CONFIDENTIAL
AMENDMENT NO. 1
TO
VOLUME LICENSE AGREEMENT
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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 the Yukon, Canada ("Licensee").
RECITALS
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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
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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 original Volume License
Agreement, dated April 26, 2000, 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:_________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇, Vice President
Licensee
IVANHOE ENERGY INC.
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EXHIBIT A
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SYNTROLEUM/IVANHOE MASTER LICENSE AGREEMENT
By:_________________________________
E. ▇▇▇▇ ▇▇▇▇▇▇, President & CEO
ATTACHMENT 3
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LICENSE FEE CALCULATION
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I. For purposes of this Attachment 3, the following terms shall have the
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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
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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 chagnes 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 ___, 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 30,000 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.
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 ___ 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 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 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.
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.