonable notice to Operator, to all
documents, materials, records, and accounts relating to the
operation of the Plant and the Plant Site for purposes of
inspection and review. During any such inspection or review
of the Plant, the Company and its representatives shall comply
with all Operator's safety and security procedures, and the
Company and its representatives shall conduct such inspections
and reviews in such a manner as to cause minimum interference
with Operator's activities.
3.7. Responsibilities of the Company. The Company shall
use its reasonable efforts under applicable circumstances to:
(a) cooperate with Operator to facilitate and expedite
Operator s operation and maintenance of the Plant
and the Plant Site in accordance with Section 3.1
of this Agreement, and Operator s performance of
the Services in accordance with this Agreement; and
(b) provide Operator with full and complete access to
all pertinent records, instruments, drawings,
schematics, documents and other information in the
Company s possession or under the Company s control
concerning the Plant Site or the Plant reasonably
necessary for Operator to perform the Services.
ARTICLE IV
ITEMS TO BE FURNISHED BY COMPANY
4.1 General. The Company shall furnish to Operator, at
the Company's expense, the information, services, materials,
and other items described below in this Article IV. All such
items shall be made available at the times and in the manner
reasonably required for the expeditious and orderly
performance of the Services by Operator.
4.2 Equipment and Supplies. The Company shall furnish
or cause to be furnished to Operator the items of equipment
described in Schedule 4.2, and the Company shall furnish or
cause to be furnished to Operator (in such quantities and of
such quality as reasonably required by Operator to perform the
Services and operate and maintain the Plant and the Plant Site
in accordance with the terms of this Agreement) electricity,
process water, natural gas and diesel fuel reasonably
necessary to operate the Plant, and process additives, and
shall provide the initial stock of maintenance spare parts and
inventory.
4.3 Information. The Company shall make available for
Operator s inspection and copying all technical, operational,
and other information in its possession or to which it has
access relating to the Plant and the Plant Site and necessary
for performance of the Services. Operator will maintain the
confidentiality of all information relating to the Plant and
the Plant Site and all financial, sales, and production
information, in accordance with Section 13.12.
4.4 Control of the Plant. Operator shall cooperate as
and to the extent reasonably requested by the Company during
the construction and start-up of the Plant so as to facilitate
an orderly transition from start-up to regular operations.
Operator shall assume operating control of the Plant and the
Plant Site upon completion of the transition.
4.5 Permits. The Company shall provide a completed
"Operator Information Mining Permit" and shall cooperate with
Operator in securing and use its reasonable efforts to secure
all Permits necessary for operation of the Plant and the Plant
Site.
4.6 Repairs, Maintenance, and Capital Improvements.
Subject to Section 5.2, the Company shall pay or reimburse
Operator for the cost of all necessary repairs, maintenance,
and capital improvements for the Plant and the Plant Site in
accordance with this Agreement. If Operator determines that
repairs or capital improvements are necessary, Operator shall
notify the Company in writing of the need for any such
repairs, maintenance, or capital improvements, make written
recommendations, and shall receive the prior written consent
of the Company to any such required work, and Operator shall
be excused from any failure to perform hereunder to the extent
such failure is caused by the Company's refusal to authorize
requested repairs, maintenance or capital improvements. Upon
receipt of such written consent, Operator shall assist the
Company in promptly effectuating the required work in a timely
manner. Operator shall cause the Company at all times to
maintain a reasonable spare parts inventory, a list of which
shall be developed by the Company and Operator and
subsequently attached to this Agreement as Schedule 4.6. The
spare parts inventory cost shall not exceed the amount
approved from time to time by the Company.
ARTICLE V
PROCEDURES, PLANS AND REPORTING
5.1 Representatives.
(a) Operator Representative. Operator shall appoint
from time to time an individual representative
("Operator Representative") coincident with the
execution of this Agreement, who shall be
authorized to act for Operator on all matters
concerning this Agreement and the Services.
Operator shall be bound by the written
communications, directions, requests, and decisions
made by the Operator Representative. Operator
shall notify the Company in writing before
employment of the Operator Representative (or any
new Operator Representative), informing the Company
of his or her identity and his or her
qualifications to operate the Plant. Until the
Company receives notice of removal of the Operator
Representative and appointment of a new Operator
Representative, the Company may treat the appointed
Operator Representative as the authorized Operator
Representative.
(b) Company Representative. The Company shall appoint
from time to time an individual representative
("Company Representative") coincident with the
execution of this Agreement, who shall be
authorized to act for the Company on all matters
concerning this Agreement and the Services. The
Chairman of the Management Committee of the Company
shall be the initial Company Representative. The
Company shall be bound by the written
communications, directions, requests, and decisions
made by the Company Representative. The Company
shall notify Operator in writing of any new Company
Representative. Until Operator receives notice of
removal of the Company Representative and
appointment of a new Company Representative,
Operator may treat the appointed Company
Representative as the authorized Company
Representative.
5.2 Expenditures.
(a) Non-Budgeted Items. Operator shall not incur any
single expenditures not budgeted for (on a line
item basis) in the Annual Operating Plan approved
by the Company in excess of $5,000 without the
prior written consent of the Company. Operator
shall not make any modifications of or capital
improvements to the Plant without the prior written
consent of the Company.
(b) Overruns. Operator shall not incur expenditures in
excess of 110% of the amount budgeted for the
expenditures (on a line item basis) in the Annual
Operating Plan, without the prior written consent
of the Company.
(c) Emergency Expenditures. Notwithstanding any
provision to the contrary in this Agreement, in an
emergency Operator may take any action it deems
reasonably necessary to protect life or property,
to protect the Plant and the Plant Site or to
comply with Laws. Operator shall promptly notify
the Company of the emergency and shall be entitled
to reimbursement for all reasonable Costs of
responding to the emergency.
5.3 Reports. Operator shall submit to the Company the
following reports, in form and substance reasonably acceptable
to the Company, concerning operation and maintenance of the
Plant:
(a) Monthly Reports. Within five days after the end of
each calendar month, Operator shall submit to the
Company an operations and financial report in the
form of Schedule 5.3 (a) attached hereto, covering
operations and maintenance conducted during the
calendar month in reasonable detail, as well as the
results of the testing required under
Section 3.1(i) hereof.
(b) Other Reporting. Promptly after an executive
officer of Operator obtains knowledge of any of the
following, Operator shall notify the Company of:
(i) any litigation or any material claims,
disputes, or actions, threatened or filed,
concerning the Plant, the Plant Site, or the
Services;
(ii) any refusal of any governmental authority or
third party to grant, renew, or extend any
Permit, approval, authorization, or consent
concerning the Plant, the Plant Site, or the
Services;
(iii) any significant dispute with any
governmental authority concerning the Plant,
the Plant Site, or the Services;
(iv) any material damage to or destruction of the
Plant or the Plant Site;
(v) death or serious injury of any employee or
other person at the Plant or the Plant Site or
otherwise in connection with the Services;
(vi) any equipment failure at the Plant or the
Plant Site that would result in a production
disruption at the Plant of more than 12
consecutive hours;
(vii) any other production disruption at the
Plant of more than 12 consecutive hours;
(viii) three successive days of production at
the Plant that is 50% or less than targeted
levels;
(ix) any release or threatened release of any
Hazardous Substance that would violate any Law
(including any Environmental Law) or any
Permit maintained by the Company or Operator
in connection with the Plant that could
reasonably be expected to subject the Company
or Operator to any liability or Penalty under
any Environmental Law;
(x) events that could reasonably lead to (i)
failure to comply with the requirements of
section 29 of the Code or (ii) failure of the
Briquettes to constitute "qualified fuel"
under section 29 of the Code; and
(xi) any decrease in Btu content of Briquettes
below the Btus per ton specified by the
Company to Operator from time to time, or any
material diminution in product quality of
Briquettes.
5.4 Officers' Certificate. In connection with delivery
of the monthly report for the last month of each calendar
quarter pursuant to Section 5.3(a), Operator shall deliver a
letter addressed to the Company signed by the Chief Financial
Officer of Operator certifying whether any condition, act, or
event has occurred and is continuing that constitutes a
violation, breach, or default under this Agreement or the
Lease to his or her best knowledge and belief after due
inquiry.
5.5 Audits. At the Company's option, the Company at its
expense may once during each calendar year conduct an
operational audit of the operations of the Plant and the Plant
Site and of Operator's performance under this Agreement.
Generally, such an audit shall review operating, accounting,
safety, environmental, and personnel matters related to the
Plant and the Plant Site and Operator's compliance with, and
level of performance under, this Agreement and the Lease. The
audit shall be conducted in such a manner as to cause minimum
interference with Operator s performance of the Services.
5.6 Other Information. Operator shall promptly submit
to the Company any material information concerning new or
significant aspects of the operation of the Plant and the
Plant Site and, as requested by the Company, shall promptly
submit any other information concerning the Plant, the Plant
Site or the Services. Operator shall permit representatives
of the Company to have full access to the records relating to
the Plant and the Plant Site during normal business hours.
Any review of such records shall be conducted in such a manner
as to cause minimum interference with Operator's activities.
5.7 Accounting Procedures.
(a) Third Party Invoices. Operator shall receive,
examine, and, if acceptable, approve all invoices for costs
payable to third parties by the Company relating to the
operation and maintenance of the Plant and the Plant Site and
the other Services provided by Operator pursuant to this
Agreement. If Operator reasonably determines that any amounts
shown on these invoices are Costs, Operator will submit such
invoices to the Company for payment in a timely fashion such
that the Company has a reasonable period of time in which to
review the invoices and underlying costs prior to the time
such invoices will become delinquent. The Parties recognize
that Operator will submit invoices as received from third
parties from time to time and not on a fixed cycle. Operator
shall prepare and submit with the invoices a summary of all
the invoices submitted that identifies which items are capital
account items, expense items and other categories requested by
the Company using a format acceptable to the Company.
(b) Labor and G&A Costs and Fees. Each month Operator
will invoice the Company for the amounts owed for Labor and
G&A Costs and the Operating Profit for the preceding month.
Each invoice will itemize in reasonable detail the amounts
owed and the total amount due and will be accompanied by
information reasonably sufficient for the Company to determine
the accuracy of the invoice. Invoices received by the Company
under this Section 5.7(b) shall be due and payable to Operator
within 15 days after the date received by the Company, but no
earlier than the last day of the month in which the invoice is
received.
5.8 Millennium Bug Issues. The computer problem known
as the "millennium bug" or the "year 2000 problem," which can
arise because computer software, hardware, or other equipment
may recognize the year 2000 to be the year 1900, shall not be
deemed to be an act of force majeure or other excuse for
nonperformance under this Agreement. Operator represents and
warrants to the Non-Operator that its computer systems are
designed to be used prior to, during and after the calendar
year 2000, and that such computer systems will operate, and
all data will be processed, during each such time period
without error. Operator acknowledges that the Non-Operator
has entered into this Agreement in reliance on Operator s
representations, warranties, and abilities to perform the
services described herein. The Company acknowledges that
Operator has entered into this Agreement in reliance upon the
Company's representations, warranties, and abilities to
perform its obligations described herein.
ARTICLE VI
LIMITATIONS ON AUTHORITY
6.1 General Limitations. Operator shall not take any of
the following actions without the prior written approval of
the Company:
(a) Disposition of Assets. The sale, lease, pledge,
mortgage, conveyance, license, exchange, or other
transfer or disposition of any property or assets
of the Company, including any tangible personal
property acquired by Operator on the Company s
behalf under this Agreement.
(b) Contracting. Making, entering into, executing,
amending, waiving any rights under, modifying, or
supplementing any contract or agreement on behalf
of, binding upon, or in the name of the Company,
except for contracts relating to approved Costs to
be incurred or expenditures provided for in this
Agreement.
(c) Lawsuits and Settlements. The settling,
compromising, assigning, pledging, transferring,
releasing, or consenting to the same, of any claim,
suit, debt, demand, or judgment against or due by
the Company or Operator on behalf of the Company,
or submitting any such material claim, dispute, or
controversy to arbitration or judicial process, or
stipulating to a judgment, or consent to do the
same. The Company shall retain control of any such
claim, suit, debt, or demand, and any other
litigation regarding the Plant, except as to
Operator's individual liability.
(d) Transactions on Behalf of the Company. Engaging in
any other transaction on behalf of the Company,
except as set forth in this Agreement or the
Beneficiation Agreement.
(e) Permits. Agreeing to waive compliance with any
Permit held in the name of the Company or agreeing
to any Penalty to be paid or charged to the Company
for violation of any Permit.
(f) No Assumption of Obligations Outside Authority.
Operator has no authority to act for or to assume
any obligation or liability on behalf of the
Company except for such authority or assumption as
is expressly conferred upon Operator by this
Agreement or the Beneficiation Agreement or by the
Company pursuant to this Agreement or the
Beneficiation Agreement or by any other written
direction or authorization from the Company to
Operator; and Operator shall indemnify and hold the
Company, the Members, their respective successors
and assigns, and their respective directors,
officers, employees, and agents harmless from and
against any and all losses, claims, damages, and
liabilities arising out of any unauthorized act or
assumption of any obligation or liability by
Operator on behalf of the Company in bad faith or
in circumstances constituting willful misconduct by
Operator.
6.2 Execution of Documents. Any agreement, contract,
notice, approval, or other document that is permitted under
this Agreement to be executed for the Company by Operator
shall be executed by the Operator Representative. No other
employee, representative, or agent of Operator shall have
signature authority for purposes of binding the Company
pursuant to this Agreement, unless otherwise provided in
writing from the Company to Operator.
6.3 Affiliates. All Services performed by Affiliates of
Operator on behalf of Operator shall have been approved in
advance by the Company and shall be invoiced at rates and
total charges to the Company no higher than the Costs (without
any profit component) that would have been chargeable to the
Company if Operator had performed such Services.
ARTICLE VII
COMPENSATION OF OPERATOR
Operator's compensation for acting as Operator shall be
limited to (i) actual Costs incurred by Operator (provided
that Costs payable to third parties are, where possible,
expected to be paid by the Company directly to the third
parties to which such Costs are owed pursuant to Section 5.7
and the Operator shall not receive such amounts so paid), plus
(ii) Labor and G&A Costs, plus (iii) 18% of the Labor and G&A
Costs (excluding any extraordinary costs incurred by Operator
in connection or as a result of the termination of any
employee, required to be incurred by Operator under the NBCWA
of 1998, or otherwise, that would otherwise constitute Labor
& G&A Costs under this Agreement) (the "Operating Profit").
In addition to the Operating Profit provided for in "(iii),"
the Company shall pay Operator each month a "Minimum Profit
Payment" equal to the amount, if any, by which (x) the number
of months for which Operator (and the operator designated
under the Beneficiation Agreement) has rendered invoices
during the calendar year that includes the month covered by
the most recent invoice multiplied by $16,666.66 is greater
than (y) the total Operating Profit, plus the Operating
Profit under the Beneficiation Agreement, previously paid or
payable by the Company in that calendar year including the
most recent invoice; provided that if this Agreement
terminates before the close of business on the last day of a
calendar month, the Minimum Profit Payment for that partial
month shall be proportionately reduced to reflect the ratio of
the number of days this Agreement was in effect during that
month to the total number of days in that month. Minimum
Profit Payments shall be paid half to Operator and half to the
operator designated under the Beneficiation Agreement. If for
any calender year the aggregate Operating Profits plus the
Operating Profits under the Beneficiation Agreement plus the
Minimum Profit Payments (collectively, the "total payments")
exceeds $200,000 (provided that in the case of a partial year
in the event this Agreement is terminated before the end of a
calendar year, this $200,000 figure shall be reduced to an
amount equal to $547.95 multiplied by the number of days this
Agreement is in effect during such calendar year), then
Operator shall refund to the Company the Minimum Profit
Payments, but not an amount in excess of the Minimum Profit
Payments, to the extent necessary to cause the total payments
after giving effect to such refund to equal $200,000 (or in
the case of a partial year, the reduced amount described
above). It is the intent of the parties that the Operating
Profit and the Minimum Profit Payments in the amount provided
for above be paid by each of the Companies with respect to the
Plant owned by such Company.
Company and Operator agree that solely for purposes of
determining Operator's compensation hereunder, this Agreement
shall be deemed to have been effective April 1, 1998 and
Operator shall be entitled to compensation in accordance with
this Agreement for the months of April, May and June, 1998.
ARTICLE VIII
TERM AND TERMINATION
8.1 Term. Unless sooner terminated as provided herein,
the term of this Agreement shall commence on the effective
date of this Agreement and shall expire on December 31, 1998
(the "Initial Term"), which term shall be automatically
extended for unlimited successive one year periods unless it
is terminated during the Initial Term or any such subsequent
period by one party furnishing the other with written notice,
at least 60 days prior to the expiration of the period, of an
intent to terminate this Agreement upon the expiration of the
period.
8.2 Termination by the Company for Cause.
(a) This Agreement may be terminated by the Company at
any time for "good cause." For purposes hereof, "good cause"
shall mean any of the following: (a) Operator s repeated
negligence; (b) Operator s unremedied negligence;
(c) Operator s willful misconduct; (d) Operator s material
breach of the standards of operation contained in Section 3.1;
or (e) Operator s material failure to perform its obligations
under this Agreement. For purposes hereof, "repeated
negligence" shall occur if (i) Operator is negligent in
performing any of its material obligations under this
Agreement; (ii) Operator receives a notice in writing from the
Management Committee specifying that the Management Committee
has reasonably determined that Operator has failed to perform
its duties as Operator, the basis for such determination by
the Management Committee, and the action necessary to be
undertaken by Operator to remedy such failure; and (iii) the
Operator receives such written notices more than two times in
any six month period (provided that after issuing a written
notice with respect to a failure by Operator to perform, the
Company shall not issue a second such notice with respect to
the same underlying circumstances within a six-month period
unless the Operator fails to promptly commence and continue
diligent efforts to cure such failure). For purposes hereof,
"unremedied negligence" shall occur if (i) Operator is
negligent in performing any of its material obligations under
this Agreement; (ii) Operator receives a notice in writing
from the Management Committee specifying that the Management
Committee has reasonably determined that Operator has been
negligent in the performance of its duties under this
Agreement as Operator, the basis for such determination by the
Management Committee, and the action necessary to be
undertaken by Operator to remedy such failure; and
(iii) Operator has not remedied, or commenced diligent efforts
to cure or remedy within such period, its negligence within
seven calendar days after its receipt of the written notice
and does not continues to pursue such diligent efforts until
such matters are cured or remedied after its receipt of the
Management Committee s notice.
(b) Termination of this Agreement as to any Company
pursuant to Section 8.2(a) or any other section of this
Agreement shall not in and of itself terminate this Agreement
as between Operator and any other Company; provided, however,
that each such other Company shall have the right to terminate
its Agreement with Operator upon 30 days' notice to Operator
if it gives such notice within 60 days after effective date
of the termination by another Company under Section 8.2(a).
8.3 Termination by Operator for Cause; Resignation;
Deemed Offer to Resign. This Agreement may be terminated by
Operator for cause if (i) the Company fails to perform its
obligations under this Agreement in any material respect, (ii)
the Company receives a notice in writing from Operator
specifying that Operator has reasonably determined that the
Company has failed to perform its obligations under this
Agreement in any material respect and the basis for such
determination, and (iii) the Company does not remedy or
commence diligent efforts to remedy its failure within seven
calendar days after its receipt of the written notice and
continue to pursue such diligent efforts until the failure is
remedied. In any other event, Operator may resign upon not
less than 120 days prior notice to the Company. If any of
the following shall occur, Operator shall be deemed to have
resigned upon the occurrence of the event described in each of
the following subsections:
(a) A receiver, liquidator, assignee, custodian,
trustee, sequestrator, or similar official for a
substantial part of Operator s assets is appointed
and the appointment is neither made ineffective nor
discharged within 60 days after the making thereof;
(b) Operator fails to pay or contest in good faith its
bills and business debts as they become due and
such failure would reasonably be expected to have a
material adverse effect on (i) the condition
(financial or otherwise), business, assets or
results of operations of Operator, or (ii) the
ability of Operator to perform its obligations
under this Agreement;
(c) Operator commences a voluntary case under any
applicable bankruptcy, insolvency, or similar Law
now or hereafter in effect; or consents to,
requests, or acquiesces in the entry of an order
for relief in an involuntary case under any such
Law or to the appointment of or taking possession
by a receiver, liquidator, assignee, custodian,
trustee, sequestrator, or other similar official of
any substantial part of its assets; or makes a
general assignment for the benefit of creditors; or
takes corporate or other action in furtherance of
any of the foregoing; or
(d) A judgment, decree, or order for relief is entered
against Operator that materially affects its
ability to perform the Services in accordance with
the terms of this Agreement by a court of competent
jurisdiction in an involuntary case commenced under
any applicable bankruptcy, insolvency, or other
similar Law of any jurisdiction now or hereafter in
effect.
Under Subsections (b), (c), or (d) above, the appointment of
a successor Operator shall be deemed to pre-date the event
causing the deemed resignation.
8.4 Termination if Plant Moved. This Agreement shall
terminate if the Company moves the Plant off the Premises,
unless the Parties otherwise agree in writing.
8.5 Termination upon Agreement. This Agreement may be
terminated at any time upon mutual written agreement of the
Parties.
8.6 Demobilization Costs. If this Agreement is
terminated pursuant to Section 8.1 or 8.4, or by Operator
pursuant to the first sentence Section 8.3, the Company shall
reimburse Operator for costs reasonably incurred in connection
with the demobilization, including, without limitation, costs
of Environmental Compliance.
8.7 Plant Condition at End of Term. Upon termination of
this Agreement, Operator shall remove its personnel from the
Plant and leave the Plant in a broom-clean condition.
Operator shall not be responsible for normal wear and tear,
any Pre-Existing Condition or any condition proximately
resulting from any act or failure to act taken or failed to be
taken pursuant to the Company s written instructions. All
special tools, improvements, inventory of supplies, spare
parts, safety equipment, operating and maintenance manuals,
including the original copies of the records and documents of
the Plant referred to in Section 11.2, the Operation and
Maintenance Procedures Manual, and any other items for which
the Company paid Operator will become or remain the property
of the Company without additional charge. The Company will
also assume, or pay the breakage costs (i.e., termination
payments and damages for premature termination in breach of an
agreement) with respect to terminating, all contracts,
agreements, Permits, and other obligations that Operator may
have undertaken with third parties in connection with the
Services and which the Company authorized or approved in
writing. The Company will also have the right, in its sole
discretion, to assume and become liable for any other
contract, agreement, Permit or obligation that Operator may
have undertaken with third parties in connection with the
Services. Operator shall execute all documents and take all
other reasonable steps requested by the Company to assign to
and vest in the Company all rights, benefits, interests, and
title in connection with such contracts or obligations to be
assigned to and assumed by the Company.
8.8 Termination Payment. In the event of a termination
of this Agreement by either Party for cause, the terminating
Party shall be entitled to recover any damages or Penalties it
incurs as a result of any breach or violation by the other
Party.
8.9 Continuation and Cooperation. Operator shall
cooperate fully with the Company and any new Operator
appointed by the Company during the transition period from
receipt of a termination notice hereunder to the termination
of this Agreement, including training any new Operator
appointed by the Company. Operator will be entitled to the
compensation provided in Article VII of this Agreement and
reimbursement for all reasonable out-of-pocket expenses
incurred during the transition period. Operator shall also
continue performing its duties hereunder after the termination
date until a new Operator assumes its duties to operate the
Plant. During such post-termination period Operator will be
entitled to the compensation provided at Article VII of this
Agreement.
8.10 Force Majeure.
(a) Definition. "Force Majeure" means any cause
reasonably beyond the control of a Party that,
wholly or in substantial part, prevents the
performance of its obligations under this Agreement
or the Lease. Examples of Force Majeure are the
following: acts of God; acts of the public enemy;
insurrections; riots, strikes; labor disputes; work
stoppages; fires; explosions; floods; electric
power failures; breakdowns of or damage to the
Plant; interruptions to or contingencies of
transportation; embargoes; and orders or acts of
civil or military authority (including a city or
county ordinance, an act of a state legislature, or
an act of the United States Congress); provided,
however, that for purposes of this Agreement, Force
Majeure shall not include, and neither Party shall
be excused from performance because of, the
development or existence of economic conditions
that may adversely affect the anticipated
profitability of the Party's activities hereunder,
acts or omissions of the Party that constitute
mismanagement or fraud on its part, or reduced
productivity of labor employed by that Party in its
activity hereunder.
(b) Effect. If because of an event of Force Majeure
either Party is unable to carry out its obligations
under this Agreement, and if the affected Party
gives the other Party notice of the Force Majeure,
the obligations and liabilities of the affected
Party and the corresponding obligations of the
other Party shall be suspended to the extent made
necessary by and during the continuance of the
Force Majeure; provided, however, that the
disabling effects of the Force Majeure shall be
eliminated as soon as and to the extent possible.
ARTICLE IX
INSURANCE
9.1 Operator Policies. Operator shall obtain, on its
own behalf, and keep in force during the term of this
Agreement, at least the following types and amounts of
insurance:
(a) Workers Compensation Insurance for statutory
requirements, including Occupational Disease
Insurance, covering location of all work places.
(b) Employer s Liability Insurance with limits of Five
Hundred Thousand Dollars ($500,000) covering
location of all work places.
(c) Comprehensive General Liability Insurance including
Products Completed Operations Coverage and Blanket
Contractual Coverage with Full Defense Coverage for
Company, with a Limit of not less than Ten Million
Dollars ($10,000,000) Combined Single Limit
covering injuries to or death of one or more
persons and property damage liability.
(d) Comprehensive Automobile Liability Insurance
covering owned, non-owned and hired vehicles with
limits of not less than One Million Dollars
($1,000,000) Combined Single Limit covering
injuries to or death of one or more persons and
property damage liability.
(e) Pollution liability insurance coverages in such
amounts as the parties shall reasonably agree on or
before June 30, 1998.
All such insurance of Operator shall specifically refer to and
cover Operator s liability under this Agreement, including
Section 10.1 and shall name the Company as an Additional Named
Insured. Operator shall deliver to the Company a certificate
of insurance evidencing the existence of all such insurance
and, upon request, the original or certified copy of each
policy of insurance and evidence. All policies providing
coverage hereunder shall contain provisions that no
cancellation or material changes in the policies shall become
effective except on 30 days advance written notice thereof to
the Company at its offices in Detroit, Michigan.
9.2 Waiver of Subrogation. All insurance policies
maintained by a Party pursuant to Section 9.1 shall expressly
waive any right on the part of the insurer to assert any
claims against the other Party. The Parties agree that all
policies will include such waiver clause or endorsement, and
each Party waives any claims against the other Party for
perils to be insured against by such insurance policies,
including any deductible amounts unless such waiver is
prohibited by the policies or Law.
ARTICLE X
INDEMNIFICATION; DAMAGES
10.1 Indemnification by Operator. Operator shall defend,
indemnify, and save and hold harmless the Company and its
Affiliates, and their respective shareholders, directors,
members, managers, partners, officers, employees, agents,
contractors and operators (the "Non-Operator Indemnified
Parties") for, from, and against, and shall promptly reimburse
each Non-Operator Indemnified Party with respect to, any and
all Losses (including Losses arising in connection with
violations of Environmental Laws or for Environmental
Compliance) paid, incurred or suffered by such Non-Operator
Indemnified Party, but only to the extent the same arise from
or are attributable to the breach of any representation,
warranty, covenant or agreement of Operator contained in this
Agreement or Operator's gross negligence or willful misconduct
in performing the Services and its other obligations under
this Agreement. The indemnification by Operator pursuant to
this Section 10.1 shall not include or cover any Losses to the
extent same are attributable to any Pre-Existing Condition or
the negligence, gross negligence or willful misconduct of the
Company.
10.2 Indemnification by the Company. The Company shall
defend, indemnify, and save and hold harmless Operator and its
Affiliates and their respective shareholders, directors,
members, managers, partners, officers, employees, agents,
contractors and operators (the "Non-Company Indemnified
Parties") for, from, and against, and shall promptly reimburse
each Non-Company Indemnified Party with respect to, any and
all Losses (including Losses arising in connection with
violations of Environmental Laws or for Environmental
Compliance) paid, incurred, or suffered by such Non-Company
Indemnified Party, but only to the extent that the same arise
from or are attributable to (i) any Pre-Existing Condition,
(ii) the breach of any representation, warranty, covenant or
agreement of the Company contained in this Agreement, or (iii)
the breach by the Company (or by any Person, other than
Operator or an Affiliate of Operator, designated by the
Company to assume) any contract, agreement, Permit or other
obligation assumed by the Company or its designee pursuant to
Section 8.7, or (iv) any breakage cost obligation assumed by
the Company pursuant Section 8.7. The indemnification by the
Company pursuant to this Section 10.2 shall not include or
cover any Losses to the extent the same are attributable to
the negligence, gross negligence or willful misconduct of
Operator.
ARTICLE XI
TITLE, DOCUMENTS, AND DATA
11.1 Materials and Equipment. Title to all materials,
equipment, supplies, consumables, spare parts, and other items
purchased or obtained by Operator and paid for by the Company
pursuant to Section 5.7 shall pass immediately to and vest in
the Company upon the passage of title from the vendor or
supplier thereof; provided, however, that such transfer of
title shall in no way affect Operator's obligations as set
forth in the other provisions of this Agreement.
11.2 Documents. All materials and documents prepared or
developed by Operator or its employees, representatives, or
contractors in connection with the Plant or the performance of
the Services, including all manuals, data, designs, drawings,
plans, specifications, reports, and accounts, will
automatically become the property of the Company when prepared
or developed; provided, however, that any patentable
invention, process or system previously or hereafter developed
by Operator independently of the Plant or the performance of
the Services shall remain and be the property of Operator and
Operator shall license the Company to use the same during the
term of this Agreement in connection with the operation of the
Plant, any replacement or relocated plant[, which is located
at or in the immediate vicinity of the Plant Site,] at a
reasonable charge to be agreed upon by the Parties prior to
any such use. All these materials and documents, together
with any materials and documents furnished to Operator or to
its contractors by the Company, shall be delivered to the
Company upon expiration or termination of this Agreement and
before final payment is made to Operator; provided, however,
that Operator may retain copies of all such materials and
documents, subject to the confidentiality provisions hereof.
ARTICLE XII
ARBITRATION
12.1 Submission to Arbitration. The Parties hereby shall
submit all unresolved controversies, claims, and matters of
difference arising under this Agreement to binding
arbitration. Without limiting the generality of the
foregoing, the following shall be considered controversies for
this purpose: (a) all disputes relating to the interpretation
or breach of this Agreement or the Parties performance
thereunder, (b) all disputes relating to any representations,
negotiations, and other proceedings leading to the execution
hereof, and (c) all disputes as to whether the right to
arbitrate any such question exists.
12.2 Initiation of Arbitration and Selection of
Arbitrators. The Party desiring arbitration shall so notify
the other party, identifying in reasonable detail the matters
to be arbitrated and the relief sought. Within 14 Business
Days after receipt of such notification, the Parties shall
attempt (acting with the utmost good faith and commercial
reasonableness) to resolve the matters detailed and the relief
sought in the notice. If the Parties are unable to resolve
the matters specified in the notice, the matters shall be
submitted for arbitration in accordance with the terms hereof.
Arbitration hereunder shall be before a three-person panel of
neutral arbitrators, consisting of one person from each of the
following categories: (1) an attorney with at least ten
years experience in mining law; (2) an attorney with at least
ten years experience in general commercial law, including
mining matters; and (3) a person with at least ten years
experience in the coal mining industry. The AAA shall submit
a list of persons meeting the criteria outlined above for each
category of arbitrator, and the Parties shall select one
person from each category in the manner established by the
AAA. If any Party or the arbitrators fail to select
arbitrators as required above, the AAA shall select such
arbitrators. The arbitrators shall be entitled to a fee
commensurate with their fees for professional services
requiring similar time and effort. If the arbitrators so
desire, they shall have the authority to retain the services
of a neutral judge or attorney (whose fees shall be treated as
an arbitrator s fees) to assist them in administering the
arbitration and conducting any hearings and taking evidence at
such hearings or otherwise.
12.3 Arbitration Procedures. All matters arbitrated
hereunder shall be arbitrated in Detroit, Michigan pursuant to
Michigan Law, and shall be conducted in accordance with the
Commercial Arbitration Rules of the AAA, except to the extent
such rules conflict with the express provisions of this
Article XII (which shall prevail in the event of such
conflict); provided, however, that all substantive law issues
relating to the rights and obligations of the Parties under
this Agreement shall be governed by Section 12.4 below. The
arbitrators shall conduct a hearing no later than 45 days
after submission of the matter to arbitration, and a decision
shall be rendered by the arbitrators within 10 days of the
hearing. At the hearing, the Parties shall present such
evidence and witnesses as they may choose, with or without
counsel. Adherence to formal rules of evidence shall not be
required, but the arbitration panel shall consider any
evidence and testimony that it determines to be relevant, in
accordance with procedures that it determines to be
appropriate. Any award entered in an arbitration shall be
made by a written opinion stating the reasons for the award
made.
12.4 Enforcement. This submission and agreement to
arbitrate shall be specifically enforceable. Arbitration may
proceed in the absence of any Party if notice of the
proceedings has been given to such party. The Parties agree
to abide by all awards rendered in such proceedings. Such
awards shall be final and binding on all parties to the extent
and in the manner provided by Michigan Law. All awards may be
filed with the clerk of one or more courts, state, federal, or
foreign, having jurisdiction over the Party against which the
award is rendered or its property, as a basis of judgment and
of the issuance of execution for its collection. No Party
shall be considered in default hereunder during the pendency
of arbitration proceedings specifically relating to such
default.
12.5 Fees and Costs. The arbitrators fees and other
costs of the arbitration and the reasonable attorney fees,
expert witness fees and costs of the prevailing Party shall be
borne by the non-prevailing Party. In its written opinion,
the arbitration panel shall, after comparing the respective
positions asserted in the arbitration claim and answer
thereto, declare as the prevailing party that Party whose
position was closest to the arbitration award (not necessarily
the Party in favor of which the award on the arbitration claim
is rendered) and declare the other Party to be the
non-prevailing Party. The arbitration award shall include an
award of the fees and costs provided by this Section 12.5
against the non-prevailing Party.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Representations and Warranties.
(a) Operator represents that it is a corporation
organized and validly existing in good standing
under the laws of Oklahoma, is qualified to do
business in the State, and has full power and
authority to enter into this Agreement.
(b) Operator represents that the person executing and
delivering this Agreement on Operator's behalf is
acting pursuant to proper authorization and that
this Agreement is the valid and binding obligation
of Operator, enforceable in accordance with its
terms, subject, however, to the effects of
bankruptcy, insolvency, reorganization, moratorium,
and similar laws for the protection of creditors,
as well as to general principles of equity,
regardless of whether enforceability is considered
in a proceeding in equity or at law.
(c) The Company represents that it is a limited
liability company organized and validly existing in
good standing under the laws of Delaware, is
qualified to do business in the State, and has full
power and authority to enter into this Agreement.
(d) The Company represents that the person executing
and delivering this Agreement on the Company's
behalf is acting pursuant to proper authorization
and that this Agreement is the valid and binding
obligation of the Company, enforceable in
accordance with its terms, subject, however, to the
effects of bankruptcy, insolvency, reorganization,
moratorium, and similar laws for the protection of
creditors, as well as to general principles of
equity, regardless of whether enforceability is
considered in a proceeding in equity or at law.
(e) The Company represents that it owns and has the
lawful right to operate the Plant, that it has the
lawful right to occupy the Plant Site, and to allow
Operator to occupy and operate the Plant and occupy
the Plant Site, for the purposes provided in this
Agreement, and that it has no knowledge of any
adverse claim thereto by any Person except as
disclosed in the Lease.
13.2 Notices. All notices and other required
communications hereunder shall be in writing, addressed as
follows:
If to the Company (specifying the applicable
Company):
150 West Jefferson Avenue
Suite 1700
Detroit, Michigan 48226
Attention: William Kraemer
Facsimile Number: (313) 256-6918
If to Operator:
Beard Technologies, Inc.
5600 North May Avenue
Suite 320
Oklahoma City, Oklahoma 73112
Attention: Herb Mee, Jr.
Facsimile Number: (405) 842-9901
Notices shall be given (a) by personal delivery to the other
Party, (b) by facsimile, with confirmation sent by registered
or certified mail, return receipt requested, or (c) by
registered or certified mail, return receipt requested. All
notices shall be effective and deemed delivered (i) if by
personal delivery, on the date of delivery if during business
hours, otherwise the next business day, (ii) if by facsimile,
on the date the facsimile is received if received during
business hours, otherwise the next Business Day and (iii) if
solely by mail, upon receipt by the addressee. A Party may
change its address by notice to the other Party.
13.3 Assignment. Operator shall not assign all or any
portion of its interests under this Agreement without the
prior written consent of the Company; provided that Operator
may assign all of its rights hereunder to an Affiliate of
Operator for so long as such entity remains an Affiliate of
Operator and on the condition that the Guaranty of even date
from Operator's parent corporation guarantying the obligations
of Operator under this Agreement shall remain in effect. The
Company shall be free to assign its rights and interests under
this Agreement to any Person without the consent of Operator
on the condition that the Guaranty of even date from MCNIC
Pipeline & Processing Company to Operator guarantying the
Companies' payment obligations under Article VII shall remain
in effect or be substituted by a guaranty from an entity with
a credit or debt rating of BBB+ or better from Standard and
Poor's or an equivalent rating from any recognized rating
agency.
13.4 Construction of Agreement. In construing this
Agreement:
(a) no consideration shall be given to the captions of
the Articles, Sections, subsections, or clauses,
which are inserted for convenience in locating the
provisions of this Agreement and not as an aid in
its construction;
(b) no consideration shall be given to the fact or
presumption that one Party had a greater or lesser
hand in drafting this Agreement;
(c) examples shall not be construed to limit, expressly
or by implication, the matter they illustrate;
(d) the word "including" means including by way of
example and not by way of limitation;
(e) unless the context requires otherwise, the plural
shall be deemed to include the singular, and vice
versa; and
(f) unless the context requires otherwise, each gender
shall be deemed to include any other gender.
13.5 Integration; Amendment. This Agreement constitutes
the entire agreement of the Parties relating to the subject
matter hereof. There are no promises, terms, conditions,
obligations, or warranties made by the Parties other than
those contained herein, that relate to the subject matter of
this Agreement. This Agreement supersedes all prior
communications, representations, and 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.
13.6 Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as
to that jurisdiction, be ineffective to the extent of the
prohibition or unenforceability without invalidating the
remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render the provision unenforceable in any other
jurisdiction.
13.7 Public Announcements. Except as required by Law,
Operator shall not make any press release or other public
announcement or public disclosure relating to this Agreement,
the subject matter hereof, or performance of the Services
without the written consent of the Company, which consent
shall not be unreasonably withheld.
13.8 Governing Law. This Agreement shall in all respects
be governed by and construed in accordance with the Laws of
the State of Michigan, without regard to its choice of law
rules.
13.9 Multiple Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original, and it will not be necessary in making
proof of this Agreement or its terms to produce or account for
more than one of these counterparts, if the counterpart
produced bears the signature of the Party sought to be bound.
13.10 No Third Party Beneficiary Rights. Nothing in this
Agreement shall be deemed to grant any third party beneficiary
or similar rights to any Person not a signatory to this
Agreement.
13.11 Statement of Performance. Upon request by the
Company, Operator shall deliver to the Company, for the
benefit of and which may be relied upon by the Company, its
members, and any potential purchaser of the Plant, from time
to time within ten days after the Company's request therefor,
a statement certifying, to the extent such statements are true
when made, that:
(a) this Agreement is in full force and effect;
(b) this Agreement is unmodified or if modified,
stating any such modifications;
(c) to its knowledge, the Company is not in
default hereunder and no events or conditions then
exist which, with the passage of time or the giving
of notice, or both, would constitute a default on
the Company's part or specifying such defaults,
events or conditions if any are claimed;
(d) such further information about this Agreement
as may reasonably be requested by the Company.
13.12 Confidentiality. Operator shall keep
confidential and not use, reveal, provide or transfer to any
third party any Confidential Information it obtains or has
obtained concerning the Company, the Plant or the Plant Site,
or the terms of this Agreement, except as follows:
(a) to the extent that disclosure to a third party is
required by applicable law, court order or
regulation, including those promulgated by the
United States Securities and Exchange Commission;
(b) to the extent disclosure is necessary or advisable,
to its employees, consultants or advisors, in each
case for the purpose of carrying out its duties
hereunder, or to its Lenders;
(c) to the extent necessary, disclosure to third
parties to enforce this Agreement;
provided, however, that in each case of disclosure pursuant to
(b) the persons to whom disclosure is made agree to be bound
by this confidentiality provision. The obligation of Operator
not to disclose Confidential Information except as provided
herein shall not be affected by the termination of this
Agreement. As used in this paragraph, the term "Confidential
Information" shall mean information concerning this Agreement
the Company, the Plant, the Plant Site or the properties,
operations, business, trade secrets, technical know-how and
other non-public information and data of or relating to the
Company.
EXECUTED by the duly authorized representatives of the
Parties as of the date first above written.
CRC NO. 1 LLC,
CRC NO. 2 LLC,
CRC NO. 3 LLC,
CRC NO. 4 LLC,
CRC NO. 5 LLC, and
CRC NO. 6 LLC,
each a Delaware limited
liability company
By: JOSEPH L. ROBERTS
Name: Joseph L. Roberts
Title: Chairman
BEARD TECHNOLOGIES, INC.,
an Oklahoma corporation
By: HERB MEE, JR.
Name: Herb Mee, Jr.
Title: Vice President
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated as of June 24, 1998, is
among THE BEARD COMPANY, an Oklahoma corporation ("Guarantor"),
and CRC NO. 1 LLC, CRC NO. 2 LLC, CRC NO. 3 LLC, CRC NO. 4 LLC,
CRC NO. 5 LLC, AND CRC NO. 6 LLC, each of which is a Delaware
limited liability company (individually, a "Company" and
collectively, the "Companies").
Recitals
A. Each of the Companies has entered into a Coal Fines
Extraction and Beneficiation Agreement dated as of June 24, 1998
(the "Beneficiation Agreement") with Beard Technologies, Inc.
("Beard"), pursuant to which Beard will dredge, extract,
beneficiate, and deliver coal fines.
B. Each of the Companies has entered into an Operation
and Maintenance Agreement dated as of June 24, 1998 (the "O&M
Agreement") with Beard, pursuant to which Beard will operate,
manage, and maintain a coal briquetting facility that will
produce briquettes from the coal fines delivered under the
Company's Beneficiation Agreement.
C. For convenience, the parties entered into a single
document as the Beneficiation Agreement, which is to be construed
and enforced as six separate Beneficiation Agreements, each of
which is between Beard and a different Company; and the parties
entered into a single document as the O&M Agreement, which is to
be construed and enforced as six separate O&M Agreements, each of
which is between Beard and a different Company.
D. Beard is a wholly-owned subsidiary of Guarantor.
F. The Companies have requested that Guarantor
guarantee the obligations of Beard to each of the Companies under
the Beneficiation Agreement and under the O&M Agreement, and
Guarantor is willing to do so upon the terms and conditions of
this Guaranty Agreement.
Agreement
1. In consideration of the foregoing and for value
received, Guarantor hereby unconditionally guarantees the prompt
performance of all obligations of Beard to each of the Companies
under the Beneficiation Agreement and under the O&M Agreement,
provided, that Guarantor shall have no liability to any Company
hereunder with respect to the non-performance by Beard of its
obligations under, and/or any breach of any representation,
warranty, covenant or agreement provided in, the Beneficiation
Agreement and the O&M Agreement except to the extent such non-
performance arises from or is attributable to (i) Beard's gross
negligence or willful misconduct, (ii) Beard's breach of any of
the provisions of the Beneficiation Agreement or the O&M
Agreement relating to the receipt, remittance, handling or
disbursement of funds, or (iii) Beard's failure to refund to any
Company the amount of any overpayment by such Company to Beard
under the Beneficiation Agreement or the O&M Agreement, as the
case may be.
2. Guarantor hereby expressly waives (a) notice of the
acceptance of this guaranty, (b) notice of the existence or
creation of any of the obligations guaranteed hereby, and (c) all
presentments, demands for performance, notices of non-
performance, protests, and all other notices whatsoever.
3. No delay or neglect on the part of a Company in the
exercise of any right or remedy existing under law or by virtue
of this Guaranty Agreement shall operate as a waiver thereof, but
such rights and remedies shall continue in full force and effect
until specifically waived or released by an instrument executed
by the Company. No single or partial exercise by a Company of
any right or remedy shall preclude the further exercise thereof
or the exercise of any other right or remedy.
4. The respective obligations of the Companies under
the Beneficiation Agreement and the O&M Agreement are several,
and nothing in this Guaranty Agreement shall be deemed to make
those obligations joint and several.
5. All notices and other required communications
hereunder shall be in writing, addressed as follows:
If to a Company (specifying the
applicable Company):
150 West Jefferson Avenue
Suite 1700
Detroit, Michigan 48226
Attention: William Kraemer
Facsimile Number: (313) 256-6918
If to Guarantor:
The Beard Company
5600 North May Avenue
Suite 320
Oklahoma City, Oklahoma 73112
Attention: Herb Mee, Jr.
Facsimile Number: (405) 842-9901
Notices shall be given (a) by personal delivery to the other
party, (b) by facsimile, with confirmation sent by registered or
certified mail, return receipt requested, or (c) by registered or
certified mail, return receipt requested. All notices shall be
effective and deemed delivered (i) if by personal delivery, on
the date of delivery if during business hours, otherwise the next
business day, (ii) if by facsimile, on the date the facsimile is
received if received during business hours, otherwise the next
business day and (iii) if solely by mail, upon receipt by the
addressee. A party may change its address by notice to the other
party.
6. Any provision of this Guaranty Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions of
this Agreement, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render the provision
unenforceable in any other jurisdiction.
7. This Guaranty Agreement shall in all respects be
governed by and construed in accordance with the laws of the
State of New York, without regard to its choice of law rules, and
Guarantor chooses New York law to govern this Guaranty Agreement
pursuant to N.Y. Gen. Oblig. Law Section 5-14-1 (Consol. 1995).
8. For convenience, the parties desire that all the
Companies be parties to this Guaranty Agreement, but that this
Agreement be construed and enforced as six separate agreements,
each of which shall be between Guarantor and a different Company.
References to a "Company" or "the Companies" shall be deemed to
refer to the applicable Company, and references to other defined
terms shall be deemed to refer to such terms insofar as they
relate to the applicable Company, as the context requires.
9. This Guaranty Agreement shall be a continuing,
absolute, and unconditional guaranty and shall continue in full
force and effect and be binding upon and inure to the benefit of
the parties hereto and their successors and assigns.
10. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original
instrument, but all of which together shall constitute one and
the same instrument.
EXECUTED to be effective as set forth in this
Agreement.
THE BEARD COMPANY
By: HERB MEE, JR.
Name: Herb Mee, Jr.
Title: President
CRC NO. 1 LLC
CRC NO. 2 LLC
CRC NO. 3 LLC
CRC NO. 4 LLC
CRC NO. 5 LLC
CRC NO. 6 LLC
By: JOSEPH L. ROBERTS
Name: Joseph L. Roberts
Title: Chairman
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated as of June 24, 1998, is
between MCNIC PIPELINE & PROCESSING COMPANY, a Michigan
corporation ("Guarantor"), and BEARD TECHNOLOGIES, INC., an
Oklahoma corporation ("Beard").
Recitals
A. This Guaranty is given to guarantee certain obligations
of CRC No. 1 LLC, CRC No. 2 LLC, CRC No. 3 LLC, CRC No. 4 LLC,
CRC No. 5 LLC, and CRC No. 6 LLC, each of which is a Delaware
limited liability company (individually, a "Company" and
collectively, the "Companies").
B. Each of the Companies has entered into a Coal Fines
Extraction and Beneficiation Agreement dated as of June 24, 1998
(the "Beneficiation Agreement") with Beard, pursuant to which
Beard will dredge, extract, beneficiate, and deliver coal fines.
C. Each of the Companies has entered into an Operation and
Maintenance Agreement dated as of June 24, 1998 (the "O&M
Agreement") with Beard, pursuant to which Beard will operate,
manage, and maintain a coal briquetting facility that will
produce briquettes from the coal fines delivered under the
Company's Beneficiation Agreement.
D. For convenience, the parties entered into a single
document as the Beneficiation Agreement, which is to be construed
and enforced as six separate Beneficiation Agreements, each of
which is between Beard and a different Company; and the parties
entered into a single document as the O&M Agreement, which is to
be construed and enforced as six separate O&M Agreements, each of
which is between Beard and a different Company.
E. Guarantor is currently a member of each of the
Companies.
F. Beard has requested that Guarantor guarantee the
respective obligations of each of the Companies to compensate and
reimburse Beard as Operator under the Beneficiation Agreement and
under the O&M Agreement, and Guarantor is willing to do so upon
the terms and conditions of this Guaranty Agreement.
Agreement
1. In consideration of the foregoing recitals and for
value received, Guarantor hereby unconditionally guarantees the
prompt payment of all amounts due and payable to Beard by each of
the Companies under Article VII of the Beneficiation Agreement
and Article VII of the O&M Agreement.
2. Guarantor hereby expressly waives (a) notice of the
acceptance of this guaranty, (b) notice of the existence or
creation of any of the obligations guaranteed hereby, and (c) all
presentments, demands for performance, notices of non-
performance, protests, and all other notices whatsoever.
3. No delay or neglect on the part of Beard in the
exercise of any right or remedy existing under law or by virtue
of this Guaranty Agreement shall operate as a waiver thereof, but
such rights and remedies shall continue in full force and effect
until specifically waived or released by an instrument executed
by Beard. No single or partial exercise by Beard of any right or
remedy shall preclude the further exercise thereof or the
exercise of any other right or remedy.
4. The respective obligations of the Companies under the
Beneficiation Agreement and the O&M Agreement are several, and
nothing in this Guaranty Agreement shall be deemed to make those
obligations joint and several.
5. All notices and other required communications hereunder
shall be in writing, addressed as follows:
If to Guarantor:
MCNIC Pipeline & Processing Company
150 West Jefferson Avenue
Suite 1700
Detroit, Michigan 48226
Attention: William Kraemer
Facsimile Number: (313) 256-6918
If to Beard:
Beard Technologies, Inc.
355 William Pitt Way
Pittsburgh, Pennsylvania 15238
Attention: Philip Jamison
Facsimile Number: (412) 826-5399
With copy to:
Beard Technologies, Inc.
5600 North May Avenue
Suite 320
Oklahoma City, Oklahoma 73112
Attention: Herb Mee, Jr.
Facsimile Number: (405) 842-9901
Notices shall be given (a) by personal delivery to the other
party, (b) by facsimile, with confirmation sent by registered or
certified mail, return receipt requested, or (c) by registered or
certified mail, return receipt requested. All notices shall be
effective and deemed delivered (i) if by personal delivery, on
the date of delivery if during business hours, otherwise the next
business day, (ii) if by facsimile, on the date the facsimile is
received if received during business hours, otherwise the next
business day and (iii) if solely by mail, upon receipt by the
addressee. A party may change its address by notice to the other
party.
6. Any provision of this Guaranty Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions of
this Agreement, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render the provision
unenforceable in any other jurisdiction.
7. This Guaranty Agreement shall in all respects be
governed by and construed in accordance with the laws of New
York, without regard to its choice of law rules, and Guarantor
chooses New York law to govern this Guaranty Agreement pursuant
to N.Y. Gen. Oblig. Law Section 5-1401 (Consol. 1995).
8. For convenience, the parties desire to enter into this
Guaranty Agreement with respect to the separate payment
obligations of all the Companies, and that it be construed and
enforced as six separate agreements, each of which shall relate
to a different Company. Any breach or default by Guarantor with
respect to a Company shall not affect any of the guaranties with
respect to any of the other Companies. References to a
"Company" or "the Companies" shall be deemed to refer to the
applicable Company, and references to other defined terms shall
be deemed to refer to such terms insofar as they relate to the
applicable Company, as the context requires.
9. This Guaranty Agreement shall be a continuing,
absolute, and unconditional guaranty of Guarantor and shall
continue in full force and effect and be binding upon and inure
to the benefit of the parties hereto and their successors and
assigns and shall continue in effect following Guarantor's
disposition of all or any portion of its interest in one or more
of the Companies.
10. Beard agrees that it will accept a substitute guaranty
on the same terms and conditions as this Guaranty Agreement from
any entity with a credit rating of BBB+ or better upon the
request of Guarantor and upon execution of such substitute
guaranty Beard shall release Guarantor from any liability
hereunder except for compensation that has accrued to Beard under
Article VII of the O&M Agreement and Article VII of the
Beneficiation Agreement through the effective date of such
substitute guaranty.
11. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original
instrument, but all of which together shall constitute one and
the same instrument.
12. Guarantor represents and warrants to Beard that (a) the
execution, delivery and performance by it of this Guaranty
Agreement are within Guarantor's corporate powers and have been
duly authorized by all necessary corporate action on the part of
Guarantor, and (b) this Guaranty Agreement constitutes the valid
and binding obligations of Guarantor, enforceable against
Guarantor in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, or similar laws affecting
the enforcement of creditors' rights generally and by general
principles of equity.
EXECUTED to be effective as set forth in this Agreement.
MCNIC PIPELINE & PROCESSING COMPANY
By: JOSEPH L. ROBERTS
Joseph L. Roberts
President
BEARD TECHNOLOGIES, INC.
By: HERB MEE, JR.
Herb Mee, Jr.
Vice President
LOAN AGREEMENT
$24,000,000 LOAN
FROM
MCNIC PIPELINE & PROCESSING COMPANY
TO
BEARD MINING, L.L.C.
June 24, 1998
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement"), dated as of this 24th
day of June, 1998 is between MCNIC PIPELINE & PROCESSING COMPANY,
a Michigan corporation ("Lender"), and BEARD MINING, L.L.C., an
Oklahoma limited liability company ("Borrower").
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Lender and Borrower
agree as follows:
ARTICLE I
DEFINITIONS
In addition to all other definitions set forth herein
the following terms shall have the meanings set forth below:
Beneficiation Equipment. All equipment (as such term is
defined in the Uniform Commercial Code as enacted in the state
where the equipment is located) acquired by Borrower with the
proceeds of the Loan for dredging, extracting, and receiving Mine
Waste from the Impoundments and processing, beneficiating,
washing and drying Mine Waste to produce coal fines for further
processing to produce Briquettes pursuant to the O&M Agreement,
including the equipment described on Schedule 1.1 attached hereto
and made a part hereof.
Briquettes. Briquettes, pellets, extrudates, and other
agglomerates produced from coal fines by the coal briquetting
facilities owned by the CRC LLCs.
Business Day. A day that banks are not required or
authorized to close in New York City, New York or Detroit,
Michigan. A "Business Day" shall not include Saturday.
Coal Fines Extraction and Beneficiation Agreement. That
certain Coal Fines Extraction and Beneficiation Agreement dated
as of June 24, 1998 among each of the CRC LLCs, individually, and
Borrower.
Collateral. The Beneficiation Equipment, all of
Borrower's rights, powers and privileges under the Contracts, and
all proceeds of the foregoing.
Contracts. The contracts and agreements listed in
Schedule 1.2 attached hereto and made a part hereof and all other
contracts and agreements to which Borrower is a party or
beneficiary and all other contractual rights of Borrower that
relate to Borrower's performance of its obligations under the
Coal Fines Extraction and Beneficiation Agreement, including,
without limitation, all rights under manufacturer and vendor
warranties and service obligations relating to the Beneficiation
Equipment.
CRC LLCs. CRC No. 1 LLC, CRC No. 2 LLC, CRC No. 3 LLC,
CRC No. 4 LLC, CRC No. 5 LLC and CRC No. 6 LLC, each a Delaware
limited liability company.
Financial Statements. The financial statements of
Borrower previously delivered to Lender, together with all
financial statements and other financial information delivered to
Lender pursuant to Article IV below.
Impoundments. The coal slurry impoundments of Mine
Waste located on the Pond Sites.
Loan. As defined in Section 2.1.
Loan Documents. This Agreement, the Note, the Security
Agreement, the Pledge and Security Agreement and any and all
other documents, instruments or agreements evidencing, governing
or securing the Loan, as such documents have been and may be
amended, restated or modified from time to time.
Loan Expenses. All reasonable charges, costs, fees and
expenses of any nature whatsoever of or incurred by Lender at any
time in connection with the enforcement of the Loan or the Loan
Documents, including, but not limited to, fees and disbursements
of Lender's attorneys and their staff. "Loan Expenses" shall not
include any charges, costs, fees or expenses incurred by Lender
in the preparation, closing or filing of the Loan Documents.
Maturity Date. The first to occur of the following:
(i) July 1, 1999; (ii) as to that portion of the Loan advanced
for Beneficiation Equipment located at a Pond Site, and all
interest accrued thereon, the termination of the Coal Fines
Extraction and Beneficiation Agreement relating to such Pond
Site; (iii) as to that portion of the Loan advanced for
Beneficiation Equipment located at a Pond Site, and all interest
accrued thereon, the closing date of any equipment financing or
substitute or replacement financing entered into by Borrower with
respect to such Beneficiation Equipment that replaces or
supersedes this Agreement, and (iv) the acceleration of the Loan.
Mine Waste. All coal, coal slurry, coal fines, coarse
coal and other coal materials, and all other minerals of
whatsoever nature mixed with or contained in the foregoing that
have been mined and deposited in the Impoundments.
Note. The Promissory Note, in the aggregate principal
amount of $24,000,000, dated June 24, 1998, as such Note may be
amended, restated, modified, renewed or extended at any time and
from time to time by agreement between Borrower and the holder of
the Note.
Obligations. All obligations of any nature whatsoever
of Borrower to Lender under the Loan Documents, whether now
existing or hereafter arising.
O&M Agreement. That certain Operation and Maintenance
Agreement dated as of June 24, 1998 among each of the CRC LLCs,
individually, and Borrower.
Person. An individual, natural person, corporation,
joint venture, partnership, limited partnership, limited
liability company, trust, estate, business trust, association,
governmental authority, or any other entity.
Pledge and Security Agreement. That certain Pledge and
Security Agreement of even date herewith from Beard Technologies,
Inc., an Oklahoma corporation, as pledgor, to Lender, as pledgee.
Pond Sites. The areas depicted and described on
Schedules 1.3(a), 1.3(b), 1.3(c), 1.3(d), 1.3(e) and 1.3(f)
attached hereto, on which the Impoundments are located and the
Beneficiation Equipment is to be located.
Security Agreement. That certain General Security
Agreement (Purchase Money Security Interest) of even date
herewith from Borrower, as debtor, to Lender, as secured party.
ARTICLE II
THE LOAN AND LOAN TERMS
2.1 The Loan. Pursuant to the terms of this Agreement
and the other Loan Documents, Lender may, in its sole discretion,
as and when requested by Borrower advance loans from time to time
to Borrower in the aggregate principal amount of up to
$24,000,000 (the "Loan"), the proceeds of which may be used
solely for the purposes set forth in Section 2.2 below;
provided, that Lender shall make such advances to Borrower at
such time and from time to time and in such amounts that Borrower
is contractually required to deliver as payment of the purchase
price for Beneficiation Equipment for a Pond Site if the
acquisition of such Beneficiation Equipment has been approved in
writing by Lender. At the sole discretion of Lender, the Loan
may be made in one or more advances (each an "Advance") on one or
more dates. The Loan is subject to the terms, conditions and
limitations set forth in this Agreement and, to the extent not
inconsistent with this Agreement, the other Loan Documents.
2.2 Purpose and Disbursement. The proceeds of the Loan
are to be used solely for the purpose of acquiring the
Beneficiation Equipment for use at the Pond Sites. In
furtherance of such purpose, all Loan proceeds shall be disbursed
by Lender from time to time and at such times as provided in
Section 2.1 directly to Brown & Root, Inc., a Delaware
corporation, on behalf of Borrower as payment of the purchase
price for the Beneficiation Equipment by Brown & Root, Inc., or
to any other third party vendors of the Beneficiation Equipment
that are approved by Lender.
2.3 Loan Terms.
(a) Maturity. The Loan shall mature and be due
and payable in full on the Maturity Date. Interest shall be
payable in accordance with the terms of the Note.
(b) Principal Payments. The Borrower shall repay
the principal amount of the Loan in equal monthly installments
due and payable on the first Business Day of each calendar month
commencing August 1, 1998 and ending and including the calendar
month in which the Maturity Date occurs. The amount of each
monthly installment shall be the dollar amount that would be
necessary for Maker to pay the principal amount of each Advance,
together with interest thereon from the date of such Advance, to
Payee in 120 equal monthly installments commencing August 1,
1998. The entire outstanding principal amount of the Loan and
accrued interest shall be due and payable on the Maturity Date.
ARTICLE III
CONDITIONS PRECEDENT TO LENDER'S
OBLIGATION TO MAKE THE LOAN
The Lender's obligation to fund the Loan shall be
subject to performance and satisfaction of all of the following
conditions at or before such funding (all documents must be
acceptable in form and substance to Lender):
3.1 Execution and Delivery of Loan Documents. Borrower
shall have duly executed and delivered or caused to be executed
and delivered this Agreement, the Note and each of the other Loan
Documents.
3.2 Representations and Warranties. All of the
representations and warranties of Borrower contained in this
Agreement and each of the other Loan Documents shall be true and
correct as of the date of such funding.
3.3 Collateral. Lender shall have a valid and
perfected first priority lien on the Beneficiation Equipment.
3.4 Approval of Beneficiation Equipment. Lender shall
be satisfied in its sole discretion that the Beneficiation
Equipment to be purchased with the advance is necessary for
Borrower to perform its obligations under the Coal Fines
Extraction and Beneficiation Agreement and that such equipment
will be adequate for the purposes for which it is to be used.
3.5 Opinions. Lender shall have received an opinion of
counsel to Borrower in the form of Exhibit A attached hereto.
3.6 Other Conditions. Borrower shall have complied
with all of the terms and conditions governing such funding under
this Agreement.
ARTICLE IV
REPORTING REQUIREMENTS
Borrower shall provide and deliver, or cause to be
provided and delivered, to Lender (all of which must be
reasonably acceptable to Lender) such information as Lender may
reasonably request to determine whether Borrower is complying
with its obligations under this Agreement and the other Loan
Documents, or to determine the financial condition of Borrower or
the value of any Collateral. Lender shall bear the cost incurred
by Borrower in processing, generating or obtaining any such
information that is not in a form kept by Borrower in the
ordinary course of business or otherwise readily available or
reasonably capable of generation by Borrower.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower represents and warrants to Lender as follows,
all of which representations and warranties are material and each
of which is made to induce Lender to make the Loan, each of which
is being relied on by Lender in making the Loan, and all of which
are true as of the date hereof and shall continue to be true and
correct until the Loan is repaid in full:
5.1 Authority and Enforceability. Borrower has full
power to enter into and perform its obligations under this
Agreement, the Note, the Security Agreement, all other Loan
Documents and any other document or instrument contemplated
hereby or executed or delivered pursuant hereto. This Agreement,
the Note, the Security Agreement and all other Loan Documents
constitute, and any other agreement required hereby will
constitute, when executed and delivered by Borrower to the
Lender, valid and binding obligations of Borrower enforceable in
accordance with their terms.
5.2 No Conflict. The execution and delivery of this
Agreement, the Note, the Security Agreement and all other Loan
Documents and consummation of all the transactions contemplated
hereby and thereby, do not and will not conflict with, or be in
contravention of, any law, order, rule or regulation applicable
to Borrower or any document, agreement or instrument to which
Borrower is a party or by which the Collateral is bound or
affected (except for conflicts or contraventions that could not
reasonably be expected to (i) materially impair the ability of
the Borrower to perform under any Loan Document and avoid any
Event of Default, or (ii) have a material adverse effect upon the
legality, validity, binding effect or enforceability of any Loan
Document or the perfection or priority of any lien granted to
Lender under the Security Agreement), and will not result in the
creation of any lien, charge or encumbrance of any nature upon
the Collateral other than the liens, charges and encumbrances
contemplated hereby or otherwise in favor of Lender or the CRC
LLCs..
5.3 Financial Condition.
(a) The Financial Statements of Borrower
heretofore delivered to Lender are accurate and complete in all
material respects and fairly represent the financial condition of
Borrower at the date thereof. Borrower does not know of any
material contingent liabilities affecting Borrower that are not
disclosed in such Financial Statements.
(b) Except as otherwise disclosed in writing to
Lender by Borrower, since the date of the most recent Financial
Statements there has been no material adverse change in
Borrower's financial condition, assets, liabilities or business
nor has any other event or condition of any character occurred or
arisen that materially and adversely affects or that could
materially and adversely affect the business or prospects of
Borrower. No additional material obligations have been entered
into by Borrower since the date of Borrower's most recent
Financial Statements, other than as disclosed to Lender in
writing.
(c) Borrower is now solvent; and no bankruptcy or
insolvency proceedings are pending or contemplated by Borrower
or, to the best of Borrower's knowledge, against Borrower.
5.4 Litigation. As of the date of this Agreement there
is no action, suit or proceeding pending against, or to
Borrower's knowledge threatened against or affecting, Borrower or
the Collateral before any court, any arbiter, or any governmental
department, agency, official or instrumentality.
5.5 Taxes. Borrower has filed all federal, state and
local tax returns that are required to be filed by Borrower and
has paid all taxes shown on such returns and on all assessments
received by Borrower to the extent that such taxes and
assessments have become due. All federal and state income taxes
and all other taxes and assessments of any nature with respect to
which Borrower is obligated have been paid when due.
5.6 Information Correct. To the best of Borrower's
knowledge, all information furnished in any document required to
be furnished by Borrower under or in connection with this
Agreement is accurate and complete in all material respects as of
the date or for the periods covered thereby.
ARTICLE VI
AFFIRMATIVE COVENANTS OF BORROWER
Until payment or performance in full of all the
Obligations, Borrower shall:
6.1 Pay Note. Duly and promptly pay or cause to be
paid each and every installment of the principal and of interest
on the Note as the same become due, without notice or demand.
6.2 Performance of Other Obligations. Perform and
comply with all other terms, conditions, covenants and
prohibitions applicable to Borrower and required by and in
accordance with the terms of any of the Loan Documents.
6.3 Compliance with Laws. Comply promptly with all
laws applicable to (a) the Collateral, (b) the use of the
Collateral, or (c) the conduct and operation of Borrower's
business; except such laws as are being diligently contested in
good faith and by proper proceedings and, such non-compliance
that could not reasonably be expected to have a material adverse
effect upon the operations, business, properties or condition
(financial or otherwise) of Borrower or upon the Collateral or
Borrower's title thereto.
6.4 Notifications. Promptly notify Lender in writing
of the occurrence of (i) any Event of Default or any event that
is reasonably likely to become an Event of Default upon notice or
the passage of time or both, (ii) any material adverse change in
the business, property, assets, value, operations or condition,
financial or otherwise, of Borrower or the Collateral and
(iii) the pendency or threat of any material litigation or
arbitration and of any material tax deficiency or other material
proceeding before any governmental body or official materially
adversely affecting Borrower or the Collateral.
6.5 Payment of Taxes and Other Obligations. Duly and
punctually pay and discharge all state and federal income taxes
and all other taxes, assessments and other charges against
Borrower or the Collateral as same become due; except such taxes,
assessments and charges as are being diligently contested in good
faith and by proper proceedings and for which adequate reserves
are being maintained by Borrower.
6.6 Payment of Loan Expenses. Immediately upon demand,
but in any event within five Business Days after notification
from Lender, pay or reimburse Lender for all Loan Expenses
incurred by Lender at any time and from time to time.
6.7 Further Assurances. From time to time within five
Business Days after request by Lender, record, register and file
all such notices, statements and other documents and take such
other steps, including, without limitation, effecting the
amendment of any Loan Document, as may be necessary or advisable
to render fully valid and enforceable under all applicable laws
the rights, liens and priorities of Lender with respect to the
Collateral from time to time furnished under this Agreement or
required to be furnished by any of the Loan Documents, in each
case in such form and at such times as shall be satisfactory to
Lender.
6.8 Indemnity. Borrower shall indemnify Lender against
and shall reimburse and pay Lender for all reasonable fees, costs
and expenses (including, without limitation, attorneys' fees,
court costs and legal expenses and consultants' and experts' fees
and expenses), incurred or expended by Lender in connection with
(i) the breach by Borrower of any representation or warranty
contained in any of the Loan Documents, (ii) the failure by
Borrower to perform any agreement, covenant, condition, indemnity
or obligation contained in any of the Loan Documents,
(iii) Lender's exercise of any of its rights and remedies under
any of the Loan Documents, or (iv) the protection of the
Collateral and the liens thereon and security interests therein
(except for filing fees incurred by Lender for the filing of
Uniform Commercial Code financing statements).
6.9 Scope of Business. Borrower shall not engage in
any business activities other than those necessary or incidental
to Borrower's ownership of the Beneficiation Equipment.
ARTICLE VII
NEGATIVE COVENANTS OF BORROWER
Until payment or performance in full of all of the
Obligations, Borrower shall not, without Lender's written
consent:
7.1 Liens. Create, assume, incur or suffer to exist
any mortgage, pledge, security interest, lien or other
encumbrance upon the Collateral except the security interests
created or contemplated hereunder and other obligations to Lender
and the CRC LLCs, and except that Borrower may lease the
Beneficiation Equipment to Beard Technologies, Inc., an Oklahoma
corporation, but only if such lease (i) is expressly subject to
any security interest, lien or other encumbrance in favor of
Lender, (ii) provides for monthly payments by Beard Technologies
to Borrower in an amount equal to, but not exceeding, the amount
of the scheduled monthly payments of principal and interest on
the Loan pursuant to the Note, and (iii) is otherwise in form and
substance reasonably satisfactory to Lender.
7.2 Assignment. Assign or attempt to assign any of its
rights or delegate any of its duties hereunder or under the other
Loan Documents.
7.3 Use of Funds. Use funds advanced under this
Agreement for any purpose other than those permitted pursuant to
this Agreement.
ARTICLE VIII
EVENTS OF DEFAULT
The occurrence of any one or more of the following
events or existence of one or more of the following conditions
shall constitute an Event of Default under this Agreement and all
other Loan Documents:
8.1 Failure to Pay Note. Borrower shall fail to pay,
when due, the principal of or interest on the Note, or any
installment thereof (whether due on the date provided for therein
or by acceleration or otherwise).
8.2 Misrepresentation. Any representation or warranty
made by Borrower to Lender herein or in any of the other Loan
Documents, or in any certificate, statement or report made
pursuant to this Agreement or the other Loan Documents is false,
misleading or erroneous in any material respect;
8.3 Covenant Default. The failure of Borrower to
properly perform or observe any obligation contained in Sections
6.3 through 6.8 above.
8.4 Other Obligations. The failure of Borrower to
properly perform or observe any obligation contained herein
(other than the obligations to make payments under the Note or
the other Loan Documents or the obligations set forth in
Section 8.3 above), which failure is not cured within 10 Business
Days after receipt of written notice from Lender, or, if such
failure is not reasonably susceptible of cure within such 10-day
period, the failure of Borrower to commence within such 10-day
period and continue reasonably diligent efforts satisfactory to
Lender to effect such cure.
8.5 Default Under Loan Documents. The occurrence of
any default by Borrower, or the occurrence of any event or
circumstance defined as an event of default, under any of the
Loan Documents other than this Agreement, not cured within the
applicable cure period, if any, set forth therein.
8.6 Bankruptcy. Borrower shall make a general
assignment for the benefit of creditors; file a petition in
bankruptcy; be adjudicated insolvent or bankrupt or admit in
writing the inability to pay debts as they mature; petition or
apply to any tribunal for the appointment of a receiver or any
trustee or similar officer for Borrower, for a substantial part
of the assets of Borrower; or shall commence any proceeding under
any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or if there
shall have been filed any such petition or application, or any
such proceeding shall have been commenced against Borrower that
remains undismissed for a period of 90 days or more; or Borrower,
by any act or omission shall indicate his consent to, approval of
or acquiescence in any such petition, application or proceeding,
or the appointment of a receiver of or any trustee or similar
officer for Borrower, or any substantial part of any of the
properties of Borrower, or shall suffer any such receivership or
trusteeship to continue undischarged for a period of 90 days or
more;
8.7 Judgment. Any judgment which, if enforced, would
have a material adverse effect upon the operations, business,
properties or condition (financial or otherwise) of Borrower,
shall be entered against Borrower, unless Borrower is diligently
appealing such judgment by appropriate proceedings.
8.8 Loan Documents. This Agreement or any other Loan
Document shall at any time for any reason cease to be in full
force and effect, except where such cessation is the result of
repayment, reconveyance, release, reassignment or other discharge
or termination in accordance with the terms of such Loan
Document, and such Loan Document is not reinstated in all
material respects within 10 days after the Borrower first knew or
should have known of such cessation.
ARTICLE IX
REMEDIES
9.1 Right to Accelerate. Upon the occurrence of any
Event of Default and at any time thereafter, the Loan, with all
accrued interest and other amounts payable hereunder, shall, at
the option of Lender, become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of
which are expressly waived by Borrower. Lender may declare a
default under all other Loan Documents, and Lender may proceed
with every remedy available at law or in equity with respect to
such Event of Default or provided for herein or in any document
executed in connection herewith, and all reasonable expenses
incurred by Lender in connection with any remedy shall be deemed
indebtedness of Borrower to Lender and a part of the Obligations.
Lender may apply the proceeds from any Collateral for the Loan or
from any other source against any of the Obligations as and in
any order it sees fit.
9.2 Other Remedies. Without limiting the foregoing,
upon the occurrence of an Event of Default hereunder Lender shall
have the right to take possession of the Collateral and exercise
all rights provided under the Loan Documents or any applicable
law.
9.3 No Effect of Delay. No delay or failure of Lender
in the exercise of any right or remedy provided for hereunder
shall be deemed a waiver of the right by Lender, and no exercise
or partial exercise or waiver of any right or remedy shall be
deemed a waiver of any further exercise of such right or remedy
or of any other right or remedy that Lender may have. The
enforcement of any rights of Lender as to any security for the
Loan shall not affect the rights of Lender to enforce payment of
the Loan and to recover judgment for any portion thereof
remaining unpaid. The rights and remedies herein expressed are
cumulative and not exclusive of any right or remedy that Lender
shall otherwise have.
ARTICLE X
RIGHTS AND DUTIES OF LENDER
10.1 Right to Assign. Lender may assign to one or more
lenders or other entities all or a portion of its rights under
the Loan. In the event of an assignment of all of its rights,
the Lender may transfer the Loan and all of the Loan Documents to
the assignee. After any such assignment or transfer, provided
that the assignee(s) agree in writing to assume and be bound by
the Loan Documents, the Lender shall be forever relieved and
fully discharged from any liability or responsibility in the
matter, and the Lender shall retain all rights and powers hereby
given with respect to property not so transferred. The Lender
may sell participations to one or more lenders or other entities
in or to all or a portion of its rights under this Loan.
10.2 Reliance Upon Attorneys. Lender may rely upon
advice received from time to time from reputable attorneys, and
any action taken by Lender in accordance with any such advice
shall be deemed to be reasonable.
10.3 Acceptance and Consent by Lender. The phrases
"acceptable to Lender" and "as Lender may require" as used in
this Agreement, shall, unless otherwise qualified, mean
acceptable to Lender in Lender's sole and absolute discretion and
as Lender may require in Lender's sole and absolute discretion.
In addition, any consent by or other action required by Lender
hereunder or under any other Loan Document or any discretion to
be rendered by Lender hereunder or under any other Loan Document
shall be in Lender's sole and absolute discretion unless
otherwise indicated.
ARTICLE XI
MISCELLANEOUS
11.1 Amendments. No provision or term of this Agreement
may be amended, modified, revoked, supplemented, waived or
otherwise changed except by a written instrument duly executed by
Borrower and Lender and designated as an amendment, supplement or
waiver.
11.2 Counting of Days. If any time period ends on other
than a Business Day, the period shall be deemed to end on the
next succeeding Business Day.
11.3 Notices. Except as otherwise expressly set forth
herein, any notice required to be given to any party pursuant to
any provision of this Agreement shall be in writing, shall be
(i) hand delivered, (ii) sent by registered or certified mail,
return receipt requested, postage prepaid, or (iii) sent by
Federal Express or other nationally-recognized overnight courier
service and, if hand delivered shall be deemed received when
delivered, if mailed shall be deemed received two Business Days
after having been deposited in the United States mail, postage
prepaid, and if sent by Federal Express or other nationally-
recognized overnight courier service shall be deemed received one
Business Day after having been deposited with Federal Express or
other nationally-recognized overnight courier service if
designated for next day delivery addressed as follows:
If to Borrower:
Beard Mining, L.L.C.
5600 North May Avenue
Suite 320
Oklahoma City, Oklahoma 73112
Attention: Herb Mee, Jr.
Facsimile Number: (405)-842-9901
If to Lender:
MCNIC Pipeline & Processing Company
150 West Jefferson Avenue
Suite 1700
Detroit, Michigan 48226
Attention: William Kraemer
Facsimile Number: (313) 256-6918
Either party may change its address for the giving of notice by
providing notice hereunder.
11.4 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one
instrument.
11.5 Captions and Pronouns. The captions and headings
of the various sections of this Agreement are for convenience
only, and are not to be construed as confining or limiting in any
way the scope or intent of the provisions hereof.
11.6 Entire Agreement. This Agreement, the Note and the
Security Agreement and the other Loan Documents executed in
connection herewith constitute and incorporate the entire
agreement between Lender and Borrower concerning the subject
matter of this Agreement and supersede any prior agreements
between Lender and Borrower concerning the subject matter
thereof.
11.7 Conflict. If any term of the Loan Documents shall
conflict with this Agreement, this Agreement shall govern to the
extent of the conflict.
11.8 Use of Terms. As used herein words in any gender
shall be deemed to include the other genders and the singular
shall be deemed to include the plural, and vice versa.
11.9 Rights Cumulative. Each right, power and remedy of
Lender under this Agreement and the other Loan Documents is
cumulative and in addition to every other right, power or remedy,
existing or implied, given now or hereafter existing, at law or
in equity, and each and every right, power and remedy set forth
herein or otherwise so existing may be exercised from time to
time as often and in such order as may be deemed expedient by
Lender, and the exercise or the beginning of the exercise of one
right, power or remedy shall not be a waiver of the right to
exercise at the same time or thereafter any other right, power or
remedy; and no delay or omission of Lender in the exercise of any
right, power or remedy accruing hereunder or arising otherwise
shall impair any such right, power or remedy, or be construed to
be a waiver of any default or acquiescence therein.
11.10 Waiver. Lender shall not be deemed to have
waived any provision of this Agreement or any Loan Document
unless such waiver is in writing and is signed by Lender.
Without limiting the generality of the foregoing, neither
Lender's acceptance of any payment with knowledge of a default by
Borrower, nor any failure by Lender to exercise any remedy
following a default by waiver by Lender of any particular default
on the part of Borrower shall be deemed a waiver of any other
default or of any similar default in the future.
11.11 No Third-Party Beneficiaries. No person shall
be a third-party beneficiary of or be entitled to assert any
rights in connection with any provision of any of the Loan
Documents; all provisions of the Loan Documents are intended
solely for the benefit of Borrower and Lender.
11.12 Provisions Several/Illegality. The
unenforceability or invalidity of any provision or provisions
hereof shall not render any other provision or provisions herein
contained unenforceable or invalid, and in lieu of each such
illegal, invalid or unenforceable provision there shall be added
automatically as a part of this Agreement a provision as similar
in terms to such illegal, invalid, or unenforceable provision as
may be possible and be legal, valid, and enforceable.
11.13 Governing Law. This Agreement, the Note, and
Loan Documents shall be governed by and construed in accordance
with the laws of the State of New York, and Borrower and Lender
each choose New York law to govern this Agreement pursuant to
N.Y. Gen. Oblig. Law Section 5-1401 (Consol. 1995).
11.14 Jurisdiction. Borrower agrees to submit to
personal jurisdiction in the State of Michigan in any action or
proceeding arising out of this Agreement and, in furtherance of
such agreement, Borrower hereby agrees and consents that without
limiting other methods of obtaining jurisdiction, personal
jurisdiction over Borrower in any such action or proceeding may
be obtained within or without the jurisdiction of any court
located in Michigan and that any process or notice of motion or
other application to any such court in connection with any such
action or proceeding may be served upon Borrower by registered or
certified mail to or by personal service at the address set forth
in Section 11.3 (unless such address is changed pursuant to the
notice provision set forth in Section 11.3), whether such address
be within or without the jurisdiction of any such court.
11.15 Waiver of Jury Trial. Borrower hereby waives
any right to jury trial of any claim, cross-claim or counterclaim
relating to or arising out of or in connection with this
Agreement or any of the other Loan Documents.
11.16 Computation of Time Periods. In this
Agreement in the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but
excluding."
11.17 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in a manner
consistent with the manner in which they were construed in the
preparation of the Financial Statements.
11.18 Time of the Essence. Time is of the essence
hereof with respect to the dates, terms and conditions of this
Agreement, the Note and the Security Agreement.
11.19 Future Discussions. Promptly after the date
hereof and in any event prior to August 1, 1998, Lender and
Borrower shall commence and diligently continue good faith
discussions concerning mutually acceptable alternatives for
replacing the Loan with permanent financing or replacing Lender
with a third-party lender or other financing arrangement.
11.20 Release. For good and valuable
considerations, Lender hereby releases and discharges Beard
Technologies, Inc. and/or The Beard Company, each an Oklahoma
corporation, and/or their respective officers, directors,
shareholders, employees, agents and attorneys (hereinafter
individually and collectively referred to as the "Released
Parties") and covenants not to sue any one or more of the
Released Parties in connection with, arising from or in any
manner related to the inaccuracy or breach of, or failure to
perform or satisfy, any representation, warranty, condition,
obligation, covenant, or other agreement made by Borrower in any
Loan Document, including, but not limited to, Borrower's failure
to properly pay when due any amounts owing under the Note or any
other Loan Document, except as otherwise provided in the Pledge
and Security Agreement dated June 24, 1998 between Beard
Technologies, Inc. and Lender, and except with respect to claims
against any Released Party arising from or attributable to the
fraudulent or other willful misconduct of a Released Party.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day first above written.
BORROWER:
BEARD MINING L.L.C.,
an Oklahoma limited liability company
By: Beard Technologies, Inc., an
Oklahoma corporation, Member and
Manager
By: HERB MEE, JR.
Name: Herb Mee, Jr.
Title: Vice President
LENDER:
MCNIC PIPELINE & PROCESSING COMPANY,
a Michigan corporation
By: JOSEPH L. ROBERTS
Name: Joseph L. Roberts
Title: President
PROMISSORY NOTE
$24,000,000 June 24, 1998
BEARD MINING, L.L.C., an Oklahoma limited liability
company ("Maker"), with an address of 5600 North May Avenue,
Suite 320, Oklahoma City, Oklahoma 73112, for value received,
hereby promises to pay to the order of MCNIC Pipeline &
Processing Company, a Michigan corporation ("Payee"), the
principal sum of the lesser of Twenty-Four Million Dollars
($24,000,000), or so much thereof as may be advanced by Payee
from time to time and outstanding under the Loan provided by
Payee to Maker pursuant to the Loan Agreement of even date
herewith between Maker and Payee (the "Loan Agreement"), together
with interest on the outstanding principal amount as provided
herein.
This Note is the Note referred to in the Loan Agreement
as the Note, and is issued pursuant to, and is subject to all the
terms and provisions of, the Loan Agreement. All capitalized
terms used herein but not otherwise defined shall have the
meanings set forth in the Loan Agreement.
Multiple Advances may be made hereunder. Each Advance
owing to Payee pursuant to the Loan Agreement, and all payments
made on account of principal thereof, shall be recorded by Payee
on the grid attached hereto which is part of this Note.
Interest shall accrue monthly on the outstanding
principal balance of the Advances at the rate of eight percent
per annum and shall be payable in arrears as provided below. The
principal amount of this Note and interest accrued thereon shall
be payable in equal monthly installments due on the first day of
each calendar month commencing August 1, 1998 and ending and
including the calendar month in which the Maturity Date occurs.
The amount of each monthly installment shall be the dollar amount
that would be necessary for Maker to pay the principal amount of
each Advance, together with interest thereon from the date of
such Advance as provided above, to Payee in 120 equal monthly
installments commencing August 1, 1998. All outstanding
principal and accrued interest shall be due and payable in full
on the Maturity Date.
Notwithstanding anything to the contrary contained in
this Note, overdue principal, and (to the extent permitted under
applicable law) overdue interest, whether caused by acceleration
of maturity or otherwise, shall bear interest at the rate of 13%
per annum from the date due until paid, and shall be due and
payable on demand.
It is not intended hereby to charge interest at a rate
in excess of the maximum rate of interest permitted to be charged
to Maker under applicable law, but if, notwithstanding such
intention, interest in excess of the maximum rate shall be paid
hereunder, the excess shall be retained by Payee as additional
cash collateral for the payment of this Note, unless such
retention is not permitted by law, in which case the interest
rate on this Note shall be adjusted to the maximum permitted
under applicable law during the period or periods that the
interest rate otherwise provided herein would exceed such rate.
Payments of principal and interest due and payable
hereunder shall be made to Payee at 150 West Jefferson Avenue,
Suite 1700, Detroit, Michigan 48226, or at such other place as
Payee shall have designated to Maker in writing. Payments, when
made, shall be applied first to accrued interest due and then to
the outstanding principal hereunder.
This Note may be prepaid, in whole or in part, at any
time without consent and without penalty, upon the payment of
interest accrued on the amount prepaid. Any partial prepayment
shall be applied as provided above and shall not postpone the due
date of any subsequent payments of principal or interest, unless
Payee otherwise agrees in writing.
This Note is secured by, and the holder of this Note is
entitled to the benefits of the Security Agreement and the Pledge
and Security Agreement described in the Loan Agreement.
Reference is made to the Security Agreement and the Pledge and
Security Agreement for a description of the property covered
thereby and the rights, remedies and obligations of the holder
hereof in respect thereto.
Time is of the essence hereof. At the option of Payee,
payment of the entire unpaid principal amount hereunder and any
and all accrued interest thereon may be accelerated, and such
amounts shall be immediately due and payable without further
notice or demand upon the occurrence of any of the following:
(a) The Maker fails to pay any principal or accrued
interest hereunder when due;
(b) An Event of Default (as such term is defined in
the Loan Agreement) shall occur.
The remedies provided in this Note shall be cumulative,
and shall be in addition to any other rights or remedies now or
hereafter provided by law or equity. No delay, failure or
omission by any holder of this Note, in respect of any default by
Maker, to exercise any right or remedy shall constitute a waiver
of the right to exercise the right or remedy upon any such
default or subsequent default.
Maker and each endorser, surety and guarantor of this
Note, hereby severally waives demand, presentment for payment,
notice of dishonor, notice of acceleration or intent to
accelerate, protest, notice of protest, and diligence in
collecting and assents to any extension of time with respect to
any payment due under this Note, to any substitution or release
of collateral and to the addition or release of any party. No
waiver by the Payee of any payment or other right under this Note
shall operate as a waiver of any other payment or right.
If any of the provisions of this Note shall be held to
be invalid or unenforceable, the determination of invalidity or
unenforceability of any such provision shall not affect the
validity or enforceability of any other provision or provisions
hereof.
This Note shall be binding upon Maker and its
successors and assigns and shall inure to the benefit of and be
enforceable by the Payee and its successors and assigns.
All notices to Maker expressly required in this Note
shall be in writing and shall be made in accordance with Section
11.3 of the Loan Agreement.
At the option of the holder hereof, an action may be
brought to enforce this Note in the District Court in and for
Wayne County, State of Michigan, or in any other court in which
venue and jurisdiction are proper. Maker and each endorser,
surety and guarantor hereof consent to such venue and
jurisdiction, in any action commenced to enforce this Note.
This Note shall be governed by and construed in
accordance with the laws of the State of New York, and Maker
chooses New York law to govern this Note pursuant to N.Y. Gen.
Oblig. Law Section 501401 (Consol. 1995).
BEARD MINING L.L.C., an Oklahoma limited
liability company
By: Beard Technologies, Inc., an
Oklahoma corporation, Member and Manager
HERB MEE, JR.
Herb Mee, Jr.
Vice President
<PAGE>
<TABLE>
Advances and Payments of Principal and Interest
<CAPTION>
Aggregate Unpaid
Date Amount of Amount of Principal Amount of Principal Balance Notification
Advance Paid or Prepaid Interest Paid of Advance Made by
<S> <C> <C> <C> <C> <C>
</TABLE>
