Cooperation Agreement Ensyn Petroleum

COOPERATION AGREEMENT


THIS COOPERATION AGREEMENT dated the 30th day of May, 2003 is entered into by and between ENSYN PETROLEUM INTERNATIONAL LTD., a Delaware corporation having offices at the City of Boston, Massachusetts 02116 (hereinafter called "Ensyn"), and IVANHOE ENERGY (USA) INC., a Nevada corporation having offices at the City of Bakersfield, California (hereinafter called "Ivanhoe").


WHEREAS, Ensyn and its Affiliates are constructing the Pilot Project;


WHEREAS, Ensyn and Ivanhoe entered into the Project Agreement; and


WHEREAS, pursuant to the Project Agreement, Ensyn may install the Pilot Project at an Ivanhoe Site, or Ensyn may install the Pilot Project at an Alternate Site.


NOW, THEREFORE, in consideration of the Parties' mutual promises and agreements and subject to the terms and conditions set forth below, the Parties agree as follows:


1. DEFINITIONS. In this Agreement, including the recital, unless there is something in the subject matter or the context inconsistent therewith, the following terms shall have the following meanings:


"AFFILIATE" means, in respect to a Party, a Person which controls, is controlled by, or is under common control with, such Party and, for the purposes of this definition, "CONTROL" means the direct or indirect ability, in the case of a corporation, to vote sufficient shares of the corporation to elect a majority of the directors thereof and, in the case of other Persons, "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership or voting of securities, by contract or otherwise. Notwithstanding the foregoing, it is understood and agreed that ITS ENSYN LLC, a Delaware limited liability company, shall be considered an Affiliate of Ensyn for purposes of this Agreement.


"AGREEMENT" means this Cooperation Agreement, together with any amendments to or replacements of or substitutions for this Agreement.


"AI EXCLUSIVE PERIOD" has the meaning of that term provided in Section 3(a) of this Agreement.


"ALTERNATE SITE" means a site that is not owned or controlled by Ivanhoe.


"AREAS OF INTEREST" has the meaning of that term provided in Section 3(a) of this Agreement.


"BPD" means barrels per day.


"BARREL" means 0.15891 cubic meters.


"BUSINESS DAY" means any day on which banks are generally open to transact commercial business in the State of Delaware, excluding any Saturday, Sunday or statutory holiday in Delaware


"BUSINESS INFORMATION" has the meaning of that term provided in Section 2(f) of this Agreement.


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"BUSINESS PLAN" has the meaning of that term provided in Section 2(f) of this Agreement.


"CONFIDENTIAL INFORMATION" means with respect to a Party, as the case may be, any and all information of a confidential nature of such Party, and of the Affiliates of such Party and of the shippers and customers of such Party or its Affiliates, whether received in writing, verbally or through observation, including without limitation, all data and information relating to the Pilot Project and any process, technology or system relating thereto, and the design, construction, operation, maintenance or any aspect of the Pilot Project, including Pilot Project plans, production characteristics and testing results related thereto and use of the RTP(TM) with respect to the Pilot Project.


"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement dated July 14, 2002 by and among Ivanhoe and its subsidiaries and affiliates and Ensyn Group, Inc. and Ensyn Technologies Inc.


"EFFECTIVE DATE" means the date first set forth above.


"EXCLUSIVITY EXTENSION PREPAYMENT" has the meaning of that term provided in Section 2(g) of this Agreement.


"FORCE MAJEURE" shall mean any act of God, accident, explosion, fire, storm, earthquake, flood, drought, riot, embargo, civil commotion, war, act of war, labor dispute or disruption, or any other circumstance or event beyond the reasonable control of the Party relying upon such circumstance or event.


"INFORMATION PERIOD" has the meaning of that term provided in Section 2(f) of this Agreement.


"INTELLECTUAL PROPERTY" means any or all of the following:


(a) all Canada, United States and foreign patents and
applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part
thereof;


(b) trade secrets and proprietary information, including trade
secrets and proprietary information that are inventions (whether
patentable or not), invention disclosures, improvements, know how,
technology, technical data, results of experiments, formulae,
specifications, procedures and tests;


(c) all copyrights, copyrights registrations and applications
therefor and all other rights corresponding thereto;


(d) all industrial designs and any registrations and
applications therefor;


(e) all trade names, logos, common law trade-marks and service
marks, and all trade-mark and service mark registrations and
applications therefor and all goodwill associated therewith;


(f) any rights similar, corresponding or equivalent to, and
all documentation related to, any of the foregoing.


"IVANHOE ANALYSIS" has the meaning of that term provided in Section 2(f) of this Agreement.


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"IVANHOE DATA" has the meaning of that term provided in Section 2(f) of this Agreement.


"IVANHOE RESULTS DATE" means the date on which Ensyn provides Ivanhoe with the results of the Ivanhoe Testing.


"IVANHOE SITE" means a site controlled by Ivanhoe in the State of California.


"IVANHOE TESTING" means upgrading petroleum supplied by Ivanhoe by use of the Technology and supplying the results of such upgrading to Ivanhoe, including assays and other data and information regarding the characteristics of such petroleum and the upgraded product produced therefrom.


"NOTICE DEADLINE" means December 31, 2003.


"OPERATING COSTS" shall include all costs for activities necessary for the operation of the Project, including labor, raw materials, utilities, insurance costs, replacement parts and maintenance. It is understood and agreed that "OPERATING COSTS" will not include any allocations for depreciation or the capital costs of the RTP(TM) equipment.


"OTHER FIELDS" has the meaning of that term provided in Section 2(f) of this Agreement.


"OWNER" means the owner of the Alternate Site at which the Pilot Project is sited.


"PARTIES" means the parties to this Agreement, and "PARTY" means one of them.


"PERSON" means any individual, corporation, limited liability company or other legal entity and also includes partnerships, whether limited or general, and any trust.


"PILOT PROJECT" means a pilot project for Ensyn to demonstrate the commercial viability of the Technology to partially upgrade bitumen and heavy oil.


"PREPAID LICENSE FEE" has the meaning of that term provided in Section 2(f) of this Agreement.


"PROJECT AGREEMENT" means the Project Agreement dated the 18th day of March, 2003 between Ivanhoe and Ensyn.


"PROJECT DATA" has the meaning of that term provided in Section 2(e) of this Agreement.


"PROJECT DATA PERIOD" has the meaning of that term provided in Section 2(e) of this Agreement.


"RTP(TM)" means Ensyn's patented Rapid Thermal Pyrolysis technology and its related Intellectual Property, including that having U.S. Patent No. 5,792,340.


"TECHNOLOGY" means (a) RTP(TM), as improved, developed, modified, expanded or refined from time to time, (b) any Intellectual Property rights relating to any Production, and (c) any and all other Intellectual Property rights dealing with rapid pyrolysis technology owned by or licensed to Ensyn.


"TESTING NOTICE" has the meaning of that term provided in Section 2(d) of this Agreement.


"THIRD PARTIES" means Persons other than Ensyn or Ivanhoe, and "THIRD PARTY" means one of them.


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2. COOPERATION. In the event that Ensyn installs the Pilot Project on an Alternate Site, the Parties agree as follows:


(a) Subject to Ensyn obtaining any necessary approvals, including that of the Owner, at the request of Ensyn, Ivanhoe agrees to provide up to twenty (20) hours per month of consulting services with respect to the Pilot Project for a 12-month period commencing on August 1, 2003, with such services consisting of evaluating construction and Operating Costs of the Pilot Project and preparing reports with respect thereto


(b) Ivanhoe agrees to fund one-half of the cost of a study to be performed by Purvin & Gertz, with Ivanhoe's portion not to exceed Seven Thousand, Five Hundred and 00/100 ($7,500.00) Dollars, to analyze and evaluate the market in the State of California for RTP(TM) upgraded products produced in the amount of one thousand (1,000), three thousand (3,000) and ten thousand (10,000) bpd.


(c) Ivanhoe agrees that, at Ensyn's request, it will deliver petroleum to the Alternate Site for a 24-hour test on the Pilot Project (i.e., up to 250 barrels) and, in such case, will pay, within thirty (30) days of Ensyn providing an invoice with respect thereto, an amount equal to one-half of the cost of assays and evaluations for the products produced from such petroleum. Ensyn will provide Ivanhoe with the results of such testing, including assays and other data and information regarding the characteristics of such petroleum and the upgraded product produced therefrom.


(d) If Ivanhoe delivers notice to Ensyn no later than the Notice Deadline in the form attached hereto as Appendix "A" that Ivanhoe requires Ensyn to operate the Pilot Project for a period of up to seven (7) days for the Ivanhoe Testing of petroleum delivered to the Alternate Site by Ivanhoe ("Testing Notice") and Ivanhoe delivers such petroleum to the Alternate Site, Ensyn shall perform such testing at a time reasonably agreed upon by the Parties, but in no case later than June 30, 2004 unless the parties otherwise agree in writing. In such case, Ivanhoe agrees to pay Ensyn within thirty (30) days of Ensyn providing an invoice with respect thereto, an amount equal to all Operating Costs of the Pilot Project during such period, as well as for the cost of assays and evaluations for the products produced from such petroleum. Provided that Ivanhoe gives Ensyn and the Owner reasonable notice and agrees to ensure that persons visiting the Alternate Site adhere to the safety and other reasonable requirements of Ensyn and the Owner, Ivanhoe has the right to visit the Alternate Site during the Ivanhoe Testing and to visit the Alternate Site with Third Parties with the prior approval of Ensyn, which approval shall not be unreasonably withheld. It is understood and agreed that any Third Parties visiting the Alternate Site at the request of Ivanhoe shall be required by Ivanhoe to deliver to Ensyn a written acknowledgement of their familiarity with the provisions of the Confidentiality Agreement and their agreement to be bound by such provisions.


(e) Subject to any confidentiality or nondisclosure agreements with Third Parties, if Ivanhoe delivers the Testing Notice to Ensyn by the Notice Deadline, during the period beginning on the date on which Ivanhoe provides the Testing Notice to Ensyn ("Notice Date") and ending six months after the Ivanhoe Results Date ("Project Data Period"), Ivanhoe shall have access to any and all data with respect to the operation of the Pilot Project and the products produced at the Pilot Project, including data with respect to the Ivanhoe Testing ("Project Data") to enable Ivanhoe to understand the operation of the Pilot Project and to analyze the economics of the Pilot Project and future facilities at which the RTP(TM) technology may be utilized, including an Ivanhoe Site. Notwithstanding the preceding sentence, it is understood and agreed that Ivanhoe may share the results from the Ivanhoe Te ...