**Exhibit10(h)**

** **

**LICENSE AGREEMENT**

 

 

                **THIS LICENSE AGREEMENT** (“Agreement”) datedas of the 15th day of November, 2004, is made by the between Advanced EnergyRecovery, Inc., a Delaware corporation, (“AER”), Allen Drilling AcquisitionCompany, a wholly-owned subsidiary of AER and a Nebraska corporation (“ADAC”),Elgin Holdings, LLC, a Texas limited liability company (“Elgin”), GatewayEnergy Corporation, a Delaware corporation (“Gateway”), and Gateway ProcessingCompany, a Texas corporation (“GPC”) (AER, ADAC and Elgin are collectivelyreferred to as the “AER Parties”).

 

# **RECITALS**

 

**                WHEREAS**, GPC holds theexclusive U. S. license to technology developed by Advanced ExtractionTechnologies, Inc., a Texas corporation (“AET”), which employs thestate-of-the-art, patented, absorption based technology to remove nitrogen andother gasses from natural gas pursuant to a First Amended and RestatedAgreement to Develop Natural Gas Treatment Projects Using Mehra Gas TreatingUnits, dated as of January 1, 2004 (the “AET Agreement”); and

 

                **WHEREAS**,****theAET Agreement authorizes GPC to license the Know-How and Patent Rights (asthose terms are defined in the AET Agreement) in the United States to design,construct, build, license, operate, sell, install, assign, lease, rent, repair,maintain, revise and revamp Mehra Gas Treating Units (as defined in the AETAgreement); and

 

**                WHEREAS**, ADAC andGateway have entered into that certain agreement dated March 6, 2003 withrespect to a project known as the “Madisonville Project”, which projectutilizes the Know-How and Patent Rights licensed to GPC pursuant to the AETAgreement; and

 

**                WHEREAS**, Elgin is acompany holding significant rights to high Nitrogen gas within the MadisonvilleField which would benefit from the processing available pursuant to Mehra GasTreating Units; and

 

**                WHEREAS**, the partieshereto desire to enter into an agreement with respect to a joint participationin future projects which will treat natural gas to remove impurities from thegas to enable the gas to meet pipeline quality specifications (“High NitrogenProjects”); and

 

**                WHEREAS**, Gatewaydesires due diligence assistance in connection with certain future Gatewayprojects, and assistance in the preparation and filing of Gateway’s Securitiesand Exchange Commission (“SEC”) reports, and AER has agreed to provide suchassistance.

 

 

 

----

 

**                NOW, THEREFORE**, inconsideration of the premises, and other good and valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, the parties agree asfollows:

 

1.               GPC hereby grants to the AER Parties anon-exclusive license to the Know-How and Patent Rights (as those terms aredefined in the AET Agreement) in the United States to design, construct, build,license, operate, sell, install, assign, lease, rent, repair, maintain, reviseand revamp one or more Mehra Gas Treating Units (as defined in the AETAgreement) operated in the AMI (as defined below) at or near the currentMadisonville facility.  The party orparties hereto that own and operate the Mehra Gas Treating Unit(s) shall beresponsible for the payment or pre-payment of all of the license fees payableto AET pursuant to the license agreement arising from such dedicated gas.  However, AER shall advance to Gateway, as aprepayment of earnings from its Madisonville operations $91,250, which equalsthe sum Gateway requires to advance pay any or all fees due AET under Gatewaythe AET Agreement.  Said funds shall bemade available to Gateway on or before December 15, 2004.  With respect to the license granted hereby,the AER Parties agree to be bound to the terms and conditions of the AETAgreement.

 

2.               The AER Parties agree that all natural gasproduced and owned by the AER Parties and their controlled affiliates, whichshall exceed 5,000 Mcf per day, whether by their own producing wells or byunitized well within the AMI, shall be dedicated to and processed by Mehra GasTreating Units pursuant to Gateway’s exclusive license under the AETAgreement.  “AMI” shall have the meaningset forth in the First Amended and Restated Master Agreement (the “MasterAgreement”), dated September 12, 2003, by and among GPC, Redwood EnergyProduction, L.P., and Hanover Compression Limited Partnership or anyamendments, modifications or replacements that may be in place from time totime.

 

3.               The AER Parties agree that with respect tothe gathering, treatment and transportation of gas within the AMI which may beperformed by the parties hereto, the economic terms of such additional servicesshall be substantially similar to those terms provided for in the agreementscurrently in place for the Madisonville Field in the agreements contemplated bythe Master Agreement or any amendments, modifications or replacements that maybe in place from time to time.  All suchservices shall be governed by definitive agreements to be executed by theparties.

 

4.               Gateway hereby grants to AER, or itsdesignee, the option to participate (a) on a *paripassu* basis with Gateway or its controlled affiliates in any HighNitrogen Projects in which Gateway is a participant and in which the projectutilizes Gateway’s exclusive license under the AET Agreement, provided that AERshall have a right, upon exercise of such option, to an interest in suchproject equal to one-third (1/3) of the total interest that would otherwiseGateway have therein,

 

 

----

 

and (b) on a *paripassu* basis with any third party financing source in one-third (1/3)of the financing of any High Nitrogen Projects in which Gateway is aparticipant and in which the project utilizes Gateway’s exclusive license underthe AET Agreement.  To exercise thisoption, AER must provide its pro rata amount of cash and other consideration inthe same form and subject to the same terms and conditions as Gateway provides insuch project.  This option shall expireon November 15, 2007, unless Gateway has not presented eight (8) or moreapplicable projects prior to such date, in which case this option shallcontinue until immediately after the eight (8th) such option is thereafterpresented.  Gateway shall have the rightto designate up to two (2) projects each year which will not be subject to theoption granted to AER pursuant to this Section 4, and such designated projectsshall not count as one of the eight projects described in the precedingsentence.  Notwithstanding the foregoing,with respect to any project developed by Gateway and in which AET by virtue ofthe AET Agreement elects to participate up to 25%, then AER and Gateway shalleach proportionately reduce their rights under this Section 4.  For purposes of this Section 4, a single HighNitrogen Project shall mean a project with capacity of at least 4,000 Mcf/d,and shall include any additions to the capacity of the plants or additionalplants included in the High Nitrogen project.

 

5.               AER will make available, on an “as neededbasis”, one or more of its employees, (Larry J. Horbach and/or Chuck A.Holtgraves) to consult with and assist Gateway employees in the preparation andfiling of it’s SEC reports for a period of up to one (1) year from the date ofthis Agreement. Gateway shall reimburse AER for all out-of-pocket expensesincurred by such employees of AER;

 

 

6.               AER will provide due diligence serviceassistance to Gateway on High Nitrogen Projects which may be potentiallydeveloped by Gateway, on a project by project basis, for a period of threeyears, from the date of this agreement. Gateway shall reimburse AER for allout-of-pocket expenses incurred by AER in connection with this due diligenceeffort;

 

7.               The parties agree, that except for theRECITALS above, no further representations, warranties, or closing obligationsare required.

 

8.               This Agreement shall be governed by andconstrued in accordance with the laws of the State of Texas.

 

9.               Any notice, request, consent orcommunications (a “Notice”) shall be effective only if it is in writing anddelivered, with receipt confirmed, address as follows:

 

 

 

----

 

                    If to AER to:

 

 

 

 

 

 

 

                    If to ADAC and Elgin, to:

 

 

 

 

 

 

 

 

 

                                Ifto Gateway and GPC, to:

 

                    Gateway Energy Corporation

                    500 Dallas Street, Suite 2615

                    Houston, TX 77002

                    Attn:  President

 

                    With a copy to:

 

                    Shook, Hardy & BaconL.L.P.

                    2555 Grand Boulevard

                    Kansas City, MO 64108

                    Attn:  Craig L. Evans

 

                IN WITNESSWHEREOF, the parties hereto have entered in this Agreement as of the date firstherein above set forth.

 
|   |   |   |   | ADVANCED ENERGY RECOVERY, INC |                               |
|--------|--------|--------|--------|-------------------------------|------------------------------------|
|   |   |   |   |                          |                               |   |
|   |   |   |   |                          |                               |   |
|   |   |   |   | By:                           |                               |   |
|   |   |   |   |                          | Charles A. Holtgraves              |   |
|   |   |   |   |                          | President                          |   |
|   |   |   |   |                          |                               |   |
|   |   |   |   |                          | ALLEN DRILLING ACQUISITION COMPANY |

 

 

----

 
|   |   |   |   |   |                  |   |
|--------|--------|--------|--------|--------|-----------------------|--------|
|   |   |   |   | By:    |                  |   |
|   |   |   |   |   | Charles A. Holtgraves |   |
|   |   |   |   |   |                  |   |

 

 

----

 
|   |   |   |   | ELGIN HOLDINGS, LLC        |                  |
|--------|--------|--------|--------|----------------------------|-----------------------|
|   |   |   |   |                       |                  |   |
|   |   |   |   |                       |                  |   |
|   |   |   |   | By:                        |                  |   |
|   |   |   |   |                       | Charles A. Holtgraves |   |
|   |   |   |   |                       |                  |   |
|   |   |   |   | GATEWAY ENERGY CORPORATION |                  |
|   |   |   |   |                       |                  |
|   |   |   |   |                       |                  |   |
|   |   |   |   | By:                        |                  |   |
|   |   |   |   |                       | John Raasch           |   |
|   |   |   |   |                       | President             |   |
|   |   |   |   |                       |                  |   |
|   |   |   |   | GATEWAY PROCESSING COMPANY |                  |
|   |   |   |   |                       |                  |
|   |   |   |   |                       |                  |   |
|   |   |   |   | By:                        |                  |   |
|   |   |   |   |                       | John Raasch           |   |
|   |   |   |   |                       | President             |   |

 

 

----