Marketing, Distribution And Transportation Logistics Service Agreement With Dte Coal Services, Inc. Dated June 6, 2006

Exhibit 10.79



MARKETING, DISTRIBUTION AND TRANSPORTATION



LOGISTICS SERVICES AGREEMENT



By and Between



KFx, Inc.



And



DTE Coal Services, Inc.



Dated as of



June 6, 2006
















THIS MARKETING, DISTRIBUTION AND TRANSPORTATION LOGISTICS SERVICES AGREEMENT (the "Agreement") is entered into and made as of June 6, 2006 (the "Effective Date"), by and between KFx Inc ., a Delaware corporation ("KFx"), and DTE Coal Services, Inc. , a Michigan corporation ("DTECS"). KFx and DTECS are also referred to herein individually as a "Party ? and collectively as the "Parties".



RECITALS



A. KFx produces a beneficiated coal product known as K-Fuel ? and wishes to engage DTECS to provide marketing, transportation, logistical and other services related thereto.



B. DTECS desires to provide such marketing, distribution and transportation, logistical, and other services to KFx pursuant to the terms of this Agreement.



AGREEMENT



NOW THEREFORE, for and in consideration of the premises, the mutual covenants and promises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the Parties, and in reliance upon the recitals, representations, warranties, covenants, terms and conditions set forth herein, the Parties, intending to be legally bound, agree as follows:



ARTICLE 1 - DEFINITIONS OF TERMS



1.1 Definitions . As used in this Agreement, the following terms shall have the respective meanings set forth below.



"Affiliate" shall mean:



(i) any other Person directly or indirectly owning, controlling or holding with power to vote 50% or more of the outstanding voting securities of the specified Person;




(ii) any other Person 50% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote by the specified Person;




(iii) any other Person directly or indirectly controlling, controlled by or under common control with the specified Person; or




(iv) any officer, director, partner or member of the specified Person or of any other Person described in clause (iii) above.




"Agreement" shall mean this Agreement, including all Schedules attached hereto, as it may be amended, modified or restated from time to time.



"Applicable Laws" shall mean all laws, rules, regulations, ordinances, judgments, decrees, injunctions, writs, orders or interpretations of any court, arbitrator or governmental agency or authority or of any federal, state, county, municipal, regional, local or other Governmental Authority having jurisdiction over the matter in question including, without limitation, those laws, rules, regulations, orders or interpretations relating to the protection of human health, safety and the environment.







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"Base Price" shall initially be set at thirty three dollars ($33.00) per ton which the Parties intend to represent the lowest price at which KFx would sell K-Fuel ? in the open market as of the date of this Agreement and such price may be annually renegotiated upward or downward to be effective as of the start of a Contract Year based on, inter alia, market conditions and prices of competing fuels. It is the further intention of the Parties that any adjustments to the "Base Price" shall approximate the market price for K-Fuel ? at the time of the annual adjustment. Failure of the Parties to agree upon a Base Price for any Contract Year shall be subject to arbitration pursuant to Section 10.2.



"Business Day" shall mean a day commercial banks in Detroit, Michigan are open for business; and a Business Day shall begin at 8:00 a.m. and end at 5:00 p.m. prevailing Eastern Time.



"Claims" shall mean all claims or actions, threatened or filed and whether groundless, false or fraudulent, that directly or indirectly relate to the subject matter of an indemnity, and the resulting losses, damages, expenses, fees of attorneys, experts and consultants, and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement.



"Contract Year" shall mean January 1 through December 31 of each year during the Term of this Agreement; except contract Year 2006 shall begin on June 6, 2006.



"DTECS" shall have the meaning assigned in the introductory paragraph, and its successors and permitted assigns.



"DTECS Confidential Information" shall have the meaning assigned in Section 17.1(b).



"DTECS Events of Default" shall have the meaning assigned in Section 8.2.



"DTECS Indemnitees" shall have the meaning assigned in Section 8.3(b).



"Default Rate" shall mean 15% per annum.



"Dollars" and "$" shall mean lawful money of the United States of America.



"Effective Date" shall have the meaning assigned in the introductory paragraph.



"Expiration Date" shall have the meaning assigned to it in Section 2.1.



"Fee" shall have the meaning assigned to it in Section 5.1.



"Fee Ton" as used in Section 5.1 shall mean each Ton of K-Fuel ? produced at any K-Fuel ? Facility, but excluding K-Fuel ? Direct Tons (as defined hereinbelow) that in any month, is marketed by KFx or its Marketing Representatives, DTECS or the K-Fuel ? Facility owner, or (ii) sold by the K-Fuel ? facility owner; and such tons are transported pursuant to any transportation contract arranged by, or in railcars leased by or from, DTECS in fulfillment of its obligations hereunder.



"Force Majeure" shall have the meaning assigned in Section 6.1.







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"Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.



"Incentive Fee" shall have the meaning assigned to it in Section 5.2.



"Indemnified Party" shall have the meaning assigned in Section 8.3(c).



"Indemnitor" shall have the meaning assigned in Section 8.3(c).



"Intellectual Property" shall have the meaning assigned in Section 7.1(g).



"Invoice" shall have the meaning assigned in Section 5.1.



"K-Fuel ? Direct Tons" shall mean K-Fuel ? manufactured on a customer's site for the exclusive use of such customer using feedstock which is transported to the customer's site without the use of DTECS' transportation services provided under this Agreement.



"K-Fuel ?" shall mean K-Fuel ? beneficiated coal product processed by temperature and pressure by KFx or one of KFx's Affiliates.



"KFx" shall have the meaning assigned in the introductory paragraph, and its successors and permitted assigns.



"KFx Confidential Information" shall have the meaning assigned in Section 17.1(a).



"KFx Events of Default" shall have the meaning assigned in Section 8.1.



"KFx Facility No.1" shall mean the first K-Fuel ? production facility at the Fort Union Mine near Gillette, Wyoming, which is designed to produce approximately 750,000 Tons of K-Fuel ? per year.



"KFx Indemnitees" shall have the meaning assigned in Section 8.3(a).



"KFx Marketing Representatives" mean those Persons designated by KFx who shall assist and participate in the overall marketing efforts of K-Fuel ? pursuant to this Agreement. The KFx Marketing Representatives shall not be considered employees of DTECS for any purposes whatsoever.



"Month" shall mean a period of time beginning at midnight (12:00 a.m.) prevailing Eastern Time on the first (1 st ) day of any calendar month and ending at 11:59 p.m. prevailing Eastern Time on the last day of such calendar month.



"Party" and "Parties" shall have the respective meanings assigned in the introductory paragraph.



"Person" shall mean any individual, a partnership, a corporation, a limited liability company, a trust, an unincorporated organization, any other type of legal entity or a government or any department or agency thereof.







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"Services" shall mean the provision of marketing, distribution, logistical, transportation and other services by performed by DTECS and the KFx Marketing Representatives pursuant to this Agreement.



"Specifications" shall have the meaning assigned in Section 4.1.



"Tax Credits" shall have the meaning assigned in Section 3.7.



"Term" shall have the meaning assigned in Section 2.1.



"Ton" shall mean a short ton of two thousand (2,000) pounds (avoirdupois).



ARTICLE 2 - TERM



2.1 Term . The term of this Agreement ("Term") shall commence on the Effective Date, and unless extended in accordance with Section 2.2 or terminated pursuant to Section 2.3 or 2.4, shall terminate on December 31, 2010 (the "Expiration Date" ) unless otherwise earlier terminated as provided elsewhere herein.



2.2 Term Extension . The Term of this Agreement may be extended beyond the Expiration Date by mutual agreement of the Parties. Failure of the Parties to agree is not subject to arbitration as set forth in Article 10.2.



2.3 Termination by KFx . KFx may terminate this Agreement at any time upon sixty (60) days written notice if DTECS has failed to obtain rail transportation services for the shipment of K-Fuel ? including commercially reasonable rates for such transportation services. Notwithstanding the foregoing, during Contract Year 2006 the Parties recognize that it may not be possible to obtain commercially reasonable rates, railcars and a suitable transportation agreement because of the uncertainties concerning the volume of K-Fuel ? to be produced, the locations of customers and the availability of railroad capacity and cars. Accordingly, if DTECS' efforts to obtain same do not result in suitable transportation arrangements in Contract Year 2006, such failure may not be the basis of termination hereunder during such Contract Year. The Parties further agree and acknowledge that "commercially reasonable rates" may not be the lowest rates available but rates that reasonably allow K-Fuel ? to be competitively delivered to the desired markets. Factors which may affect the rail rates which can be obtained for the shipment of K-Fuel ? include but are not limited to the then current market for such rail rates and transportation services the volumes of K-Fuel ? to be shipped, location of potential customers and K-Fuel ? production facilities and the train loading capacity and conditions at such facilities. Notwithstanding any other provision of this Agreement to the contrary, the termination of this Agreement by KFx is the sole and exclusive remedy for DTECS failure to obtain transportation services as provided in this Agreement.



2.4 Termination by DTECS . DTECS may terminate this Agreement upon sixty (60) days written notice to KFx in the event KFx fails to produce, or be capable of producing upon reasonable notice, marketable quantities of K-Fuel ? including but not limited to, the failure to produce the volume of K-Fuel ? to fully load unit trains in any Contract Year after Contract Year 2006; fails to reach sustained reliable production of K-Fuel ?; or fails to cooperate with DTECS in the overall marketing, distribution, transportation, and logistical services efforts relating to the sale of K-Fuel ? under this Agreement. Quantities of K-Fuel ? that might otherwise be considered not to be "marketable quantities" for purposes of this Section 2.4 that are sold as test burns shall not be a basis for termination under this Section 2.4.



2.5 Obligations Not Affected . The termination of this Agreement pursuant to this Article shall not in any way affect the obligations of either KFx or DTECS with respect to contractual agreements





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entered into by KFx or DTECS with other Persons prior to the date of termination, including but not limited to customers and end users, rail and other carriers and rail car lessors or sublessors; and DTECS shall be entitled to a Fee (as hereinafter defined) due on contracts and commitments to Persons that continue in effect beyond the termination or Expiration Date of this Agreement.



2.6 No Liability . If a Party terminates pursuant to Section 2.3 or 2.4, as the case may be, neither Party shall have any further obligations under this Agreement, except as provided in Section 2.5. Notwithstanding the foregoing, this Section 2.6 shall not be construed so as to relieve either Party from any liability for any breach or default of their duties under this Agreement.



ARTICLE 3 - SERVICES BY DTECS



3.1 Joint Marketing Efforts . Within fifteen (15) days after the Effective Date, the Parties shall meet to commence development of a marketing plan for K-Fuel ?. DTECS and KFx Marketing Representatives shall review current marketing conditions, KFx long and short term sales strategies and identify customers. Such plan shall also set forth the specific services to be performed by DTECS and the KFx Marketing Representatives in order to avoid duplication of efforts and to maximize the Parties' resources. The Parties may perform the marketing services singly or jointly, but at all times coordinating their efforts to achieve the marketing objectives agreed to by the Parties. All costs associated with the efforts of the KFx Marketing Representatives shall be born by KFx.



3.2 Market Studies and Services . DTECS agrees to use commercially reasonable efforts to market on behalf of KFx the K-Fuel ? production, in amounts consistent with the marketing plan, which meets the Specifications and at a price determined as set forth in this Agreement. Within thirty (30) days following the Effective Date, DTECS shall provide KFx with a market study of potential utility markets for K-Fuel ?. Sixty (60) days after the delivery of the utility study, DTECS shall deliver to KFx a study of industrial coal markets for K-Fuel ?.



3.3 Contracts and Commitments . The Parties shall discuss the terms and conditions, including price, of any potential sale of K-Fuel ? to any Person prior to entering into any binding commitments. Notwithstanding any other provision of this Agreement to the contrary, KFx shall have the right to approve or reject any contract for the sale of K-Fuel ?. In the event DTECS or KFx marketing efforts result in a potential sale of K-Fuel ? to a customer, the Parties shall review such offer(s) and discuss the terms and conditions of such offer(s), including the price per ton, volumes and the cost and conditions of transportation. The final decision to enter into binding contracts for the transportation of the K-Fuel ? shall be by mutual agreement.



3.4 Product Volume Commitments . DTECS and KFx will agree to specific maximum product volumes, delivery schedules, timing and other material terms and conditions that are normal and standard considerations in sales contracts prior to DTECS consummating any proposed transaction for the sale of K-Fuel ? on behalf of KFx. Once KFx consents to such sale on its behalf, DTECS shall have the right to enter into any such transactions on behalf of KFx. KFx shall abide by and fully perform all of the terms and conditions of any contracts or commitments presented by DTECS to KFx for execution or executed by DTECS on behalf of KFx.



3.5 Rail Transportation . DTECS represents that it has the requisite personnel, skills and expertise in the negotiation of rail transportation contracts, including rates, and in railroad and other transportation logistics. DTECS shall use good faith and commercially reasonable efforts to obtain rail transportation services to support the volume commitments resulting from the marketing efforts of the Parties. KFx acknowledges that the current contract rates DTECS has in place with various rail carriers may not be used for the transportation of K-Fuel ? sold under this Agreement. DTECS, if so requested by KFx, shall





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use commercially reasonable and good faith efforts to obtain rail cars and sets for the transportation of K-Fuel ? sold under this Agreement on a cost pass through basis, provided however, DTECS does not warrant or guaranty that such rail transportation services, rail cars or car sets can be obtained at any particular cost, or any cost, for transporting K-Fuel ?.



3.6 DTECS Not a Party . Unless expressly agreed to by DTECS and KFx in writing, DTECS shall not be or deemed to be a party to any of the contracts and other binding commitments for the sale of K-Fuel ? made pursuant this Agreement. Accordingly, DTECS shall have no liability with respect to the performance, or lack thereof under any such contract or commitment entered into pursuant to this Agreement.



3.7 Section 45 Tax Credits . If at any time during the term of this Agreement the production and/or sale of K-Fuel ? becomes eligible for certain tax credits under Section 45 of the United States Tax Code (the "Tax Credits") the Parties shall determine an appropriate means to insure eligibility (if possible) for such credits, as well as to maximize the application of such credits to production and sales of K-Fuel ? under this Agreement. KFx agrees that, in those instances, where (i) it sells K-Fuel ?, at a price below the market price for K-Fuel ? at the time of the proposed sale; (ii) DTECS would otherwise be entitled to a Fee (as defined in Section 5.1); and (iii) the reason KFx proposes to sell such K-Fuel ? below market is that KFx expects Tax Credits to make ...