Exhibit 10.47

 

 

 

CARBON SUPPLY AGREEMENT

BETWEEN

WINFIELD INDUSTRIES, INC.

SELLER

AND

ADA-ES, INC.

BUYER

 

 

 

Dated as of August 6, 2008

 

* indicates portions of the exhibit that have been omitted pursuant to a request
for confidential information. The non-public information has been filed with the
Commission.

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CARBON SUPPLY AGREEMENT

This CARBON SUPPLY AGREEMENT (the “Agreement”) is made and entered into as of
the 6th day of August 2008, by and between Winfield Industries, Inc., a Colorado
Corporation, (“Seller”) and ADA-ES, Inc., a Colorado Corporation, (“Buyer”).
Together, Seller and Buyer are “Parties” to the Agreement and either Seller or
Buyer individually is a “Party” to the Agreement.

WHEREAS, Seller is engaged in the manufacture and sale of sub-bituminous
activated carbon (“Carbon”);

WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, Carbon in the amounts and upon the terms and conditions set forth in this
Agreement; and

WHEREAS, Seller desires to fulfill its obligations under this Agreement (i) by
manufacturing Carbon at its contracted facilities in * and (ii) by selling and
delivering such Carbon to Buyer in accordance with the terms, and subject to the
conditions, of this Agreement

NOW THEREFORE, in consideration of the mutual covenants and obligations stated
in this Agreement, the receipt and sufficiency of which the Parties acknowledge
Seller and Buyer hereby agree as follows:

SECTION 1. DEFINED TERMS

The words and phrases listed in Section 1 shall have the meanings ascribed to
them in Section 1 wherever they appear in this Agreement as defined terms, which
shall be indicated by initial capital letters on each word. Capitalized words
and phrases contained in this Agreement that are not listed in Section 1 of this
Agreement shall be defined in the particular Section(s) in which they are used.

“Additional Pounds” shall have the meaning given in Section 4.5.

“Agreement” means this Carbon Supply Agreement and all modifications and
supplements hereto implemented in accordance with this Agreement.

“Affiliate” shall mean any person or entity with control over or subject to
control by, or under direct or indirect common control with a Party. For
purposes of this definition, “control” when used with respect to a specific
Person (including the Parties) means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract, or otherwise. Notwithstanding the foregoing,
in no event shall either Party be deemed an Affiliate of the other Party for the
purposes of this Agreement.

“Applicable Laws” shall mean any laws, statutes, ordinances, regulations, rules,
notice requirements, court decisions, agency guidelines, permits, principles of
law and orders of any Governmental Authority which are applicable to the Buyer
or Seller, whichever the case may be.

 

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“Buyer” shall have the meaning set forth in the Preamble to this Agreement and
includes Buyer’s successors and permitted assigns under this Agreement.

“Carbon” shall mean the sub-bituminous activated carbon supplied by Seller to
Buyer hereunder, which shall have the specifications and quality characteristics
set forth in Exhibit 1.

“Contract Price” shall have the meaning given in Section 9.1.

“Effective Date” shall have the meaning given in Section 2.1.

“Event of Default” shall have the meaning given in Section 15.1.

“Event of Force Majeure” shall have the meaning given in Section 14.1.

“Excuse Event” shall have the meaning given in Section 4.4

“Extension Period” shall have the meaning given in Section 2.4.

“Force Majeure” shall have the meaning given in Section 14.1.

“Force Majeure Period” shall have the meaning given in Section 14.2.

“Governmental Authority” shall mean any nation or government (including, without
limitation, the governments of the United States and China), any state, county,
municipal or other political subdivision thereof and any Person exercising
legislative, judicial, regulatory or administrative functions of or pertaining
to the government.

“Legal Holiday” shall mean Saturday, Sunday or any Day on which banking
institutions in New York, New York are authorized by law, regulation or
executive order to remain closed.

“Notice” shall mean a notice given in accordance with and complying with the
requirements of Section 19.

“Party” shall mean either Buyer or Seller and “Parties” means both Buyer and
Seller.

“Person” shall mean any individual, limited liability company, partnership,
corporation, association, business trust, or other entity or Governmental
Authority.

“Point of Delivery” means D.D.P. Murchison, Texas.

“Poundage Variations” shall have the meaning given in Section 4.3.

“Quarterly Nomination” refers to the total number of Pounds of Carbon that Buyer
instructs Seller to deliver during each calendar quarter, in accordance with
Section 4.2 of this Agreement.

“Seller” shall have the meaning set forth in the Preamble to this Agreement and
includes Seller’s successors and permitted assigns under this Agreement.

 

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“Seller’s Facility” means Seller’s contracted carbon production facilities
located in *.

“Starting Delivery Date” shall have the meaning given in Section 2.2.

“Term” shall have the meaning given in Section 2.3.

SECTION 2. CONTRACT TERM

2.1 Effective Date. The “Effective Date” shall be the date of this Agreement.

2.2 Starting Delivery Date. Buyer and Seller Agree that Carbon Deliveries will
commence under this Agreement on February 2, 2009 (the “Starting Delivery Date”)
which date shall be a Business Day.

2.3 Term. The “Term” of this Agreement shall begin on the Effective Date and
shall continue thereafter to and including December 31, 2009 unless earlier
terminated in accordance with this Agreement, or unless extended pursuant to
Section 2.4.

2.4 Term Extensions. The initial Term may be extended for up to two
(2) additional two (2) year extension periods (each an “Extension Period”) if on
or before July 1, 2009 of Seller provides Notice to Buyer of the pricing and
escalation methodology offered for the next Extension Period, and Buyer accepts
such pricing and escalation in writing by April 1 of the same year.

SECTION 3. OUTLINE OF THE OBLIGATIONS OF THE PARTIES

3.1 Purpose. The purpose of this Section 3 is to state in brief form a summary
of the obligations of the Parties under this Agreement. Notwithstanding this
Section 3, Buyer and Seller expressly intend that all the promises, covenants
and other obligations contained in any portion of this Agreement shall be
performed as fully and faithfully as the obligations stated in this Section 3.

3.2 Obligations of Seller or Seller’s Affiliate(s). Subject to the terms and
conditions of this Agreement, Seller or Seller’s Affiliate(s) shall perform the
following obligations:

3.2.1 Provide Carbon to the Buyer of the quality specified in Exhibit 1 and in
the quantities specified in Exhibit 2 in accordance with the schedules
established pursuant to this Agreement.

3.2.2 Tender Carbon for delivery to Buyer at the Point of Delivery in the
quantities and having the qualities set forth in this Agreement, and in
accordance with the schedules established pursuant to this Agreement.

3.2.3 Issue invoices for Carbon as specified by this Agreement.

3.24 Maintain adequate books and records with respect to its obligations and
performance under this Agreement.

 

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3.2.5 Seller may perform its obligations hereunder directly or cause such
obligations to be performed by any of its Affiliates, contractors or other
designees provided that Seller shall at all times remain responsible to Buyer
for the full and timely performance of its obligations hereunder.

3.3 Obligations of Buyer. Subject to the terms and conditions of this Agreement,
Buyer shall perform the following obligations:

3.3.1 Except in connection with an Excuse Event, purchase the full Carbon
Purchase Commitment set forth in Exhibit 2 under this Agreement and accept
delivery of such Carbon in accordance with the schedules established pursuant to
this Agreement.

3.3.2 Pay the applicable Contract Price for Carbon delivered and accepted in
accordance with this Agreement and any other amounts owed by it hereunder as and
when due in accordance with this Agreement.

SECTION 4. CARBON QUANTITIES

4.1 Maximum Availability Commitment: Quantity Obligations. For the term of this
Agreement, Seller guarantees to Buyer the availability of * of Carbon (“Maximum
Contract Volume”) broken down into the quarterly amounts specified in Exhibit 2.

4.2 Carbon Purchase Commitment. In the manner specified in this Section 4, Buyer
will take or pay for *% of the Maximum Contract Volume (the “Carbon Purchase
Commitment”) broken down into the quarterly amounts (each a “Quarterly
Nomination”) specified in Exhibit 2. Buyer may revise the Quarterly Nominations
in accordance with the limitations and notification requirements for Poundage
Variations specified in Section 4.3. Seller shall tender to Buyer at the Point
of Delivery and Buyer shall purchase from Seller, the total quantity of Carbon
specified in Buyer’s Quarterly Nominations as such Quarterly Nominations may be
revised from time to time in accordance with Section 4.3 and other applicable
provisions of this Agreement; provided that Buyer’s Annual Nomination shall at
all times be consistent with achieving Buyer’s full Carbon Purchase Commitment
during the term of this Agreement except to the extent that Buyer is not
obligated to purchase such full Carbon Purchase Commitment due to an Excuse
Event, as hereinafter defined.

4.3 Delivery Schedule and Poundage Variations. Pursuant to the delivery schedule
set forth in Exhibit 2, Seller shall tender to Buyer at the Point of Delivery
and Buyer shall purchase from Seller, the total quantity of Carbon specified in
Buyer’s Quarterly Nominations as such Quarterly Nominations may be revised from
time to time in accordance with this Section 4.3 and other applicable provisions
of this Agreement; except to the extent that Buyer is not obligated to purchase
such full Carbon Purchase Commitment due to an Excuse Event, as hereinafter
defined. No later than sixty days prior to the scheduled delivery date for a
calendar quarter, Buyer may, in its sole discretion and for any reason, increase
or decrease the Quarterly Nomination for that calendar quarter to reflect its
revised expectation of its Carbon needs by providing written notice to Seller
(“Poundage Variations”). The Poundage Variation for any calendar quarter shall
be limited to the maximum availability for that calendar quarter as set forth in
Exhibit 2; provided, however Buyer may exceed the maximum availability to the
extent of a negative Poundage Variation in the previous calendar quarters.

 

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4.4 Excuse Events. Buyer’s performance under this Section 4 shall be excused if
(a) Seller is unable to deliver all required Carbon for the Carbon Purchase
Commitment in accordance with this Agreement, (b) Seller is in material default
under this Agreement and has failed to cure said default after notice and
opportunity to cure, (c) Force Majeure prevents Seller from supplying Buyer with
sufficient Carbon to fulfill the Carbon Purchase Commitment, or (d) Buyer is
unable to accept Carbon due to Force Majeure or because the Buyer’s Facility for
Carbon is purchased or forced to shutdown due to no fault of Buyer (each an
“Excuse Event”). In the case of an Excuse Event, Buyer’s Carbon Purchase
Commitment shall be equitably reduced to account for such event provided,
however, that in the event an Excuse Event leads to termination of this
Agreement in accordance with its terms, the Carbon Purchase Commitment will
terminate upon such termination.

4.5 Additional Pounds. In the event that the Buyer desires and/or needs to
purchase Carbon in excess of the Maximum Contract Volume, Seller shall, in good
faith, determine whether the additional Pounds (the “Additional Pounds”) can be
supplied by Seller. If the Additional Pounds are not available for supply to
Buyer (the “Declined Pounds”), then it shall promptly (and, in any event, within
ten (10) Days) provide Notice thereof to Buyer and Buyer shall have the right to
solicit proposals for the supply of the Declined Pounds from third parties.

SECTION 5. PRODUCT WARRANTY

5.1 Seller represents and warrants that it owns and holds full, unencumbered
title to the Carbon free of any liens or encumbrances. Supplier further warrants
that all Carbon sold and delivered to Purchaser under the Contract shall conform
strictly to the quality specifications set forth in Exhibit 1. Carbon shall be
tested in accordance with the testing protocols set forth in Exhibit 1. In the
event that any Carbon sold hereunder does not conform to the foregoing warranty,
Seller shall provide replacement Carbon in a quantity to replace any unused
quantity of out of specification Carbon. To the extent out of specification
Carbon is used by Buyer, Seller shall provide a replacement quantity of Carbon
sufficient to compensate for the diminished value of the out of specification
Carbon. Supply of replacement Carbon is the sole remedy for breach of the
foregoing warranty.

5.2 The warranty and remedy set forth in Paragraph 5.1 above is in lieu of all
other warranties and remedies, representations or conditions of any kind or
nature, express or implied, in fact or by law, including, without limiting the
generality of the foregoing, any warranty of merchantability or fitness for a
particular purpose.

SECTION 6. SOURCE OF CARBON

6.1 Source of Carbon. The Carbon delivered pursuant to this Agreement shall be
supplied from a qualified source that has been pre-approved by the Buyer. If for
any reason the Seller anticipates a need to supply from alternate sources, those
sources shall be approved by Buyer prior to shipment based on testing performed
by Buyer pursuant to the testing protocols set forth in Exhibit 1 and the
procedures set forth in Section 12 hereof. In order to accommodate the product
testing, Seller shall provide test samples to Buyer no later than ninety
(90) days prior to the projected delivery date.

 

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SECTION 7. DELIVERY OF CARBON

7.1 Point of Delivery. The “Point of Delivery” shall be Murchison TX, freight
pre-paid.

7.2 Title and Risk of Loss. Title to Carbon shall pass to Buyer upon payment
pursuant to Section 10. Risk of loss and damage shall pass to Buyer upon
delivery to the Point of Delivery. Seller warrants that it will pass to Buyer
full title to such Carbon free and clear of all liens and encumbrances. Seller
assumes no liability for the Carbon after title and risk of loss pass to Buyer,
except as otherwise specifically provided in this Agreement.

7.3 Delivery. Carbon delivery should be as scheduled in Exhibit 2 unless
mutually agreed by the Parties.

SECTION 8. INTENTIONALLY OMITTED

SECTION 9. PRICE OF CARBON

9.1 Contract Price. The contract price for 2009 is $* DDP Murchison, TX, freight
pre-paid. The term DDP shall have the meaning provided in Incoterms 2000, the
international commerce terms devised and published by the International Chamber
of Commerce, except as otherwise provided for herein. Seller shall be
responsible for containerizing the carbon and all shipping charges to the
destination including loading costs, freight, customs and insurance, and export
formalities. Based upon exchange rate of *.

9.2 Adjustments for Changes in Applicable Law. The Contract Price includes all
costs of compliance with all government impositions (including but not limited
to taxes, fees and royalties other than any applicable sales tax and import
duties which shall be to the Buyer’s account) in effect as of the Effective
Date. If any changes to Applicable Law result in an increase or decrease to
Seller’s cost of performance of this Agreement, Seller shall provide Buyer with
notice of same including documentary evidence supporting the increased and
decreased costs. If such changes represent 10% of the Contract Price, the price
of Carbon purchased and sold pursuant to this Agreement shall be adjusted upward
or downward by an amount equal to Seller’s increased or decreased costs
resulting from the changes to Applicable Law.

9.3 Rounding. Unless otherwise specifically provided by this Agreement, the
values used to perform the calculations prescribed by this Agreement shall be
rounded to three decimal places. For invoicing purposes, the dollar amounts of
charges and credits shall be rounded to the nearest cent.

 

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9.4 End of Term Reconciliation of Carbon Purchased versus Carbon Purchase
Commitment: At the end of the Term of this Agreement, the actual quantity of
carbon delivered to Buyer (the “Actual Carbon Purchase”) shall be reconciled
against the quantity of the Carbon Purchase Commitment given by Buyer. If the
Purchased Carbon quantity is less than the Carbon Purchase Commitment ( a
“Purchase Deficit”), Buyer shall pay to Seller an amount equal to the average
Billing Price times the Purchase Deficit ( the “Deficit Payment”) no later than
sixty (60) days following receipt of Buyer’s invoice. Such payment shall be
Seller’s sole and exclusive remedy for Buyer’s failure to meet its Carbon
Purchase Commitment, and Seller’s consequent loss of revenues. In the event that
the Purchased Carbon exceeds the Carbon Purchase Commitment, the parties shall
have no further obligations to each other hereunder. To the extent that Seller
has production capacity available at the end of the Term of the Agreement and
Buyer has a Purchase Deficit, Seller shall offer Buyer an opportunity to enter
into a new Carbon Purchase Agreement for a duration of no less than one year for
an annual purchase amount of Carbon equal to or greater than Buyer’s last twelve
months of carbon purchases from Seller at Seller’s then market price and terms
otherwise consistent with this Agreement and if Buyer agrees to enter into such
a contract, Seller shall waive the Deficit Payment.

SECTION 10. PAYMENT

10.1 Documents Against Payment. Payment shall be effected in accordance with the
Uniform Rules for Collections (1995 revision, International Chamber of Commerce
Publication No. 522) by the collection of a documentary sight draft (the “Sight
Draft”), a form of which is attached hereto as Exhibit 5, drawn by the Seller on
the Buyer. Immediately following the clearance of US Customs in the United
States, Seller shall deliver to its bank (the “Sellers Bank” or the “Remitting
Bank”) (i) the completed Sight Draft and letter of instructions, (ii) an
invoice, (iii) the bill of lading endorsed by the Seller, (iv) the insurance
certificate, and (v) such other documents as are required by Buyer in order to
clear customs at the Point of Delivery. Seller’s Bank will remit the Sight Draft
and supporting documents to the Buyer’s bank (“Buyer’s Bank”) for payment by
Buyer with instructions that the supporting documents may only be provided to
Buyer upon the payment by Buyer of the Sight Draft by wire transfer in
accordance with the wire transfer instructions set forth in Exhibit 6.

10.2 Payment Procedures. Buyer shall pay invoices in United States Dollars by
wire transfer within five (5) Days after the documents identified in
Section 10.1 above have been presented to the bank. If Seller does not receive
payment within thirty (30) days of delivery, then interest shall be charged at
the prime rate in effect on that date (as set by the Chase Manhattan Bank of New
York on ninety (90) Day commercial loans as of the date payment is due) plus two
percent (2%), but in no event in excess of the highest rate allowed by
Applicable Law.

10.3 Disputed Invoices. Buyer shall pay all invoices issued by the Seller in
accordance with this Section 10, except those portions of any invoice that the
Buyer formally disputes in a Notice, which Notice the Buyer shall submit to the
Seller within ten (10) Days after receiving the invoice. Buyer shall pay all
undisputed portions of each disputed invoice. The Parties shall make every
reasonable effort to settle invoice disputes promptly through good faith
negotiations. If the Parties fail to settle such disputes, either Party may
refer them to arbitration in accordance with Section 16. Payment of disputed
amounts shall be made within ten (10) Days following either (i) the date of
settlement, or (ii) the date of an arbitration award. Thereafter, such amounts
shall accrue interest at the late payment rate established pursuant to
Section 10.2.

 

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SECTION 11. COMPLIANCE WITH LAWS

11.1 Construction. In performing this Agreement Buyer and Seller shall not
knowingly violate any Applicable Laws; provided, however, that no such violation
shall constitute an Event of Default by a Party unless it results in a material
non-performance of the Party’s other performance obligations under this
Agreement. Buyer and Seller shall interpret and construe this Agreement to
achieve lawful results.

11.2 Severability. If any portion of this Agreement becomes or is determined by
a Governmental Authority with jurisdiction to be illegal, Buyer and Seller shall
modify that portion to correct the illegality. The illegality of any portion of
this Agreement shall not affect the validity or the enforceability of the
remainder of this Agreement.

SECTION 12. WEIGHING, SAMPLING, AND ANALYSIS

12.1 Procedures. Weighing, sampling, and analysis of the Carbon tendered for
delivery shall be carried out in accordance with the provisions of this
Section 12.

12.2 Duties to Sample Carbon. Seller shall collect per shipment samples at
Seller’s Facility in accordance with the testing protocol set forth in Exhibit
1. The sampling shall be conducted at the Seller's Facility and in a
statistically reliable method that is in compliance with procedures approved by
the American Society for Testing and Materials (“ASTM”). The Seller will retain
a portion of the sample for testing in accordance with Exhibit 1 and will send
the pre-shipment sample as defined in Exhibit 1 to the Buyer for testing in the
Buyer’s facility. This lot should be quarantined at the Seller’s facility until
the Seller receives notice from the Buyer the lot is released for shipment.
Quality specifications defined in Exhibit 1 will be the basis for acceptance or
rejection.

12.3 Duties of Seller to Weigh Carbon.

12.3.1 Duty to Weigh; Use of Weighing Data. Seller shall weigh or cause to be
weighed all Carbon either (i) by a batch weighing system maintained by Seller at
Seller’s Facility or (ii) at the Port of Export by using certified scales
maintained by the carrier transporting the Carbon to the Point of Delivery (the
“Carrier”) pursuant to a procedure developed by Seller and the Carrier and
approved by Buyer. A representative of Buyer may be present at each weighing The
weight of Carbon thus determined shall be accepted as the Poundage to be used in
determining the quantity of Carbon for which invoices are to be rendered and
payments made in accordance with Section 10.

SECTION 13. RECORDS AND AUDITS

13.1 Record Review.

13.1.1 Seller shall maintain books and records of all matters relating to its
performance under this Agreement in accordance with generally accepted
accounting practices, Seller shall submit to Buyer, upon Buyer’s written
request, information in sufficient detail to support and document any invoices.

 

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13.1.3 Overpayment or Underpayment. Should a record review performed by Buyer
reveal an overpayment, then the amount of the overpayment or t shall promptly be
refunded to Buyer by Seller with interest at the late payment rate specified by
Section 10.2.

13.2 Timing of Record Review. Any invoices which are not contested by Seller
within twelve (12) months from their date of issue shall be deemed to be correct
and final.

SECTION 14. FORCE MAJEURE

14.1 Definition of Force Majeure. “Force Majeure” shall mean an event or
condition that prevents or delays the performance by a Party of its obligations
under this Agreement to the extent beyond the reasonable control, and without
the fault or negligence, of the party claiming relief, and which by the
reasonable exercise of due diligence such claiming Party is unable to prevent or
overcome. Force Majeure, includes, but is not limited to, Acts of God, fires,
floods, explosions, electrical storms, windstorms, extremes of temperature,
earthquakes, enactment of new Applicable Law or changes in Applicable Law,
landslides, cave-ins, war, riot, terrorism, accident, embargoes, acts of the
public enemy or sabotage, boycotts, terrorism, wars, and riots.

14.2 Effect of Force Majeure. If Force Majeure prevents either Party from
performing any of its obligations under this Agreement, and if such Party gives
to the other Party Notice of the Force Majeure (which Notice (i) shall identify
the event of Force Majeure and, to the extent known, the expected length of time
during which the event of Force Majeure will be in effect and the plan of the
Party experiencing the Force Majeure to correct or remove it and (ii) be
delivered promptly, but in no event later than ten (10) Days after the start of
the Force Majeure event), then the obligations of the Party giving such Notice
are excused to the extent made necessary by the Force Majeure and during its
continuance, which time period shall be called the “Force Majeure Period.” An
event of Force Majeure shall excuse the obligations of the notifying Party only
to the extent that the Party takes all commercially reasonable actions necessary
to overcome the Force Majeure with all reasonable dispatch. Only the Party
suffering a Force Majeure may claim Force Majeure relief; provided, however,
that the other Party shall be excused from its obligations which depend upon the
performance of the obligations excused by the Force Majeure. An attempt by the
Party suffering an event of Force Majeure to perform its obligations
notwithstanding the Force Majeure shall not constitute a waiver of the right to
claim Force Majeure if such attempt proves unsuccessful. The Party affected by
Force Majeure shall not be required to submit to unreasonable conditions or
restrictions imposed by any governmental authority or contract counterparty to
overcome the Force Majeure.

SECTION 15. EVENTS OF DEFAULT; REMEDIES

15.1 Event of Default. An event of default (“Event of Default”) under this
Agreement shall be deemed to exist upon the occurrence of any one or more of the
following events:

15.1.1 Payment Default. Failure by either Party to pay or cause to be paid any
undisputed amount that is due and payable under this Agreement and such failure
continues for a period of ten (10) Days after Notice of such nonpayment is
delivered to the defaulting Party.

 

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15.1.2 Failure to Perform Material Provisions. Failure by either Party to
perform fully any material provision of this Agreement other than as described
in Sections 15.1.1 and (a) such failure continues for a period of thirty
(30) Days after Notice of such nonperformance is delivered to the non-performing
Party or (b) if the non-performing Party shall commence within such thirty
(30) Days and shall thereafter continuously proceed with all due diligence to
cure such failure, such failure is not cured within such longer period (not to
exceed ninety (90) Days) as shall be necessary for such Party to cure the same
with all due diligence.

15.2 Remedies for Default. Upon the occurrence and during the continuation of
any Event of Default, the non-defaulting Party shall have the right, at its
option, to terminate this Agreement upon ten (10) days’ advance Notice to the
defaulting Party, unless the Event of Default is cured within such ten (10) day
period, and to pursue any other remedies provided under this Agreement or now or
hereafter existing at law or in equity or otherwise. Without limiting the
foregoing, the non-defaulting Party shall be entitled to recover from the
defaulting Party its “cover costs” associated with an Event of Default or a
termination due to an Event of Default. As used above “cover costs” means
(i) the additional cost above what would have been paid to Seller for procuring
and transporting equivalent replacement Carbon due to a default by Seller, or
(ii) costs of procuring and lost revenues resulting from the sale to a
replacement purchaser for the same quantity of equivalent Carbon due to a
default by Buyer.

15.2.1 Failure to provide cover costs by Seller. Should Seller not be able to
provide cover as defined in 15.2, Seller shall convey the property described
below in Section 26 free and clear to the Buyer.

15.3 Insolvency. Either Party may terminate this Agreement immediately by
written notice to the other Party if there occurs any assignment of the other
Party's assets for the benefit of creditors, any dissolution of the other Party,
any voluntary act of bankruptcy by the other Party, or any involuntary filing
under any bankruptcy law against the other Party which is not dismissed within
thirty (30) days of filing.

15.4 Specific Performance and Injunctive Relief. Each of the Parties shall have
and retain under this Agreement all rights and remedies existing in their favor,
at law or in equity, including (without limitation) the right to bring actions
for specific performance and injunctive and other equitable relief to enforce or
prevent a breach or violation of this Agreement. All such rights and remedies
shall be cumulative to the extent permitted by law.

15.5 Waiver of Breach. Either Party may waive a breach by the other Party,
provided that no waiver by or on behalf of either Party of any breach of any of
the covenants, provisions, conditions, restrictions or stipulations contained in
this Agreement shall take effect or be binding on Buyer or Seller unless the
waiver is reduced to writing and executed by such Party, and any such waiver
shall be deemed to extend only to the particular breach waived and shall not
limit or otherwise affect any rights that Buyer or Seller may have with respect
to any other or future breach.

15.6 Limitation of Liabilities. Except as specifically provided in this
Agreement, neither Party shall be liable to the other Party for any punitive,
special, incidental or consequential damages based upon breach of any warranty
or of contract, negligence or any other theory of legal liability arising under
or out of this Agreement. The Parties acknowledge that the direct damages
incurred by Buyer under this Agreement in the event Seller fails to deliver all
of the Carbon it is obligated to deliver hereunder shall be limited to the
difference between the Buyer’s actual out of pocket costs to purchase
replacement Carbon and the cost of such Carbon under this Agreement had Seller
delivered Carbon in accordance herewith.

 

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SECTION 16. CHOICE OF LAW; DISPUTE RESOLUTION

16.1 Choice of Law. The Parties agree that this Agreement shall be deemed to
have been made and entered into in the State of Colorado, and all questions
arising out of or affecting this Agreement, including but not limited to those
concerning validity, interpretation, performance, breach, remedies and
termination, shall be governed by and decided in accordance with the laws of the
State of Colorado without giving effect to principles of conflict of law.

16.2 Dispute Resolution. The Parties agree to make a diligent, good faith
attempt to resolve any dispute before commencing dispute resolution by
arbitration with respect to any such dispute and, with respect to any dispute
regarding amounts owed under this Agreement, to pay such undisputed amounts
pursuant to the terms hereof. If, despite the Parties’ diligent, good faith
attempt to resolve such dispute pursuant to the first sentence of this
Section 16.2, the Parties do not resolve such dispute, then at the written
request of either Party, senior officers of each Party shall meet at any
mutually agreed location in Colorado within thirty (30) Days of receipt of such
request to resolve the dispute. If despite such meeting the Parties do not
resolve the dispute, or if no such meeting takes place within such time despite
one Party's attempts therefore, either Party may commence arbitration in
accordance with the next paragraph. Arbitration shall be the sole remedy for any
dispute, and shall be binding and final among the Parties.

16.3 Arbitration. Any dispute under this Agreement that has not been resolved
pursuant to Section 16.2 above, shall be settled by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association using the Expedited Procedures set forth therein. The number of
arbitrators shall be one and shall have experience in the implementation and
interpretation of contracts relating to the supply of carbon. The place of
arbitration shall be Denver, Colorado and the language of the arbitration shall
be English.

16.3.1 Arbitration Costs. The losing Party, as determined by the arbitration
award, shall bear all costs of the arbitration, including (without limitation,
its own costs and expenses, the other Party’s reasonable costs and expenses and
the arbitrator’s and administrative fees of arbitration.

16.3.2 Enforcement of Award. Judgment upon the award rendered by the arbitrators
may be entered by any court having jurisdiction thereof.

16.4 Remedies. Notwithstanding anything in this Agreement to the contrary,
nothing in Section 16.3 is intended to, nor shall it, prevent either Party from
seeking injunctive or other equitable relief at any time as may be available
under law or in equity in order to specifically enforce a right or obligation
under this Agreement in existence prior to that Party seeking such injunctive or
other equitable relief.

 

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SECTION 17. ASSIGNMENTS

17.1 Assignment Not Allowed. Subject to paragraph 17.2 neither Party may assign
or otherwise transfer any right or responsibility set forth in this Agreement
except with the prior written consent of the other Party. Notwithstanding the
foregoing, either Party may, upon advance written notice, assign this Agreement
to any entity, other than a competitor of the non-assigning Party, into which
the assigning Party has merged or otherwise transferred all of its business and
assets to which this Agreement pertains, other than through insolvency
proceedings.

17.2 Assignment to Affiliate. Either Party, without the consent of the other
Party, may assign rights or delegate obligations under this Agreement in whole
or in part, upon thirty (30) Days’ prior Notice to the other Party, to an
Affiliate who assumes the obligations delegated under this Agreement. A Party
who assigns rights or delegates obligations to an Affiliate shall do so in
writing, and shall provide a copy of such writing to the other Party. In all
circumstances, the Party who initiates an assignment or delegation shall remain
liable to the other Party for its Affiliate’s full performance of the Party’s
obligations under this Agreement.

17.3 Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the Parties and their respective, authorized successors and
assigns.

SECTION 18. CONFIDENTIALITY

Each Party shall maintain confidential all provisions of this Agreement that
pertain to the quality, pricing and escalation of the pricing of Carbon, and all
business records relating to the negotiation of this Agreement and the Parties’
performance of their respective obligations hereunder. Notwithstanding the
foregoing, each Party may disclose such information to its board of directors or
other internal governing body, Affiliates, independent auditors, bankers,
brokers, consultants, and advisors, provided that such persons are bound by the
same confidentiality obligations as stated herein. Nothing in this provision
shall prohibit Buyer or Seller from making public the existence of this
Agreement, the term of this Agreement, or the Poundage of Carbon covered by this
Agreement. Buyer and Seller acknowledge specifically that this provision shall
not prohibit the disclosure of confidential information:

 

(i) to an independent firm of Certified Public Accountants for the purpose of
auditing and verifying price calculations under or pursuant to this Agreement;

 

(ii) to the arbitrator(s) appointed to hear disputes in accordance with the
procedures set forth at Section 16 of this Agreement;

 

(iii) to a court in connection with the enforcement of arbitration awards or
arbitration obligations or any other dispute under this Agreement;

 

(iv) in response to an order, directive, or request for information from a
governmental authority, court, or litigant, where the disclosure of information
is required by law;

 

(v) as required to comply with any law, rule, regulation or other directive or
requirement of or in connection with any report or information filed with the
Securities and Exchange Commission or other appropriate governmental authority
or agency; or

 

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(vi) to consultants and contractors performing work related to this Agreement
who agree in writing to protect the confidentiality of such information as and
to the extent provided in this Agreement.

In the foregoing situations, the Party disclosing information shall comply with
any specific confidentiality requirement(s) imposed by this Agreement, shall
notify the other Party as soon as practicable prior to disclosure, and shall
otherwise take reasonable measures to limit the disclosure of confidential
information in a manner consistent with Applicable Law. Such measures shall
include, as appropriate and permitted by Applicable Law, filing documents under
seal, redacting specific pricing information from disclosed documents, and
disclosing documents subject to court-approved protective orders.

SECTION 19. NOTICES

19.1 General Notices. Except as otherwise specifically provided by this
Agreement, any notice provided for pursuant to this Agreement or given or made
in connection with this Agreement, shall be in writing and shall be deemed
properly and sufficiently given or made if delivered in person with receipt
acknowledged in writing by the recipient, sent by registered or certified mail
return receipt requested, to the respective Parties at the addresses specified
below:

If to Seller, addressed to:

Winfield Industries, Inc.

P.O. Box 626 Monument, Colorado 80132

Attention: Tony Soong, Chairman

If to Buyer, addressed to:

ADA-ES

8100 South Park Way, Unit B

Littleton, Colorado 80120-4525

Attention: Jean Bustard, COO

With a copy to:

Schuchat, Herzog & Brenman, LLC

1900 Wazee Street, Suite 300

Denver, CO 80202

Attention: Julie Herzog, Esq.

19.2 Effectiveness. No notice is effective unless it is given or made in
compliance with Section 19.1. Notices given or made in compliance with
Section 19.1 are effective as of the time of delivery to or receipt by the Party
to whom the notice is addressed; provided, however, that if a notice given or
made other than in writing is confirmed by the Party giving or making notice
within 48 hours of receipt in compliance with Section 19.1, the effectiveness of
the notice relates back to the time of the receipt.

 

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19.3 Changes in Persons and Addresses. The persons or address of any Party to
which notice shall be given pursuant to this Agreement may be changed at any
time pursuant to this Section 19.3 by giving notice to the other Party.

SECTION 20. WAIVERS

The failure of either Party to require strict performance of any provision of
this Agreement by the other Party, or the forbearance to exercise any right or
remedy under this Agreement shall not be construed as a waiver by such Party of
the right to require strict performance of any such provision or the
relinquishment by such Party of any such right or remedy it might have with
respect to any subsequent breach of such provisions. All waivers shall be signed
in writing, designated a waiver, and signed by the waiving Party, and shall
recite the rights waived.

SECTION 21. HEADINGS AND SECTION NUMBERS - CONSTRUCTION

21.1 Headings Not to Affect Construction. The headings of the sections of this
Agreement are inserted for convenience only and shall have no effect on the
construction, interpretation, or meaning of this Agreement.

21.2 References to Section Numbers. All references in this Agreement to a
section of this Agreement will be interpreted to refer to the entire section,
including subsections. For example, a reference to Section 1, Defined Terms,
refers not only to the introductory text on Section 1, but also to all of the
subsections of Section 1.

SECTION 22. AMENDMENTS

Any and all amendments, supplements, and modifications to this Agreement shall
be effective only if in writing and signed by the Parties.

SECTION 23. COMPLETE AGREEMENT

This Agreement is the complete and total expression of all agreements,
contracts, covenants, and other promises between Seller and Buyer related to the
sale of Carbon to Buyer.

SECTION 24. COUNTERPARTS

Buyer and Seller may execute this Agreement in two or more counterparts, each of
which shall constitute an original document and all of which taken together
shall constitute a single Agreement.

SECTION 25. REGISTRATION OF AGREEMENT. If this Agreement is required by
Applicable Law to be registered with any applicable authority or in any
applicable registry, to the extent permitted by Applicable Law a short form of
this Agreement, in form and substance acceptable to Buyer shall be so
registered.

 

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SECTION 26. SECURITY. In order to secure all obligations of Seller under this
Agreement, Seller hereby grants to Buyer a security interest in and to all of
Seller’s right, title and interest in and to the property, including the
building and all fixtures located on the property identified in Exhibit 7 (the
“Collateral”). Seller warrants and represents that it has the unqualified right
to transfer the Collateral to Buyer and that the Collateral is not subject to
any security interest, lien, encumbrance or claim in favor of any third party
other than Buyer or to any right or option of any third party to purchase or
acquire the Collateral. Seller will promptly sign and deliver to Borrower all
assignments, endorsements, powers of attorney, instructions to issuers and other
parties, and other documents that Buyer may from time to time request to perfect
Buyer’s security interest in the Collateral or to facilitate transfer of the
Collateral. During the Term of the Agreement, Seller will not sell, lease,
transfer, or assign the Collateral or any interest in the Collateral, or permit
the Collateral to be transferred by operation of law, or permit any lien,
security interest or other encumbrance or writ of attachment, garnishment, levy,
execution or other legal process to be issued against or placed on the
Collateral. Seller authorizes Buyer to file one or more financing statements or
other instruments required under Applicable Laws evidencing the security
interest granted herein. If Seller fails to perform its obligation under
Section 15.2Buyer may immediately, without notice to Seller and without Seller’s
consent, transfer the Collateral into Buyer’s name or the name of Buyer’s
nominee.

IN WITNESS WHEREOF, the Parties have duly executed this Agreement in their
respective corporate names as of the 6th day of August, 2008.

 

Winfield Industries, Inc. Seller By:   /s/ Tony Soong Name:   Tony Soong Title:
  Chairman ADA-ES, Inc. Buyer By:   /s/ C. Jean Bustard Name:   C. Jean Bustard
Title:   Chief Operating Officer

 

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EXHIBIT 1

CARBON SPECIFICATION AND TESTING PROTOCOLS

 

1. Carbon Source Approval – The unique properties of activated carbon are the
result of the raw material source being used for the carbon and the process
being utilized to manufacture the carbon.

 

  a. Before a carbon is accepted for use by ADA-ES the raw material source and
the manufacturing process will be audited and approved by the Director of
Sorbent Operations. Once this is completed the carbon will be place on the
approved carbon list.

 

  b. Any changes to the raw material source or the manufacturing process must be
preapproved by the Director of Sorbent Operations prior to acceptance of carbon
from the source.

 

2. Quality Specifications - Carbons used for interim processing will conform to
the following quality criteria. All carbons will be tested per the latest ASTM
standard.

 

  a. *

 

  b. *

 

  c. *

 

3. Testing and Pre-shipment Samples – Sampling of carbons being shipped to ADA
will be tested at the supplier site to insure that they conform to the
Specifications in 2a, 2b, and 2c.

 

  a. A composite sample will be taken of the carbon prior to shipment that is
statistically representative of the shipment. This sample will be shipped to the
attention of the Quality Assurance Manager, ADA-ES, 8100 SouthPark Way, Suite B,
Littleton Colorado 80120.

 

  b. This sample will be given a lot identification number and testing will be
completed by ADA-ES personnel to determine if the carbon can be released for
shipment.

 

  c. The supplier will receive written confirmation that the material is
approved for shipment. At that time the supplier will identify each bag or
shipping unit with the lot number supplied by ADA-Es.

 

D-1

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EXHIBIT 2

CARBON PURCHASE COMMITMENT & DELIVERY SCHEDULE

Quantities agreed to in 7/31/2008 Meeting

Winfield Industries

 

    

*

   *    Total Pounds          per year    *    *                              
                                                                 

*

      *   

*

   *    *   

*

      *   

*

   *    *                           

Total 2009

   *            *            20,900,000                        

*

   *    *   

*

   *    *   

*

   *    *   

*

   *    *                           

Total 2010

   *                    *    29,920,000               

 

D-2

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EXHIBIT 4

PRICING

New Carbon Pricing

 

2009

   $* per pound, DDP Murchison, TX, freight pre-paid.

2010

   $* per pound, DDP Murchison, TX, freight pre-paid.

TERMS:

   Product will be sold DDP Murchison, TX, freight pre-paid. The term DDP shall
have the meaning provided in Incoterms 2000, the international commerce terms
devised and published by the International Chamber of Commerce, except as
otherwise provided for herein. Seller shall be responsible for containerizing
the carbon and all shipping charges to the destination including loading costs,
freight, customs and insurance, and export formalities.    ADA-ES will be
responsible for all additional freight costs for shipments to LA (versus
delivery to Murchison, TX)    Payment upon clearing US Customs against documents

 

D-3

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EXHIBIT 5

SIGHT DRAFT

 

D-4

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EXHIBIT 6

WIRE TRANSFER INSTRUCTIONS

 

D-5

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EXHIBIT 7

THE COLLATERAL

 

D-6