Volume License Agreement [Amendment No. 1] - Syntroleum Corp. and Ivanhoe Energy Inc.
AMENDMENT NO. 1
TO
VOLUME LICENSE AGREEMENT
THIS AMENDMENT NO. 1 TO VOLUME LICENSE AGREEMENT ("Amendment No. 1") is made and
entered into as of this 11th day of October, 2000 by and between Syntroleum
Corporation, a Delaware corporation ("Licensor"), and Ivanhoe Energy Inc., a
company organized under the laws of Yukon, Canada ("Licensee").
RECITALS
A. WHEREAS, Licensor and Licensee have entered into that certain Volume License
Agreement dated as of April 26, 2000 ("License Agreement"); and
B. WHEREAS, Licensor and Licensee desire to amend certain provisions of the
License Agreement as set forth in this Amendment No. 1.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Amendment No. 1, the Parties agree as follows. Unless otherwise
provided in this Amendment No. 1, capitalized terms used in this Amendment No. 1
have the meanings set forth in the License Agreement.
1. The title of the License Agreement is amended and restated to read in its
entirety as follows: "Master License Agreement."
2. Section 1.02 of the License Agreement is amended and restated to read in its
entirety as follows:
1.02 "AGREEMENT" means this Master License Agreement.
3. Section 2.01 of the License Agreement is amended and restated to read in its
entirety as follows:
2.01 Subject to the terms and conditions of this Agreement, Licensor grants
to Licensee a limited, non-exclusive, non-transferable (except as provided
in Section 2.06 and Article 8) right and license to use Licensor Patent
Rights and Licensor Technical Information to design, construct, operate and
maintain (including modify, expand and replace) Licensed Facilities under a
separate Site License Agreement for each Licensed Plant, to practice the
Conversion Process to manufacture Synthetic Product solely for the purpose
of producing, using, and selling Marketable Products anywhere in the world.
4. Attachment 3 to the License Agreement is amended and restated to read in its
entirety as set forth on Exhibit A to this Amendment No. 1.
5. In consideration for the rights granted to Licensee by Licensor under this
Amendment No. 1., Licensee shall pay Licensor a non-refundable amount of
7,000,000 U.S. dollars upon execution of this Amendment No. 1. This amount, as
well as the previous payment of $3 million under the License Agreement, shall be
credited against the first 10,000,000 U.S. dollars in License Fees payable by
Licensee to Licensor as provided in Attachment 3 to the License Agreement.
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6. Except as expressly amended by this Amendment No. 1, the License Agreement is
and shall remain in full force and effect in accordance with its terms.
Licensor
SYNTROLEUM CORPORATION
By: /s/ LARRY J. WEICK
------------------------------------
Larry J. Weick, Vice President
Licensee
IVANHOE ENERGY INC.
By: /s/ E. LEON DANIEL
------------------------------------
E. Leon Daniel, President & CEO
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EXHIBIT A
SYNTROLEUM/IVANHOE MASTER LICENSE AGREEMENT
ATTACHMENT 3
LICENSE FEE CALCULATION
I. For purposes of this Attachment 3, the following terms shall have the
meanings ascribed thereto:
A. "LICENSED PLANT" means the Licensed Plant in which a Site License Agreement
for such plant is issued to and remains in the name of the Licensee who has
executed this Agreement with Licensor and, in which the Participating
Interest held by Licensee, or collectively by Licensee and any other Person
who has executed a license agreement (which is applicable to the Licensed
Plant) with Licensor, represents at least 10% of the entire Participating
Interest not held by a governmental authority regardless of operatorship of
the Licensed Plant.
B. "ROYALTY RATE" shall mean (i) the lowest royalty rate per Barrel of
Synthetic Product accepted by Licensor for a Site License Agreement with a
non-Affiliate for a facility of comparable size, in the Licensed Territory,
which is not under a master preferred license agreement, during the twelve
(12) months immediately preceding the execution date of the applicable Site
License Agreement under this Agreement, or (ii) if no such Site License
Agreement has been executed during the twelve (12) months immediately
preceding, then the royalty rate per Barrel of Synthetic Product in the
last Site License Agreement with a non-Affiliate, in the Licensed
Territory, executed by Licensor, which is not under a master preferred
license agreement, or (iii) if none of the foregoing applies, then US$0.50
per Barrel of Synthetic Product. Market Royalty Rate does not include the
catalyst price as provided for under Section 2.03 of this Agreement.
C. "BLS INDEX" shall mean the index for January of the year in question
represented by the Producer Price Index for Industrial Commodities as
published by the Bureau of Labor Statistics, U.S. Department of Labor,
using the year 1982 as the base index equal to 100. If, at any time, the
above index should cease to be published, then another suitable index
published by the U.S. Government or other authoritative organization and
generally recognized by the trade as authoritative with respect to changes
in the U.S. of equivalent commodity costs shall be used.
II. For each Site License Agreement executed under this Agreement for a
Licensed Plant with a maximum daily design capacity, as defined by the
Process Design Package, of less than barrels of Synthetic Product per day,
Licensee agrees to pay License Fees to Licensor on a prepaid license basis
as follows:
A. Licensee agrees to pay Licensor a one-time, prepaid License Fee
calculated in accordance with the following formula:
License Fee = "C" X 350 X 7.5 X "R" wherein:
"C" = the maximum daily design capacity, as defined by the Process
Design Package, of such Licensed Plant to produce Marketable
Products measured in Barrels of Synthetic Product per day for
which such Licensed Plant is originally designed and constructed,
and
"R" = the Royalty Rate.
and payable in installments as follows:
(i) within thirty (30) days after the execution of the Site License
Agreement for Such Licensed Plant;
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(ii) within thirty (30) days after delivery of the Process Design
Package or within one hundred twenty (120) days after the
execution of the Site License Agreement for such Licensed Plant,
whichever first occurs;
(iii) within thirty (30) days after the commencement of field
construction move-in;
(iv) within one-hundred and twenty (120) days after the Start-Up Date
of the Licensed Plant or a successful Performance Test as
specified in the Process Guarantee and Performance Test
Agreement, whichever first occurs.
B. Notwithstanding any other provision of this Agreement, payments made
by Licensee to Licensor under Section 5.01 of this Agreement and
Section 5 of Amendment No. 1 to Volume License Agreement between
Licensee and Licensor date October 11, 2000, shall be fully credited
against the License Fees payable by Licensee to Licensor under
Section II.A.
C. In the event the actual production capacity of any Licensed Plant,
under II.A. above, is determined to have either exceeded the original
maximum daily design capacity established in its Site License
Agreement or is increased through major equipment modification, by
more than five percent (5%) or by more than 500 barrels per day, at
any time after the Start-Up Date, Licensee shall pay Licensor an
additional License Fee, on a prepaid basis, equal to the difference
between (a) the prepaid License Fee as would have been calculated
with the higher production capacity for such Licensed Plant
substituted for "C" in the calculation method set forth in II.A.
above, and (b) the License Fee as would have been calculated for such
Licensed Plant by the method set forth in II.A. above using the
original maximum daily design capacity established in each Site
License Agreement. The incremental License Fee due will be reduced by
any previous incremental adjustments. Such additional License Fee
shall be payable within thirty (30) days after the end of the
calendar year in which such increase in production capacity of such
Licensed Plant occurs. Incremental License Fees for increased
production capacity in any Licensed Plant shall not be due if the
increased production capacity is the result of the initial use of
Licensee Patent Rights or Licensee Technical information. The total
cumulative incremental capacity adjustments under each Site License
Agreement will be limited to 50 percent of the initial maximum daily
capacity under such Agreement.
D. Upon payment of all fees due under the Site License Agreement for
each Licensed Plant under this Section II, Licensee shall be deemed
to have acquired a fully paid license for such Licensed Plant up to
the original maximum daily design capacity or any adjusted daily
design capacity made under the provisions of Section II.B. above. Any
additional incremental increases in the Licensed Plant capacity will
be subject to additional License Fees as calculated under incremental
adjustments pursuant to this Section II.
III. For each Site License Agreement executed under this Agreement for a
Licensed Plant with a maximum daily design capacity, as defined in the
Process Design Package, of or more barrels of Synthetic Product per day,
Licensee agrees to pay License Fees to Licensor as follows.
A. PREPAID LICENSE FEE.
1. Licensee agrees to pay Licensor a one-time, prepaid License Fee
calculated in accordance with the following formula:
License Fee = "C" X 350 X 7.5 X "R" / 2 wherein:
"C" = the maximum daily design capacity, as defined by the Process
Design Package, of such Licensed Plant to produce Marketable
Products measured in Barrels of Synthetic Product per day for
which such Licensed Plant is originally designed and constructed,
and
"R" = the Royalty Rate.
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and payable in installments as follows:
(i) within thirty (30) days after the execution of the Site License
Agreement for such Licensed Plant;
(ii) within thirty (30) days after delivery of the Process Design
Package or within one hundred twenty (120) days after the
execution of the Site License Agreement for such Licensed Plant,
whichever first occurs;
(iii) within thirty (30) days after the commencement of field
construction move-in;
(iv) within one hundred and twenty (120) days after the Start-Up Date
of the Licensed Plant or a successful Performance Test as
specified in the Process Guarantee and Performance Test
Agreement, whichever first occurs.
2. Notwithstanding any other provision of this Agreement, payments made
by Licensee to Licensor under Section 5.01 of this Agreement and Section
5 of Amendment No. 1 to Volume License Agreement between Licensee and
Licensor dated October 11, 2000, shall be credited against the License
Fee payments due by Licensee to Licensor under Section III.A.1. at the
rate of up to 50%, such that the Licensor shall receive a cash payment
of at least 50% of the scheduled installment payment under Section
III.A.I.
3. In the event the actual production capacity of any Licensed Plant for
which a prepaid License Fee has been paid under Section III.A. above is
determined to have exceeded the original maximum daily design capacity
established in its Site License Agreement by more than five percent (5%)
or by more than 500 barrels per day, at any time after the Start-up
Date, Licensee shall pay Licensor an additional License Fee, on a
prepaid basis, equal to the difference between (a) the prepaid License
Fee as would have been calculated with the higher production capacity
for such Licensed Plant substituted for "C" in the calculation method
set forth in II.A. above, and (b) the License Fee as would have been
calculated for such Licensed Plant by the method set forth in Section
III.A. above using the original maximum daily design capacity
established in each Site License Agreement. Such additional License Fee
shall be payable within thirty (30) days after the end of the calendar
year in which such increase in production capacity of such Licensed
Plant occurs. Incremental License Fees for increased production capacity
in any Licensed Plant shall not be due if the increased production
capacity is the result of the initial use of Licensee Patent Rights or
Licensee Technical information. The total cumulative incremental
capacity adjustments under each Site License Agreement will be limited
to of the initial maximum daily capacity under such Agreement.
B. RUNNING ROYALTY LICENSE FEES.
1. In addition to the prepaid License Fee payable by Licensee to
Licensor in accordance with Paragraph A above, Licensee agrees to pay
Licensor, on or before thirty (30) days after the end of each calendar
quarter, a quarterly running royalty license fee based on the actual
operation of the Licensed Plant and calculated in accordance with the
following formula:
Quarterly Running Royalty License Fee = "QP" X ("R" / 2) X "BLS"
wherein:
"QP" = the total quarterly production in Barrels of Syncrude during a
calendar quarter as measured in a manner specified in the Process
Design Package,
"R" = the Royalty Rate, and
"BLS" = the factor equal to (a) the BLS Index for the calendar year in
which the payment is being made divided by (b) the BLS Index
applicable as of the Effective Date of the Master License
Agreement.
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IV. All payments required hereunder shall include a statement showing the
details supporting the calculation of the License Fees being paid. Licensee
shall keep accurate and complete records of all natural gas feedstock
processed (volume and composition) and all Synthetic Product produced at
and either used internally within or removed from each Licensed Plant to
enable verification of statements and payments rendered to Licensor
hereunder. Licensee agrees to permit Licensor, at Licensor's expense, to
inspect such records on reasonable notice and at reasonable intervals
during normal business hours to verify the license fees paid and payable
under this Agreement.
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