Exhibit 10.6

 

AGREEMENT IN PRINCIPLE FOR GTL PROJECT DEVELOPMENT

 

THIS AGREEMENT entered into this 18th day of June 2003, between Ivanhoe Energy
Inc., a Yukon corporation with its principal office in Vancouver, B.C., Canada
(“Ivanhoe”) and Syntroleum Corporation, a Delaware corporation, with its
principal office in Tulsa, Oklahoma (“Syntroleum”). Each of Ivanhoe and
Syntroleum are sometimes herein called individually a “Party” and collectively
the “Parties”.

 

WHEREAS, Syntroleum is engaged in researching, developing, testing,
commercializing and licensing its proprietary gas-to-liquids processes and
catalysts (the “GTL Technology”) for use by the energy industry throughout the
United States of America and the world; and

 

WHEREAS, Syntroleum is engaged in developing GTL projects world-wide, either for
its sole ownership or in partnership with others; and

 

WHEREAS, Ivanhoe is engaged in developing GTL projects world-wide, either for
its sole ownership or in partnership with others, under the terms of the Master
License Agreement, dated April 26, 2000, Amended October 11, 2000 and June 1,
2002 (“License”) with Syntroleum; and

 

WHEREAS, Ivanhoe and Syntroleum desire to jointly develop certain GTL projects
(“GTL Projects”) from time to time whereby the Parties would share cumulative
commercial and technical knowledge, business and government relationships,
engineering designs and development activities to form the basis for an equity
share in the Projects;

 

NOW, THEREFORE, in consideration of the foregoing and of the covenants, promises
and agreements contained in this Agreement, Syntroleum and Ivanhoe agree as
follows.

 

1. Projects Under Consideration. The Parties have discussed possible joint
participation in GTL Projects in Bolivia, Egypt and Qatar. Additional GTL
Projects may be added from time to time under a nomination procedure that will
be developed jointly. Nothing in this Agreement shall prevent Ivanhoe or
Syntroleum from pursuing GTL projects on their own. If Ivanhoe pursues GTL
projects on its own, the normal terms of the License shall be applicable, except
as amended pursuant to Paragraphs 2(a) and 2(b) below.

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In recognition of the consideration to be given and received by the Parties
under this Agreement, and in order to promote and facilitate GTL Projects, the
Parties have agreed to the following:

 

2. Addenda to the License:

 

(a) The License will be amended to include in the Licensed Territory the United
States of America, Canada, Mexico, the People’s Republic of China, India, and
their respective territorial waters and any country in its territorial waters.
With respect to China and India, the Parties will develop additional procedures
to protect intellectual property and Syntroleum shall have final approval in
respect of intellectual property protection procedures and project participants
and contractors in these countries, and approval shall not be unreasonably
withheld.

 

(b) The rights of Ivanhoe to receive future license fee credits under the
License for the US$10 million paid under Article 5 of the License and the
related indemnifications under Article 6 are hereby terminated pursuant to
Paragraph 4 below.

 

(c) For GTL Projects in which the Parties participate, the License Fees and
royalties, technology fees and catalyst markup will not be payable to Syntroleum
by Ivanhoe and such waiver by Syntroleum will be taken into consideration in
determining respective ownership interest in the project. Nothing in this
Agreement shall prevent Syntroleum from receiving compensation for technology
and catalyst mark-ups from third party participants, as may be negotiated as
part of the Participation Agreement between the Parties.

 

The terms of the License shall otherwise continue in effect, except as they are
changed by the foregoing agreed Addenda to the License. Nothing in this
Agreement shall imply a waiver of License Fees, royalties, technology fees and
catalyst mark-up for projects independently pursued by Ivanhoe under the
License.

 

3. Sweetwater Project Credit. The US$2 million previously paid by Ivanhoe as
equity participation in the Sweetwater project is hereby forfeited to Syntroleum
and shall not be applicable for any credit in any other project where license
fees are otherwise due and payable to Syntroleum. Ivanhoe is released from any
further obligations on the Sweetwater Project and the DOE Catoosa Project under
previous agreements.

 

4. Syntroleum Research and Development. Syntroleum has made significant
expenditures in research and development over the last four years including
pilot plant facilities for the multi-stage advanced reactor unit, product
upgrading Synfining unit and the Catoosa DOE project that have supported the
design basis for and critical to the success of large plants being developed by
Ivanhoe. It is agreed that the previous payments in the amount of US$10 million

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and its US$2 million equity contribution to the Sweetwater Project are partial
reimbursement to Syntroleum for its expenses to conduct the research and
development program through the first quarter of 2003.

 

5. Syntroleum Specialty Products. For joint venture projects being pursued
together by the Parties, in order to enhance the project economics, Syntroleum
will contribute the ability to produce specialty products and lubricants subject
to economic enhancement opportunities and product market limitations. Nothing in
this Agreement shall imply that Ivanhoe has the right to produce specialty
products and Lubricants except as provided in this Paragraph 5.

 

(6) Individual GTL Project Agreements. Joint participation by the Parties in
each GTL Project will be pursuant to a mutually an agreed definitive
participation agreement (“Participation Agreement”) entered into by the Parties
or jointly with third parties. The Parties shall have no obligations in respect
of any GTL Project until they have entered into the Participation Agreement. The
Participation Agreements will contain terms and conditions generally found in
similar agreements in the international petroleum industry. The Parties shall
both have the right to participate in the negotiations of contracts with a host
country or other private entities for a GTL Project, but they shall appoint one
representative to be the principal negotiator on behalf of the Parties. The
negotiator shall keep the Parties fully informed and consult with the Parties
regarding principal issues and developments.

 

If the Parties are successful in obtaining a GTL Project, the Parties shall also
enter into a mutually agreeable Joint Operating Agreement (“JOA”) to govern
their relationships in respect of fulfilling the obligations and operations
under the GTL Project. The JOA will also contain provisions normally found in
such agreements in the international petroleum industry, including the
appointment of an operator, budgeting and cash call provisions and an
appropriate accounting procedure.

 

7. Contributions and Participation in GTL Projects by the Parties; Costs and
Expenses. The Parties agree that their participation in each GTL Project shall
be based on and in proportion to what they contribute and/or bring into the GTL
Project, either by way of commercial and technical knowledge and data and/or
financial assistance. The contributions and participations shall be detailed in
the Participation Agreement for each individual GTL Project separately.

 

If other qualified companies join the GTL Project with the agreement of the
Parties, in order to share costs and minimize individual risks, expenses and
investments, the Parties agree to reduce their participations proportionately to
the participating interest to be obtained by other companies included in the GTL
Project.

 

Unless expressly agreed otherwise in writing, each Party shall bear its own
costs and expenses of performing this Agreement and obtaining any individual GTL
Project and/or entering into separate Participation Agreements.

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8. Term of Agreement. The term of this Agreement shall be for two (2) years from
the date of this Agreement and may be renewed for additional, successive one (1)
year periods by mutual agreement.

 

9. Entire Agreement. This Agreement sets forth the entire agreement and
understanding between Syntroleum and Ivanhoe regarding its subject matter,
except that for each individual GTL Project the Parties are to enter into
Participation Agreements. This Agreement supersedes all prior agreements and
understandings regarding the same subject matter. This Agreement may be modified
or amended only by a written document duly signed by both Syntroleum and
Ivanhoe.

 

10. General Provisions.

 

10.1 Confidentiality. The confidentiality agreements previously signed between
Ivanhoe and Syntroleum with respect to the License and operations thereunder,
shall apply mutatis mutandis, to activities under this Agreement unless and
until more specific agreements are entered into.

 

10.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, United States of America,
without regard to conflict of laws provisions thereof.

 

10.3 Assignment. This Agreement shall not be assigned by either Party without
the prior written consent of the other Party.

 

IN WITNESS WHEREOF, Syntroleum and Ivanhoe have duly executed this Agreement as
of the date and year first above written.

 

SYNTROLEUM CORPORATION By:  

/s/ K.R. Roberts

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Kenneth R. Roberts

Sr. Vice President

IVANHOE ENERGY INC. By:  

/s/ E. L. Daniel

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E. Leon Daniel

President and CEO