SYNTROLEUM MASTER PREFERRED LICENSE AGREEMENT
CONFIDENTIAL
CONFIDENTIAL
Master Preferred License Agreement
Between
Syntroleum Corporation
and
Texaco Natural Gas Inc.
MASTER PREFERRED LICENSE AGREEMENT
THIS LICENSE AGREEMENT is made and entered into as of this 25th day of
September 1996 by and between Syntroleum Corporation, an Oklahoma corporation
("Licensor"), and Texaco Natural Gas Inc., a Delaware corporation ("Licensee").
RECITALS
A. WHEREAS, Licensor has developed and owns certain patent rights and
technical information relating to the Conversion Process; and
B. WHEREAS, Licensee desires to enter into a non-exclusive limited
license with Licensor to use Licensor Patent Rights and Licensor Technical
Information in practicing the Conversion Process in the Licensed Facilities
in the Licensed Territory.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, the Parties agree as follows:
1. DEFINITIONS
The following terms (whether or not underscored) when used in this
Agreement, including its preamble and recitals, shall, except where the context
otherwise requires, have the following meanings (such meanings to be equally
applicable to the singular and plural forms thereof).
1.01 "AFFILIATE" means, with respect to each Party, any company (including a
corporation, partnership, joint venture or other entity) in which the Party or
its parent company(ies) (one or more parent companies in an upward series) shall
at the time in question directly or indirectly own a fifty percent (50%) or more
interest in such
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company. It is understood that: (i) a Party or its parent company(ies)
directly owns a fifty percent (50%) or more interest in a particular company
if that Party or its parent company(ies) individually or collectively holds
shares carrying fifty percent (50%) or more of the voting power to elect
directors or other managers of the said particular company, and (ii) a Party
or its parent company(ies) indirectly owns a fifty percent (50%) or more
interest in a particular company if a series of companies can be specified
beginning with a Party or its parent company(ies), individually or
collectively, and ending with the particular company so related that each
company of the series, except the particular company, directly owns a fifty
percent (50%) or more interest in a later company in the series.
1.02 "AGREEMENT" means this Master Preferred License Agreement.
1.03 "BARREL" means forty-two (42) gallons of two hundred thirty-one (231)
cubic inches each, measured at sixty degrees Fahrenheit (60DEG.F) and one (1)
atmosphere pressure.
1.04 "CHAIN-LIMITING CATALYST" means a type of catalyst for use in a
▇▇▇▇▇▇▇-Tropsch Reaction whose primary products are predominately hydrocarbon
molecules of 20 or fewer carbon atoms which remain liquid at ambient
temperature and pressure.
1.05 "CONFIDENTIAL INFORMATION" means information, including any formula,
pattern, compilation, program, apparatus, device, drawing, schematic, method,
technique, process or pilot plant data that: (a) derives independent economic
value, actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use, and (b) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy. Confidential
Information includes, without limit, Licensor Catalyst Information, Licensor
Technical Information, and Licensee Technical Information.
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1.06 "CONFIDENTIALITY AGREEMENT" means the agreement between Licensee and
Syntroleum, dated December 8, 1993.
1.07 "CONVERSION PROCESS" means any process for the conversion of a
substantially gaseous hydrocarbon stream, that may contain methane, ethane,
propane, butanes, and other gaseous substances normally occurring with
natural gas, into a mixture of hydrocarbons which may be a combination of
normally gaseous, liquid, or solid hydrocarbons at ambient temperatures and
pressures and comprised of (i) autothermal reforming of a feed stream
consisting substantially of gaseous hydrocarbons in the presence of air, or
enriched air having an oxygen level of up to 53.5 volume percent, to create
an intermediate feed stream containing carbon monoxide and molecular
hydrogen, and (ii) reacting the intermediate feed stream in the presence of a
▇▇▇▇▇▇▇-Tropsch Catalyst to produce a product stream consisting of any
combination of gaseous, liquid or solid hydrocarbons at ambient temperature
and pressure.
1.08 "EFFECTIVE DATE" means the date set forth in the first paragraph of this
Agreement.
1.09 "▇▇▇▇▇▇▇-TROPSCH CATALYST" means any catalyst for use in a
▇▇▇▇▇▇▇-Tropsch Reaction including, but not limited to, Chain Limiting
Catalyst and High Alpha Catalyst.
1.1 "▇▇▇▇▇▇▇-TROPSCH REACTION" means the catalytic reaction of carbon
monoxide and hydrogen, the primary products of which are hydrocarbons.
1.2 "HIGH ALPHA CATALYST" means a type of ▇▇▇▇▇▇▇-Tropsch Catalyst, whose
alpha number, as calculated by the ▇▇▇▇▇▇-▇▇▇▇▇ distribution equation, is
0.85 or higher.
1.3 "INVENTIONS OR IMPROVEMENTS" means any process, formula, composition,
device, catalyst (both autothermal reforming catalysts and ▇▇▇▇▇▇▇-Tropsch
Catalysts), apparatus, technology, know-how, operating technique, improvement,
modification, or enhancement
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relating to the use, operation, or commercialization of the Conversion
Process and the products of the Conversion Process, which is discovered,
made, designed, developed or acquired by Licensee, solely or with others,
since the date of the Confidentiality Agreement, or used in a Licensed Plant,
in each instance whether patentable or not, including, without limitation,
patents, copyrights, and Confidential Information and further including the
full scope and content of the intellectual and tangible property included
therein and produced therefrom, e.g., drawings, prints, chemical formulae,
prototypes, data, computer programs and software, and the like. Inventions
or Improvements shall not include any information relating to methods of
manufacturing catalysts for use in the Conversion Process.
1.4 "LICENSE FEE" means the fee paid by Licensee to Licensor, as
consideration for granting a license to use Licensor Technology at each
Licensed Plant, as calculated in Attachment 3 of this Agreement, and does not
include fees related to the purchase of the associated Process Design
Package, any catalyst or catalyst markup.
1.5 "LICENSED FACILITIES" means one or more Licensed Plants.
1.6 "LICENSED PLANT" means a plant (including modification, expansion or
replacement thereof) licensed to operate pursuant to a Site License Agreement
issued under the terms of this Agreement, at a fixed site within the Licensed
Territory and at a design production capacity measured in Barrels of Syncrude
per day, using Licensor Technology to practice the Conversion Process to produce
Marketable Products.
1.7 "LICENSED TERRITORY" means all the countries of the world and their
respective territorial waters, except for United States of America, Canada,
Mexico, the People's Republic of China, India, and any country that, from time
to time, may be restricted by the United States Government from receiving
Licensor's underlying technology or the product thereof.
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1.8 "LICENSEE PATENT RIGHTS" means all rights with respect to patents and
patent applications of all relevant countries to the extent that the claims
embody features of Inventions or Improvements practiced in a Licensed Plant, in
each case to the extent that, and subject to the terms and conditions under
which, Licensee has the right to grant licenses, immunities or licensing rights
without having to make payment to others.
1.9 "LICENSEE TECHNICAL INFORMATION" means all unpatented Inventions or
Improvements practiced in a Licensed Plant, in each case to the extent that, and
subject to the terms and conditions under which, Licensee has the right to grant
licenses, immunities or licensing rights without having to make payment to
others.
1.10 "LICENSOR CATALYST INFORMATION" means, without limit, information
relating to any catalyst, catalyst formulation, conditioning procedure, start-up
procedure, regeneration procedure, or performance information considered to be
proprietary by and to Licensor or acquired by Licensor which is useful in the
practice of the Conversion Process and which has been used commercially or is
ready for commercial use. However, it shall be specifically understood that
Licensor Catalyst Information shall not include any information relating to
methods for manufacturing catalysts for use in the Conversion Process.
1.11 "LICENSOR CATALYST PATENT RIGHTS" means all rights with respect to
patents and patent applications of all relevant countries to the extent that
the claims embody features of catalysts useable in the Conversion Process
(including, without limitation, autothermal reforming catalysts and
▇▇▇▇▇▇▇-Tropsch Catalysts) and expressly excluding any process operating
techniques or apparatus or methods for manufacturing such catalysts, which
are acquired by Licensor or are based on inventions conceived by Licensor
prior to termination of this Agreement; in each case to the extent that, and
subject to the terms and conditions,
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including the obligation to account to and/or make payments to others, under
which Licensor has the right to grant licenses, immunities or licensing
rights.
1.12 "LICENSOR PATENT RIGHTS" means all rights with respect to patents and
patent applications of all relevant countries to the extent that the claims
embody features of the Conversion Process (including, without limitation, any
operating techniques and apparatus and expressly excluding Licensor Catalyst
Patent Rights) which are acquired by Licensor or are based on inventions
conceived by Licensor prior to termination of this Agreement; in each case to
the extent that, and subject to the terms and conditions, including the
obligation to account to and/or make payments to others, under which Licensor
has the right to grant licenses, immunities or licensing rights.
1.13 "LICENSOR TECHNICAL INFORMATION" means all unpatented information
relating to the Conversion Process (including, without limitation, operating
techniques and apparatus for carrying out the Conversion Process and expressly
excluding Licensor Catalyst Information and Reactor Information) which
(a) either (i) has been commercially used or (ii) is in a stage of development
suitable for commercial use, and (b) has been made or acquired by Licensor prior
to the termination of this Agreement; in each case to the extent that, and
subject to, the terms and conditions, including the obligation to account to
and/or make payments to others, under which Licensor has the right to disclose
and grant rights to others.
1.14 "LICENSOR TECHNOLOGY" includes Licensor Technical Information and
Licensor Patent Rights related to the practice of the Conversion Process and
Licensor Catalyst Information and Licensor Catalyst Patent Rights related to the
use of Licensor catalysts to practice the Conversion Process but expressly
excluding the right to make, have made, or sell Licensor Catalysts.
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1.15 "LUBRICANTS" means hydrocarbon base oils which can be made into, or
blended with other base oils to be made into, without limit (a) automotive
lubricating oils such as PCMO, HDD, transmission and hydraulic fluids, and gear
oils; (b) industrial lubricants such as metalworking lubricants, process oils,
white oils, agricultural spray oils, de-foamers, cutting and quenching oils, and
rubber processing oils; (c) greases; (d) drilling fluids; or (e) any other
specialty product agreed to by the Parties which is not a Marketable Product.
1.16 "MARKETABLE PRODUCTS" means finished hydrocarbon fuels, hydrocarbons
consumed as fuel, or fuel blending stocks including, but not limited to, diesel,
kerosene, gasoline, and naphtha processed from Syncrude and expressly excluding
waxes, chemicals, Lubricants, or any other specialty hydrocarbon products and
subject to the express condition that Marketable Products shall be:
(a) produced from Syncrude at the Licensed Plant; or
(b) produced from Syncrude at a separate facility by the Licensee, its
Affiliates, or third Persons who are contractually committed to Licensee
or its Affiliate to produce only Marketable Products from such Syncrude;
or
(c) produced at any location from a blended stream of Syncrude and at
least 15 vol % produced crude oil or condensate, in which the Syncrude,
before any blending,
(i) remains a liquid at sixty degrees Fahrenheit (60DEG.F) and
one (1) atmosphere pressure or,
(ii) has a chemical composition consisting of molecules having at
least 85 vol % of which contain no more than 20 carbon atoms each
and no more than 1 vol % of which contains more than 40 carbon
atoms each; or
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(d) produced at any location from a blended stream of Syncrude and at
least 40 vol % produced crude oil or condensate such that after blending
the mixture is a transportable liquid, expressly excluding slurries.
Notwithstanding the above language in this Section 1.26, hydrocarbons consumed
as fuel by Licensee or its Affiliates at locations which satisfy (a) or (b)
above are Marketable Products, regardless of whether or not they happen to be
waxes, chemicals, Lubricants, or any other specialty hydrocarbon products.
1.17 "PARTICIPATING INTEREST" means at least a ten percent (10%) working,
net profits, equity, or other economic interest, directly or indirectly
through another entity, in a Licensed Plant or Person owning or controlling a
Licensed Plant, but excluding a contract for operation of such Licensed Plant.
1.18 "PARTIES" means Licensor and Licensee.
1.19 "PARTY" means Licensor or Licensee.
1.20 "PERSON" means any natural person, corporation, partnership, limited
liability company, firm, association, trust, government, governmental agency
or any other entity, other than the Parties.
1.21 "REACTOR INFORMATION" means all information, including but not limited
to data, processes, plans, specifications, flow sheets, designs, and drawings
which relate to the internal design including, without limitation, tube
count, tube size and configuration and catalyst volume, of any Licensor
autothermal reformer or ▇▇▇▇▇▇▇-Tropsch reactor, which, at any time during
the term of this Agreement, Licensor discloses to Licensee.
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1.22 "REACTOR VENDOR" shall mean those fabricators approved by Licensor to
perform the fabrication, and/or repair work in connection with autothermal
reformer or ▇▇▇▇▇▇▇-Tropsch reactors for installation and use in Licensed
Facilities. Licensor may, from time to time, add or remove any Reactor
Vendor.
1.23 "PROCESS DESIGN PACKAGE" means a compilation of text, figures,
drawings and documentation, relating to the design and construction of a
Licensed Plant, in the form as attached to the Site License Agreement and
which may be modified from time to time by mutual consent of the Parties.
1.24 "SITE LICENSE AGREEMENT" means an agreement between the Parties, in
the form attached to this Agreement as Attachment 6 and which may be modified
from time to time by mutual consent of the Parties, granting the right to
build and operate a single Licensed Plant, specifying in each case the fixed
site and the nominal design capacity, in Barrels of Syncrude produced per day.
1.25 "START-UP DATE" means the first full calendar day following a five (5)
day period, after completion of catalyst pre-treatment and other preliminary
operations, during which the applicable Licensed Plant produces quantities of
Syncrude in an amount equal to at least 75% of the per-day design production
capacity of such Licensed Plant averaged over such 5 day period. Licensee
shall promptly notify Licensor in writing of such Start-up Date.
1.26 "SYNCRUDE" means those hydrocarbons, having a chemical composition
substantially consisting of molecules with five or more carbon atoms each,
produced using Licensor Technology in the practice of the Conversion Process
at a Licensed Plant.
2. LICENSE GRANTS
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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 2.05 & 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 in the Licensed
Territory, under a separate Site License Agreement for each Licensed Plant,
to practice the Conversion Process to manufacture Syncrude solely for the
purpose of producing, using, and selling Marketable Products anywhere in the
world.
2.02 Subject to the terms and conditions of this Agreement, Licensor grants
to Licensee a limited, non-exclusive, non-transferable (except as provided in
Section 2.05 & Article 8) right to purchase from Reactor Vendors the
appropriate ▇▇▇▇▇▇▇-Tropsch reactors and autothermal reforming reactors for
use in the practice of the Conversion Process at each Licensed Plant.
Licensee shall have no rights to make, have made, or sell any reactor based
on Reactor Information except as expressly provided in this Section 2.02.
2.03 Subject to the terms and conditions of this Agreement, Licensor grants
to Licensee (a) the right to purchase from Licensor the appropriate
▇▇▇▇▇▇▇-Tropsch Catalyst and, from either Licensor or a catalyst vendor
designated by Licensor, the appropriate autothermal reforming catalyst for
use in the practice of the Conversion Process at each Licensed Plant in the
Licensed Territory to manufacture Syncrude solely for the purpose of
producing, using, and selling Marketable Products anywhere in the world and
(b) a limited non-exclusive, non-transferable (except as provided in Section
2.05 & Article 8) right and license under Licensor Catalyst Patent Rights and
Licensor Catalyst Information to use such catalysts in the practice of the
Conversion Process at the Licensed Plant in the Licensed Territory to
manufacture Syncrude solely for the purpose of producing, using, and selling
Marketable Products anywhere in the world. Licensee may purchase catalyst
from Licensor at a price equal to the lowest of (a) Licensor's cost to
produce or have produced such catalysts, plus a markup of twenty five percent
(25%), or (b) if, during the twelve (12) month period prior to a catalyst
purchase by Licensee, the same catalyst (at
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comparable quantities) was sold to another party at a markup less than twenty
five percent (25%), Licensee shall have a right to the lower markup for its
current catalyst purchase. Licensor will, no more than once per year, provide
Licensee reasonable access to the relevant books of Licensor to verify the
lowest markup for such catalyst. Licensee shall have no rights to make, have
made, or sell any Licensor ▇▇▇▇▇▇▇-Tropsch Catalyst or autothermal reforming
catalyst, if proprietary to Licensor. Beyond the initial catalyst fill,
Licensee will have the right to buy replacement catalyst from other catalyst
suppliers. If Licensor specifies in the Process Design Package an
autothermal reforming catalyst commercially available from a third party,
Licensee shall have the right to purchase such catalyst directly from a third
party.
2.04 Upon Licensee's request, Licensor will execute a Site License
Agreement with respect to a specific proposed Licensed Plant if:
(a) Licensee has a Participating Interest in the proposed Licensed Plant
as represented in a Request for Site License Agreement (Attachment 1);
(b) Licensee is current on all payments due under prior Site License
Agreements for all Licensed Facilities under this Agreement in accordance
with their respective terms;
(c) There is not a material default under this Agreement for which
Licensee is responsible resulting from or affecting more than one
Licensed Plant; and
(d) No Person having a Participating Interest in the proposed Licensed
Plant is in material default under any agreement relating to Licensor
Technology.
Until such time as the above conditions are satisfied, Licensee shall have no
right or license to use Licensor Technology at the proposed Licensed Plant.
2.05 During the term of this Agreement, Licensee may extend this Agreement
to any Affiliate, provided that Licensee shall first notify Licensor in
writing of any such extension and the acceptance of such extension by such
Affiliate pursuant to this Section 2.05. The
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Affiliate to which this Agreement may be extended by Licensee shall be
subject to and shall accept in writing (in the form set forth in Attachment
2) the same obligations to which Licensee is subjected under this Agreement
and all terms and conditions of this Agreement shall apply to such Affiliate
with respect to its obligations and its rights (except the right of extension
as set forth in this Section 2.05) as if such Affiliate had entered into this
Agreement with Licensor effective as of the date of such extension. Licensee
warrants to Licensor the full performance by such Affiliate of the
obligations which are imposed upon such Affiliate as a result of such
extension of this Agreement and, notwithstanding any assignment, Licensee
shall still be liable to Licensor for all sums which become due from such
Affiliate to Licensor and for any default by such Affiliate.
3. TECHNICAL ASSISTANCE
3.01 Licensee shall purchase and Licensor agrees to furnish to Licensee, or
to a contractor selected by Licensee, a Process Design Package for each
Licensed Plant according to the terms specified in Section 5.03 of this
Agreement.
3.02 Reactor Information required for each Licensed Plant shall be excluded
from the Process Design Package, however, those elements of Reactor
Information which are required to fabricate such reactors will be provided by
Licensor directly to the Reactor Vendors selected by Licensee to manufacture
the autothermal reformer and ▇▇▇▇▇▇▇-Tropsch reactors from Licensor's then
current list of Reactor Vendors. Licensor may, from time to time, add or
remove any Reactor Vendor.
3.03 Except as set forth in a Process Design Package, the obligations of
Licensor under this Agreement do not include the performing of any basic or
detailed design, engineering, training, consulting, start-up, operating or
maintenance services with respect to any Licensed Plant. Licensor's
responsibilities for any such services in the design, construction and
operation (including maintenance) of any Licensed Plant shall be as set forth
in one or
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more separate written engineering services agreement(s) between Licensor and
Licensee specifically applicable to each Licensed Plant.
3.04 Licensor agrees to disclose to Licensee, upon reasonable request but
at least once a year, improvements or inventions which have been commercially
used or which Licensor determines are in a stage of development suitable for
commercial use. Licensor shall permit Licensee to reasonably inspect, at
mutually convenient times, the operating procedures, process conditions,
material balances, energy consumption, catalyst performance, and analyses of
internal streams and/or Syncrude at Licensor's pilot plant which are
applicable to such improvements or inventions.
3.05 Licensee agrees to permit Licensor and/or its representatives access
to Licensee's Licensed Plants for inspection and training, at reasonable and
convenient times, by representatives of Licensor. Licensor shall have the
right to charge a reasonable fee for any training as agreed with the Licensee
on a case by case basis.
4. LICENSEE GRANTS TO LICENSOR
4.01 Licensor may, no more than one (1) time per year, request and Licensee
agrees to disclose to Licensor any Inventions or Improvements related to the
Conversion Process.
4.02 Subject to the terms and conditions of this Agreement, Licensee grants
to Licensor a limited, non-exclusive, irrevocable, royalty free, worldwide
license under Licensee Patent Rights and to use Licensee Technical
Information for the design, construction, operation and maintenance
(including modify, expand and replace) of plants practicing the Conversion
Process, together with the right to grant corresponding sublicenses to other
licensees of Licensor Technology provided that such other licensees shall
have granted reciprocal rights to Licensor to use and grant sublicenses under
their patent rights and technical information for the benefit of Licensee.
Licensee shall have
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the right to charge a reasonable fee for any training as agreed with the
Licensor on a case by case basis.
4.03 Should Licensee, during the term of this Agreement, make any
patentable Inventions or Improvements relating to use of the Conversion
Process for the production of Syncrude, Licensee may, at its sole discretion,
file patent applications with respect to such improvements in its own name
and at its own expense, and take such other steps as are necessary, in the
sole judgment of Licensee, to protect its rights in such Inventions or
Improvements. In the event Licensee declines to file any patent application
with respect to Inventions or Improvements, it shall promptly notify Licensor
in a timely manner to allow Licensor, at its sole discretion, to file such
patent application at its sole expense, and to take such other steps as are
necessary, in its judgment, to protect the Parties' rights in such Inventions
or Improvements, subject to Licensee's obligation to account to third parties
therefor.
4.04 Licensor and Licensee each agree that they will take all actions and
execute all documents and shall cause their employees, agents and contractors
to take all actions and execute all documents as are necessary or appropriate
to carry out the provisions of this Article 4 or to assist each other in the
preparation, filing and prosecution of patent applications or securing such
protection referenced in this Article 4 when so requested.
4.05 Licensee shall permit Licensor and/or its representatives to
reasonably inspect, at mutually convenient times, the operating procedures,
process conditions, material balances, energy consumption, catalyst
performance, and analyses of internal streams and/or Syncrude which are
applicable to such Inventions or Improvements at any Licensed Plant
incorporating such Inventions or Improvements.
4.06 Licensee agrees to provide, from time to time and upon request by
Licensor, samples of Marketable Products as they are produced by any of
Licensee's Licensed Plants
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to verify compliance with this Agreement. Licensor agrees to limit its
analysis of samples of Marketable Products to those analyses necessary to
determine compliance with the definition of Marketable Products.
5. LICENSE AND OTHER FEES
5.01 In consideration for the rights granted to Licensee by Licensor under
this Agreement, Licensee shall pay Licensor ___________________________________
upon signing this Agreement and such monies shall be fully credited against
the first __________________________ in License Fees that become due as they
are set out in Attachment 3.
5.02 Licensee agrees to pay fees to Licensor in accordance with Attachment
3 for each Licensed Plant.
5.03 In addition to the amounts to be paid to Licensor under Section 5.01 &
5.02, Licensee agrees to pay Licensor for each Process Design Package, a fee
equal to the costs actually incurred by Licensor in preparing a Process
Design Package, plus 10 percent (10%) of the total of such actual cost. Such
fee shall be invoiced to Licensee after delivery of a Process Design Package.
Payment will be made within thirty (30) days from receipt of invoice by
Licensee.
5.04 All fees payable under this Agreement shall be paid by Licensee to
Licensor at Licensor's address specified in Section 10.07, or to an account
at a bank specified by Licensor, in dollars of the United States of America.
5.05 In the event Licensee is required to withhold any taxes from the fees
payable to Licensor under this Agreement, Licensee agrees to provide Licensor
at the time of such withholding with a receipt or other evidence reflecting
the deposit of such taxes with the appropriate governmental agency.
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5.06 With respect to each Site License Agreement under this Agreement, if
the Licensee's Participating Interest at the time of execution of the Site
License Agreement results in the Licensed Plant being classified as a
Standard Licensed Plant, regardless of whether the license is executed by
Licensee or an Affiliate of Licensee, Licensor agrees to refund to Licensee
that portion of the License Fee equal to the difference between the Preferred
Royalty Rate and the Market Royalty Rate, as defined in Attachment 3 of this
Agreement, pro-rated by Licensee's or Affiliate's share of the entire
Participating Interest.
6. WARRANTIES AND INDEMNITIES
6.01 Licensor represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Oklahoma, United States of America, and has full power and authority to
enter into and perform its obligations under this Agreement, including the
right to grant the rights and licenses as set forth in Article 2. The
execution, delivery and performance of this Agreement and all documents
relating hereto by Licensor have been duly and validly authorized by all
requisite corporation action and constitute valid and binding obligations of
Licensor enforceable in accordance with their respective terms.
6.02 Licensee represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of Delaware
and has full power and authority to enter into and perform its obligations
under this Agreement including the right to grant the rights and licenses as
set forth in Article 4. The execution, delivery and performance of this
Agreement and all documents relating hereto by Licensee have been duly and
validly authorized by all requisite corporate action and constitute valid and
binding obligations of Licensee enforceable in accordance with their
respective terms.
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6.03 Except as otherwise expressly set forth in this Agreement or other
written agreement between the Parties, LICENSOR MAKES NO AND HEREBY DISCLAIMS
ANY EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, OR ANY OTHER WARRANTIES OR REPRESENTATIONS
OF ANY KIND TO LICENSEE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OR
REPRESENTATION WITH RESPECT TO USE OF LICENSOR TECHNOLOGY AS AUTHORIZED
HEREUNDER.
6.04 EXCEPT FOR UNAUTHORIZED DISCLOSURE OF CONFIDENTIAL INFORMATION UNDER
THIS AGREEMENT, IN NO EVENT SHALL A PARTY BE LIABLE TO THE OTHER FOR ANY
SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, OR EXEMPLARY DAMAGES, INCLUDING
WITHOUT LIMITATION, LOST PROFITS OR SAVINGS, REGARDLESS OF THE FORM OF ACTION
GIVING RISE TO SUCH A CLAIM FOR SUCH DAMAGES, WHETHER IN CONTRACT OR TORT
INCLUDING NEGLIGENCE, EVEN IF LICENSOR OR LICENSEE HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. BUT IF A PARTY IS FOUND LIABLE, DESPITE THE
ABOVE LANGUAGE, TO THE OTHER PARTY FOR SPECIAL, INDIRECT, CONSEQUENTIAL,
INCIDENTAL, PUNITIVE, OR EXEMPLARY DAMAGES THEN THE MAXIMUM LIMIT OF SUCH
DAMAGES IS AGREED TO BE FIVE THOUSAND DOLLARS ($5,000.00).
6.05 A Party will promptly advise the other Party in writing of any claim
made or lawsuit alleging infringement of any patent or copyright or
misappropriation of Confidential Information based on the design,
construction and/or operation of the Licensed Facilities (including the
Syncrude produced from the Licensed Facilities).
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(a) If the Licensee has made a modification to the Process Design
Package, and infringement or misappropriation would not exist in the absence
of Licensee's modification, Licensee will be solely responsible for any claim
or lawsuit. Licensee will (i) promptly undertake at its own expense the
defense of the claim or lawsuit, and (ii) hold Licensor, its Affiliates, and
their officers, directors, and employees harmless from any damages or other
sums that may be assessed in or become payable under any decree or judgment
by any court or other tribunal which results from such claim or lawsuit.
(b) If the design, construction and/or operation, which is the basis for
the alleged infringement or misappropriation, is in accordance with the
designs, specifications and operating conditions (including, but not limited
to, catalysts) embodied in the Process Design Package for the Licensed
Facilities, Licensor will (i) promptly undertake at its own expense the
defense of the claim or lawsuit, and (ii) hold Licensee, its Affiliates, and
their officers, directors, and employees harmless from any damages or other
sums that may be assessed in or become payable under any decree or judgment
by any court or other tribunal which results from such claim or lawsuit.
(c) A Party will render all reasonable assistance that may be required
by the other Party in the defense of such claim or lawsuit and such Party
shall have the right to be represented therein by advisory counsel of its
selection and at its expense.
(d) In the event a court or other tribunal finds that infringement
and/or misappropriation has occurred not as a result of Licensee's
modifications, Licensor shall have the option, at its sole expense, to either
(i) provide designs, specifications and/or operating conditions (including,
but not limited to, catalysts) and make modifications to the Licensed Plant
which avoid such infringement and/or misappropriation without degrading the
economics or performance of the Licensed Facilities, or (ii) acquire the
right to continue using the design, construction and operating conditions
(including, but not limited to, catalysts), which were the subject of such
infringement and/or misappropriation.
18
(e) Except as provided in (d) above, a Party shall not settle or
compromise any such claim or lawsuit without the written consent of the other
Party if such settlement or compromise obligates the other Party to make any
payment or part with any property, to assume any obligation or grant any
licenses or other rights, or to be subject to any injunction by reason of
such settlement or compromise.
6.06 Licensor agrees to indemnify and hold harmless Licensee, its
Affiliates, and their officers, directors, and employees from and against the
full amount of any and all claims, demands, actions, damages, losses, costs,
expenses, or liability whatsoever (including without limitation the costs of
litigation, including reasonable attorneys' fees), for patent infringement,
property (real and personal) damage, personal injury or death, fines, or
penalties arising in whole or in part out of the use of Licensee Patent
Rights and Licensee Technical Information in a plant operated by Licensor or
Person under license from Licensor.
6.07 Licensor agrees to indemnify and hold harmless Licensee, its
Affiliates, their officers, directors, and employees from and against the
full amount of any and all claims, demands, actions, damages, losses, costs,
expenses, or liability whatsoever (including without limitation the costs of
litigation, including reasonable attorneys' fees), for property (real and
personal) damage, personal injury or death, fines, or penalties arising in
whole or in part out of acts or omissions in the preparation and content
(including design, engineering, and specifications) of the Process Design
Package for the Licensed Facilities.
6.08 Licensee agrees to indemnify and hold harmless Licensor, its
Affiliates, their officers, directors, and employees from and against the
full amount of any and all claims, demands, actions, damages, losses, costs,
expenses, or liability whatsoever (including without limitation the costs of
litigation, including reasonable attorneys' fees), for property (real and
personal) damage, personal injury or death, fines, or penalties arising in
whole or
19
in part out of acts or omissions outside the scope of or any modification to
the content (including design, engineering, and specifications) of the
Process Design Package for the Licensed Facilities.
6.09 Licensor's total obligation and liability to indemnify and hold
Licensee harmless for any and all claims (i) under this Article 6, including
but not limited to all expenses incurred by Licensor in assuming Licensee's
defense, making modifications to the Licensed Plant and for paying any
judgments or settlements on Licensee's behalf, or for any other reason
contemplated by this Article 6, (ii) for failure to meet any process
guarantees that may have been provided under a separate agreement, or (iii)
for any other indemnification made by Licensor pursuant to this Agreement,
shall in no event exceed 50% of the total License Fees received from the
Licensee for any such Licensed Plant that is subject to the above claims.
6.4 Licensee's total obligation and liability to indemnify and hold
Licensor harmless for any and all claims (i) under this Article 6 including
but not limited to all expenses incurred by Licensee in assuming Licensor's
defense and for paying any judgments or settlements on Licensor's behalf, or
for any other reason contemplated by this Article 6, or (ii) for any other
indemnification made by Licensee pursuant to this Agreement, shall in no
event exceed 50% of the total License Fees received by Licensor from Licensee
for any such Licensed Plant that is subject to the above claims.
7. CONFIDENTIALITY AND LIMITATIONS
7.01 Licensee agrees that any Confidential Information disclosed by
Licensor or an Affiliate directly or indirectly to Licensee during the period
from the date of Licensee's execution of its Confidentiality Agreement
through the term of this Agreement, will be kept confidential by Licensee for
a period of fifteen (15) years after the date of each disclosure, but not to
exceed five (5) years after the termination of this Agreement or
20
fifteen (15) years from the Effective Date, whichever last occurs, with the
same standard of care Licensee uses to protect its own similar confidential
information, and except as otherwise provided in this Agreement, will not be
disclosed to others or copied or duplicated (except for internal use), and
will be used by Licensee solely as it relates to this Agreement, and for no
other purpose, including Licensee's research, development or commercial
activities related to the Conversion Process for its own account. To the
extent reasonably necessary to carry out the purposes of this Agreement,
Licensee may disclose any of the foregoing information to an Affiliate,
provided that the Affiliate has agreed in writing to be bound by this
Agreement.
7.02 Licensor agrees that any Confidential Information disclosed by
Licensee or an Affiliate directly or indirectly to Licensor during the term
of this Agreement will be kept confidential by Licensor for a period of
fifteen (15) years after the date of each disclosure, but not to exceed five
(5) years after the termination of this Agreement or fifteen (15) years from
the Effective Date, whichever last occurs, with the same standard of care
Licensor uses to protect its own similar confidential information, and except
as otherwise provided in this Agreement, not disclosed to others or copied of
duplicated, and used by Licensor solely in the development, marketing and
licensing of the Conversion Process, and for no other purpose. Licensor may
disclose such Confidential Information to third parties who have executed a
secrecy agreement with confidentiality terms similar to this Agreement. To
the extent reasonably necessary to carry out the purposes of this Agreement,
Licensor may disclose any of the foregoing information to an Affiliate,
provided that the Affiliate has agreed in writing to be bound by the relevant
provisions of this Agreement.
7.03 A Party shall not be subject to the restrictions set forth in Sections
7.01 and 7.02 as to the disclosure, duplication or use of disclosed
Confidential Information, which the receiving Party can prove by competent
evidence (a) was already known to the receiving Party or an Affiliate prior
to the disclosure thereof by the disclosing Party; (b) is or
21
becomes part of the public knowledge or literature without breach of this
Agreement by the receiving Party only after it becomes part of the public
knowledge or literature; (c) shall otherwise lawfully become available to the
receiving Party or an Affiliate from a third party but only after it becomes
so available and provided the third party is not under obligation of
confidentiality to disclosing Party; or (d) is developed by the receiving
Party or an Affiliate independently of any disclosure by the disclosing Party
to the receiving Party or an Affiliate under this Agreement or independently
of any joint research and development activities of Licensee and Licensor
which may occur under a separate Agreement. Any Confidential Information
disclosed shall not be deemed to fall within the confidentiality exceptions
of this Section 7.03 merely because it is embraced by more general
information. In any such case set forth in Section 7.03(a), (b), (c), and
(d), the receiving Party shall keep confidential and not disclose to any
third party that any such information was also made available to or acquired
by the receiving Party or an Affiliate from the disclosing Party, and such
release from the secrecy obligation shall not be considered as a license to
make, sell, use or operate under any of the disclosing Party's proprietary
rights.
7.04 The receiving Party shall limit access to the confidential information
disclosed to it to those employees of the receiving Party or an Affiliate who
reasonably require the same and who are under a legal obligation of
confidentiality on the terms set forth in Section 7.01 and Section 7.03. The
receiving Party shall be responsible to the disclosing Party for the
performance by its employees. The receiving Party shall keep a record of any
Confidential Information marked "Limited Access" and the identity of each
employee who has access to Confidential Information so marked. The receiving
Party shall inform the other Party of the identity of each such employee
within thirty (30) days of disclosure.
7.05 The Parties agree that they will each take all actions and execute all
documents, and shall cause their employees, agents and contractors to take
all actions and execute all
22
documents as are necessary or appropriate to carry out the provisions of this
Article 7 or to assist each other in securing protection of intellectual
property and Confidential Information referenced in this Article 7.
7.06 With respect to any catalyst furnished by Licensor to Licensee for use
by Licensee at the Licensed Facilities, Licensee will not, and Licensee will
not allow any other person to, analyze, break down, reverse engineer or
otherwise seek to determine the chemical composition, except for loss on
ignition and bulk density, of any such catalyst, except that Licensee shall
be entitled to (a) perform analyses that Licensor may from time to time
specifically authorize in writing, to the extent required for monitoring the
performance of the Licensed Facilities and for regeneration, reclamation or
disposal of spent catalysts, such authorization not to be unreasonably
withheld, and (b) provide results of the aforementioned analyses to other
parties to the extent required for regeneration, reclamation or disposal of
spent catalysts, but only after such other parties have entered into an
agreement with Licensor in a form attached hereto as Attachment 4. Licensor
will be provided with a copy of all such analyses which has been approved in
writing prior to release to other parties.
8. ASSIGNMENT AND TRANSFERS
8.01 Except for assignment to an Affiliate, which may be performed without
written consent of Licensor, this Agreement shall not be assignable by
Licensee without the prior written consent of the Licensor, which consent
will not be unreasonably withheld. Licensee will notify Licensor in writing
of any assignment to an Affiliate. Any attempted assignment of this
Agreement by Licensee without consent of Licensor shall be void.
8.02 In the event of the transfer of Licensee's Participating Interest in
any Licensed Plant to another Person other than an Affiliate, Licensee and
Licensor shall simultaneously agree to the following:
23
a) acquire from the Licensor a fully paid license for the then current
design capacity of the Licensed Plant,
b) transfer the fully paid license acquired in 8.02 (a) above to the Person
acquiring the Licensee's Participating Interest in the Licensed Plant
using the form of letter agreement set forth in Attachment 5 and
submitting it to Licensor, and
c) obtain the Person's unconditional execution of a new site license
agreement in the form of Attachment 6, and submit such new site license
agreement to Licensor, whereupon if Licensor gives its consent, such
consent not to be unreasonably withheld, and executes such new site
license agreement, then such Licensed Plant shall be deleted from this
Agreement and the Person or Persons shall be substituted for Licensee for
all purposes in connection with such Licensed Plant. Licensor's refusal
to consent may be justified by a reasonable concern that assignee will
not comply with the terms of the license agreement. A transfer of
Licensee's Participating Interest does not relieve Licensee of its
confidentiality obligations with respect to Confidential Information
associated with such transferred Participating Interest prior to
transfer.
9. TERM AND TERMINATION
9.01 This Agreement shall extend for a period of fifteen (15) years
following the Effective Date and shall then continue on a year-to-year basis
until terminated at the end of any calendar year by either Party on sixty
(60) days prior written notice to the other Party.
9.02 Upon the written notice from Licensor to Licensee of any material
default under this Agreement, other than as noted in Section 2.04 (c), all
rights of Licensee under Section 2.04 of this Agreement, shall be suspended
until such default is cured by Licensee. Licensee's or an Affiliate's right
to operate any Licensed Plant which is in compliance with its Site License
Agreement shall not be affected by either a default under this Agreement or a
default at another Licensed Plant. If a material default under this Agreement
shall
24
continue for a period of one year following written notice of such default to
Licensee from Licensor without being cured by Licensee, then Licensor shall
have the right to terminate this Agreement upon written notice to Licensee.
The actions by Licensor under this Section shall not prejudice Licensor from
enforcing any claim which it may have for damages or otherwise on account of
the default.
9.03 Termination of this Agreement shall not:
(a) relieve Licensee of its obligations to account for and pay all
amounts due Licensor under this Agreement and all Site License
Agreements under this Agreement;
(b) affect any rights granted under Site License Agreements in effect
on the date of termination;
(c) affect any rights granted under Article 4 with respect to Licensee
Patent Rights and Licensee Technical Information, which shall
survive termination in accordance with its terms; or
(d) affect the obligations of Licensor and Licensee under Articles 6
and 7 and Sections 8.02 and 10.02, which shall survive termination
in accordance with their terms.
9.04 Except as provided in Section VI of Attachment 3, no Party to this
Agreement shall be in default in performing its obligations under this
Agreement to the extent that performing such obligations, or any of them, is
delayed or prevented by revolution, civil unrest, strike, labor disturbances,
epidemic, accident, fire, lightening, flood, storm, earthquake, explosion,
blockage or embargo, or any law, proclamation, regulation or ordinance, or
any other cause that is beyond the control and without the fault or
negligence of the Party asserting the benefit of this Section 9.04. Each
Party shall do all things reasonably possible to remove the cause of such
default.
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9.05 Licensee shall have the right to terminate this Agreement in its sole
discretion, with or without cause, upon the delivery of written notice of
termination to Licensor.
10. MISCELLANEOUS
11.01 This Agreement embodies the entire intent of the Parties and merges
all prior oral and written agreements between the Parties hereto with respect
to subject matter hereof, except for the Confidentiality Agreement between
Texaco Development Corporation and Syntroleum, dated July 5, 1995, the
Confidentiality Agreement, the Sponsored Research and License Option
Agreement, dated February 15, 1995, and the Joint Development Agreement,
dated September ___, 1996, which were made between Licensee and Licensor. No
stipulation, agreement, representation or understanding of the Parties hereto
shall be valid or enforceable unless contained in this Agreement or in a
subsequent written agreement signed by the Parties hereto. In the event of a
conflict between this Agreement and a Site License Agreement under this
Agreement, this Agreement will govern.
10.01 THIS AGREEMENT HAS BEEN ENTERED INTO IN THE STATE OF NEW YORK AND THE
VALIDITY, INTERPRETATION AND LEGAL EFFECT HEREOF SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. The Parties expressly and
irrevocably consent and submit to the jurisdiction of any state or federal
court sitting in Texas or Oklahoma and agree that, to the fullest extent
allowed by law, only such Texas or Oklahoma courts, to the exclusion of all
others, shall have jurisdiction over any action, suit or proceeding arising
out of or relating to this Agreement. The Parties each irrevocably waive, to
the fullest extent allowed by law, any objection either of them may have to
the laying of venue of any such suit, action or proceeding brought in any
state or federal court sitting in Texas or Oklahoma based upon a claim that
such court is inconvenient or otherwise an objectionable forum. Any process
in any action, suit or proceeding arising out of or
26
relating to this Agreement may, among other methods, be served upon any Party
by delivering it or mailing it to their respective addresses set forth
herein. Any such delivery or mail service shall be deemed to have the same
force and effect as personal service in the States of Texas or Oklahoma.
10.02 This Agreement does not grant and shall not be construed as granting
any license, authorization or consent, to either Party by the other Party
hereto, to use any name, trademark, service ▇▇▇▇ or slogan of the other
Party. A Party shall not use the other Party's name without written consent,
except for the identification of the other Party as a Licensee or Licensor of
Licensor Technology. The terms of this Agreement will be maintained in
confidence by each Party subject to the same standard of care each Party uses
to protect its confidential information, except as required by law. A press
release which includes the name of the other party must have prior written
approval of the other Party, except as required by law.
10.03 Failure of either Licensor or Licensee at any time or from time to
time to exercise any of its rights under this Agreement or to insist upon
strict performance of the other Party's obligations hereunder shall not be
deemed a waiver of or to limit any of such rights or obligations with respect
to any subsequent occurrence.
10.04 Licensee agrees that all Licensor information, technology, patents,
and the product produced directly by the use thereof, when used outside the
United States of America, shall be used by Licensee subject to and in
accordance with regulations of any department or agency of the United States
of America and shall not be re-exported or trans-shipped to any destination
requiring the approval of the United States Government for such
re-exportation or trans-shipment until a request to do so has been submitted
to and approved by the United States Government and Licensor.
27
10.05 Should any part or provision of this Agreement be held unenforceable
or in conflict with the law of any state or of the United States of America
or of any foreign country, the validity of the remaining parts or provisions
shall not be affected by such holding.
10.06 All notices hereunder shall be addressed to the Parties as follows:
(a) If to Licensor:
Syntroleum Corporation
▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Phone No.: (▇▇▇) ▇▇▇-▇▇▇▇
ATTN: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
with copy to:
▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Pray, Walker, Jackman, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Phone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Licensee:
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Texaco Natural Gas Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Phone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice required or permitted to be given under this Agreement by one of
the Parties to the other shall be deemed to have been sufficiently given for
all purposes hereof if mailed by registered or certified mail, postage
prepaid, addressed to such Party at its address
28
indicated above, electronically transmitted and acknowledged by the other
Party or by actual delivery of written notice to the other Party.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date set forth above.
Licensor
SYNTROLEUM CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, CEO
Date: September 25, 1996
----------------------------
Licensee
TEXACO NATURAL GAS INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------
Title: Chairman
---------------------------
Date: September 20, 1996
------------------------------
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