Master License Agreement [Amendment No. 3] - Syntroleum Corp. and Ivanhoe Energy Inc.
CONFIDENTIAL
AMENDMENT NO. 3
TO
MASTER LICENSE AGREEMENT
(formerly the Volume License Agreement)
THIS AMENDMENT NO. 3 TO MASTER LICENSE AGREEMENT ("Amendment No. 3") is
made and entered into as of this 1st day of July, 2003 by and between Syntroleum
Corporation, a Delaware corporation ("Licensor"), and Ivanhoe Energy Inc., a
company organized under the laws of the Yukon, Canada ("Licensee").
RECITALS
A. WHEREAS, Licensor and Licensee previously entered into that certain
Volume License Agreement dated as of April 26, 2000, as amended by Amendment No.
1 to Volume License Agreement dated as of October 11, 2000 which, among other
things, changed the Volume License Agreement to a Master License Agreement.
(collectively, the "Master License Agreement") and by Amendment No. 2 dated June
1, 2002; and
B. WHEREAS, Licensor and Licensee desire to amend certain provisions of
the Master License Agreement as set forth in this Amendment No. 3.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Amendment No. 3, the Parties agree as follows. Unless
otherwise provided in this Amendment No. 3, capitalized terms used in this
Amendment No. 3 but not defined shall have the meanings set forth in the Master
License Agreement.
1. The definition of "Licensed Territory" at Section 1.15 of the Master
License Agreement and Section 1.16 of the Site License Agreement is amended to
read as follows:
"LICENSED TERRITORY" means all the countries of the world and their
respective territorial waters, including the United States of America,
Canada, Mexico, the People's Republic of China, India, and their
respective territorial waters, except for
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any country and its territorial waters (i) that, from time to time, may
be prohibited, or whose citizens (considered as a group) may be
prohibited, by the United States government from receiving Licensor
Technology or the products thereof or (ii) the inclusion of which in
the definition of Licensed Territory is, or could in good faith be
argued to be, prohibited by United States law, including, without
limitation, United States Executive Orders and administrative orders,
rules and regulations. Licensed Territory shall include territories or
territorial waters which are the subject of official dispute between or
among countries only if all countries claiming sovereignty, a sovereign
right, or jurisdiction over such territories or territorial waters are
otherwise included within the definition of such term.
2. Paragraph 5 of Amendment No. 1 is amended to delete the final
sentence of Paragraph 5. Paragraph No. 5 shall now read as follows:
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 original Volume License Agreement, dated April 26,
2000, shall not be credited against the first $10,000,000 U.S. dollars
in License Fees payable by Licensee to Licensor as partial
reimbursement for the research and development costs previously
incurred by Licensor.
3. Section 2.01 of the Master License Agreement is hereby amended to
add the following sentence at the end of the section:
With respect to any Licensed Plant Licensee wishes to develop
in India and the People's Republic of China, Licensor and Licensee
shall develop additional procedures to protect intellectual property;
Licensor shall have the final approval in respect of any intellectual
property protection procedures and participants and contractors
involved in a
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Licensed Plant in those countries, which approval shall not be
unreasonably withheld. Such participants shall not exclude China
International Trust and Investment Corporation and national energy
companies.
4. Except as expressly amended by this Amendment No. 3, the Master
License Agreement is and shall remain in full force and effect in accordance
with its terms and the parties hereby ratify and reaffirm the Master License
Agreement as amended hereby.
Licensor
SYNTROLEUM CORPORATION
By: /s/ K. R. Roberts
-------------------------------------
Ken Roberts, Senior Vice President
Licensee
IVANHOE ENERGY INC.
By: /s/ E. L. Daniel
-------------------------------------
E. Leon Daniel, President & CEO
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Exhibit A to Amendment Number 2
ATTACHMENT 3
to Master License Agreement
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. "LARGE LICENSED PLANT" means a Licensed Plant under a single Site License
Agreement with a maximum daily design capacity, as defined in a single
Process Design Package, of nominally 180,000 or more barrels of Synthetic
Product per day and which may be constructed in two phases of nominally
90,000 or more barrels per day for each phase and with the second phase
constructed either concurrently with the first phase or in a separate
consecutive period starting no more than 1 year following the start of
construction of the first phase.
C. "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.
D. "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
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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 30,000 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) 20% within thirty (30) days after the execution of the
Site License Agreement for such Licensed Plant;
(ii) 30% 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) 20% within thirty (30) days after the commencement of
field construction move-in;
(iv) 30% 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 dated October 11, 2000, shall be
fully credited against the License Fees payable by Licensee to
Licensor under Section II.A.
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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, equal to or more than 30,000 barrels but less than
nominally 180,000 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" x .50 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
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which such Licensed Plant is originally designed and
constructed, and
"R" = the Royalty Rate.
and payable in installments as follows:
(i) 20% within thirty (30) days after the execution of the
Site License Agreement for such Licensed Plant;
(ii) 30% 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) 20% within thirty (30) days after the commencement of
field construction move-in;
(iv) 30% 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.1.
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
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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.
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 month, a monthly running royalty license fee
based on the actual operation of the Licensed Plant and
calculated in accordance with the following formula:
Monthly Running Royalty License Fee =
"MP" x ("R" x .50) x "BLS"
wherein:
"MP" = the total monthly production in Barrels of
Synthetic Product 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.
IV. For each Site License Agreement executed under this Agreement for a Large
Licensed Plant, Licensee agrees to pay License Fees to Licensor as
follows:
1. FIRST PHASE
A. PREPAID LICENSE FEE
25% of the Prepaid License Fee for the first nominal 90,000
barrels per day of a Large Licensed Plant ("First Phase") will
be paid in accordance with the installment payment schedule
set forth in Section III.A. above
AND
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B. RUNNING ROYALTY LICENSE FEES
The remaining License Fee in respect to the First Phase of a
Large Licensed Plant, will be paid, on or before thirty (30)
days after the end of each calendar month, as a running
royalty license fee ("First Phase Running Royalty License
Fee") per barrel of actual production of Marketable Products
for the life of the project. The First Phase Running Royalty
License Fee rate, will be equal to 75% of the standard Royalty
Rate for a Licensed Plant current at the time of execution of
the Site License Agreement and escalated annually thereafter
based upon the Bureau of Labor Statistics published inflation
index, calculated as follows:
FirstPhase Running Royalty License Fee =
"MP x ("R" x 0.75) x "BLS"
Wherein:
"QP" = total monthly production in Barrels of Marketable
Products during a calendar month
"R" = the Royalty Rate
"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.
2. SECOND PHASE
For the second nominal 90,000 barrels per day minimum or more for
the Large Licensed Plant under the same Site License Agreement
referenced above ("Second Phase") that will be included in a
combined design with the First Phase as a single project for
purposes of preparation of the Process Design Package, with the
Second Phase constructed either concurrently with the First Phase or
in a separate consecutive period starting no more than 1 year
following the start of construction of the First Phase, the License
Fee associated with the Second Phase of the Large Licensed Plant
shall be paid as follows:
A. PREPAID LICENSE FEES
25% of the Prepaid License Fee for the Second Phase will be
payable in installments as follows:
(i) 50% at the closing of the financing on the First Phase
with respect to a Large Licensed Plant covered by a Site
License (Financial Closing)
(ii) 20% within thirty (30) days after the commencement of
field construction move-in; and
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(iii) 30% at the satisfactory Performance Test of the Second
Phase of the Large Licensed Plant.
AND
B. RUNNING ROYALTY LICENSE FEES
The remaining License Fee in respect to the Second Phase of
the Large Licensed Plant, will be paid, on or before thirty
(30) days after the end of each calendar month, as a running
royalty license fee ("Second Phase Running Royalty License
Fee") per barrel of actual production of Marketable Products
for the life of the project. The Second Phase Running Royalty
License Fee rate, will be equal to 50% of the standard Royalty
Rate for the Licensed Plant current at the time of execution
of the Site License Agreement and escalated annually
thereafter based upon the Bureau of Labor Statistics published
inflation index, calculated as follows:
Second Phase Running Royalty License Fee =
"MP x ("R" x 0.50) x "BLS"
Wherein:
"MP" = total monthly production in Barrels of Marketable
Products during a calendar month
"R" = the Royalty Rate
"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.
3. Accumulated credits, if any, to which Licensee is entitled against
the License Fee under the Site License may be applied at Financial
Closing and any remaining credits may be applied the thirty (30)
days after commencement of field construction move-in.
V. 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
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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.
VI. If the Licensee can not achieve financing on commercially reasonable terms
for the Licensed Plant or if the project is terminated for any reason
prior to such time, Licensee shall retain 25% of the License Fee payments
made to Licensor for the project up to that date and the remaining 75%
shall be credited to any future Licensed Plant that is initiated within 15
years from the Effective Dates of the Master License Agreement.