-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WkSBAgYw2IYRaiQZwlqnMJ/nLz1vexrt3lQ88eik9IagjE1usvxo7UGt2EeJrns2 TtlL0t7RtDNJ3ft8jGF8ig== 0000909334-98-000055.txt : 19980716 0000909334-98-000055.hdr.sgml : 19980716 ACCESSION NUMBER: 0000909334-98-000055 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980715 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980715 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEARD CO /OK CENTRAL INDEX KEY: 0000909992 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INORGANIC CHEMICALS [2810] IRS NUMBER: 730970298 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-12396 FILM NUMBER: 98666825 BUSINESS ADDRESS: STREET 1: 5600 N MAY AVE STREET 2: STE 320 CITY: OKLAHOMA CITY STATE: OK ZIP: 73112 BUSINESS PHONE: 4058422333 MAIL ADDRESS: STREET 1: 5600 N MAY STREET 2: STE 320 CITY: OKLAHOMA CITY STATE: OK ZIP: 73112 FORMER COMPANY: FORMER CONFORMED NAME: BEARD INVESTMENT CO DATE OF NAME CHANGE: 19930730 8-K 1 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) 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. 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 THE BEARD COMPANY EXHIBIT INDEX Forming a Part of Form 8-K Current Report to the Securities and Exchange Commission
EXHIBIT NUMBER BRIEF DESCRIPTION METHOD OF FILING 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
EX-10.1 2 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 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 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 EX-10.2 3 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 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 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 EX-10.3 4 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 EX-10.4 5 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 EX-10.5 6 LOAN AGREEMENT $24,000,000 LOAN FROM MCNIC PIPELINE & PROCESSING COMPANY TO BEARD MINING, L.L.C. June 24, 1998 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 EX-10.6 7 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 Advances and Payments of Principal and Interest
Aggregate Unpaid Date Amount of Amount of Principal Amount of Principal Balance Notification Advance Paid or Prepaid Interest Paid of Advance Made by
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