Document:

exv4w4

 

Exhibit 4.4

Hydrocracking Process Agreement

Between

Silver Eagle Refining –Woods Cross Inc.

A Utah Corporation

“Silver Eagle”

and

Genoil Inc.

A Canada Corporation

“Genoil”

September 3, 2003

 

 

Contents

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page	 
	1.	 	Date	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.	 	Parties	 	 	1	 
	 	 	2.1	 	Silver Eagle Refining–Woods Cross Inc	 	 	1	 
	 	 	2.2	 	Genoil Inc	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	Defined Terms	 	 	1	 
	 	 	3.1	 	“Agreement”	 	 	1	 
	 	 	3.2	 	“Ancillary Items”	 	 	1	 
	 	 	3.3	 	“Build Completion and Delivery Date”	 	 	1	 
	 	 	3.4	 	“Closing”	 	 	2	 
	 	 	3.5	 	“Feedstock Cost”	 	 	2	 
	 	 	3.6	 	“Genoil Capital Costs”	 	 	2	 
	 	 	3.7	 	“Heavy Oil Upgrading Process”	 	 	2	 
	 	 	3.8	 	“Hydrocracking Unit”	 	 	2	 
	 	 	3.9	 	“Operating Costs”	 	 	2	 
	 	 	3.10	 	“Parties”	 	 	2	 
	 	 	3.11	 	“Silver Eagle Capital Costs”	 	 	2	 
	 	 	3.12	 	“Unit Revenue”	 	 	2	 
	 	 	3.13	 	“Woods Cross Refinery”	 	 	3	 
	 	 	3.14	 	“Woods Cross Refinery Expenses”	 	 	3	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.	 	Recitals	 	 	3	 
	 
	 	 	 	 	 	 	 	 	 	 
	5.	 	Agreements	 	 	4	 
	 	 	5.1	 	Building of Hydrocracking Unit by Genoil; Delivery of Hydrocracking Unit by Genoil to Woods Cross
Refinery	 	 	4	 
	 	 	5.2	 	Installation of Hydrocracking Unit	 	 	4	 
	 	 	5.3	 	Genoil Capital Costs	 	 	4	 
	 	 	5.4	 	Silver Eagle Capital Costs	 	 	5	 
	 	 	5.5	 	Day-to-day Operations of Hydrocracking Unit and Ancillary Items; Meetings of Silver Eagle and
Genoil	 	 	5	 
	 	 	5.6	 	Operating Costs (Including Feedstock Cost); Woods Cross Refinery Profit Center for Hydrocracking
Unit and Ancillary Items	 	 	6	 
	 	 	5.7	 	Rents, Royalties, or Other Compensation to Genoil	 	 	6	 
	 	 	5.8	 	Showing of Hydrocracking Unit and Ancillary Items to Potential Customers of Genoil	 	 	7	 
	 	 	5.9	 	Term of Agreement	 	 	7	 
	 	 	5.10	 	Termination of Silver Eagle Obligations	 	 	7	 
	 	 	5.11	 	Termination of Genoil Obligations	 	 	7	 
	 	 	5.12	 	Insurance	 	 	8	 
	 	 	5.13	 	Confidential and Proprietary Information	 	 	8	 
	 	 	5.14	 	Not Partnership; Not Joint Venture	 	 	8	 
	 	 	5.15	 	No Other Genoil Hydrocracking Unit in Utah	 	 	8	 
	 	 	5.16	 	Representations and Warranties of Silver Eagle	 	 	8	 
	 
	 	 	 	(a)	 	Organization of Silver Eagle	 	 	9	 
	 
	 	 	 	(b)	 	Authorization of Transaction	 	 	9	 
	 
	 	 	 	(c)	 	Noncontravention	 	 	9	 
	 
	 	 	 	(d)	 	No Pending or Threatened Litigation or Claims	 	 	9	 

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Contents Page i of ii

 

 

	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	(e)	 	No Representations	 	 	9	 
	 	 	5.17	 	Representations and Warranties of Genoil	 	 	9	 
	 
	 	 	 	(a)	 	Organization of Genoil	 	 	9	 
	 
	 	 	 	(b)	 	Authorization of Transaction	 	 	9	 
	 
	 	 	 	(c)	 	Noncontravention	 	 	10	 
	 
	 	 	 	(d)	 	No Pending or Threatened Litigation or Claims	 	 	10	 
	 
	 	 	 	(e)	 	No Patent Infringement	 	 	10	 
	 	 	5.18	 	Conditions Precedent to Closing	 	 	10	 
	 
	 	 	 	(a)	 	Conditions Precedent to the Obligations of Silver Eagle	 	 	10	 
	 
	 	 	 	(b)	 	Conditions Precedent to the Obligations of Genoil	 	 	10	 
	 	 	5.19	 	Miscellaneous	 	 	11	 
	 
	 	 	 	(a)	 	Entire Agreement; Integration	 	 	11	 
	 
	 	 	 	(b)	 	Survival of Representations and Warranties	 	 	11	 
	 
	 	 	 	(c)	 	Binding Nature; No Assignments	 	 	11	 
	 
	 	 	 	(d)	 	Further Action	 	 	11	 
	 
	 	 	 	(e)	 	Time is of the Essence	 	 	11	 
	 
	 	 	 	(f)	 	Amendments, Modifications, Approvals, and Consents	 	 	11	 
	 
	 	 	 	(g)	 	Parties in Interest; No Third-Party Beneficiaries	 	 	11	 
	 
	 	 	 	(h)	 	Notices	 	 	12	 
	 
	 	 	 	(i)	 	Costs and Expenses	 	 	12	 
	 
	 	 	 	(j)	 	No Brokerage Commissions, Finders Fees, or Similar Costs	 	 	12	 
	 
	 	 	 	(k)	 	Attorneys Fees	 	 	12	 
	 
	 	 	 	(l)	 	Governing Law	 	 	13	 
	 
	 	 	 	(m)	 	Construction	 	 	13	 
	 
	 	 	 	(n)	 	Rights and Remedies	 	 	13	 
	 
	 	 	 	(o)	 	Arbitration	 	 	14	 
	 
	 	 	 	(p)	 	No Waiver	 	 	14	 
	 
	 	 	 	(q)	 	Severability	 	 	14	 
	 
	 	 	 	(r)	 	Covenant of Good Faith	 	 	14	 
	 
	 	 	 	(s)	 	Force Majeure	 	 	14	 
	 
	 	 	 	(t)	 	Titles and Captions	 	 	15	 
	 
	 	 	 	(u)	 	Pronouns and Plurals	 	 	15	 
	 
	 	 	 	(v)	 	Counterparts	 	 	15	 
	 
	 	 	 	 	 	 	 	 	 	 
	Exhibit A – Heavy Oil Upgrading Process	 	 	A	 
	 
	 	 	 	 	 	 	 	 	 	 
	Exhibit B – Genoil Capital Costs–Pro Forma	 	 	B	 
	 
	 	 	 	 	 	 	 	 	 	 
	Exhibit C – Silver Eagle Capital Costs–Pro Forma	 	 	C	 
	 
	 	 	 	 	 	 	 	 	 	 
	Exhibit D – Operating Costs	 	 	D	 
	 
	 	 	 	 	 	 	 	 	 	 
	Exhibit E – Hydrocracking Unit – Profit Center Pro Forma	 	 	E	 
	 
	 	 	 	 	 	 	 	 	 	 
	Exhibit F – Woods Cross Refinery Expenses	 	 	F	 

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Contents Page ii of ii

 

 

Hydrocracking Process Agreement

	1.	 	Date: September 3, 2003

	2.	 	Parties:

	 	2.1	 	Silver Eagle Refining–Woods Cross Inc. , a Utah corporation formerly known as
Inland Refining, Inc., having a mailing address of Attention: David W. McSwain,
President, 2355 South 1100 West, Woods Cross, Utah 84087, USA, and a facsimile (fax) number of (801) 298-1112
(herein “Silver Eagle”).
	 
	 	2.2	 	Genoil Inc., a Canada corporation, having a mailing address of
Attention: Thomas F. Bugg, President, 101 6th Avenue SW, Suite 650,
Calgary, Alberta T2P 3P4, Canada, and a facsimile (fax) number of (403) 290-0592
(herein“Genoil”).

	3.	 	Defined Terms: The terms defined in this Part 3 shall have the meanings herein specified for all purposes of this Agreement, unless the context clearly otherwise requires:

	 	3.1	 	“Agreement” means this agreement together with and including any and all attachments,
appendices, or exhibits referred to herein and any and all modifications, alterations,
amendments, and supplements hereto—all of which shall be deemed for all purposes of this
Agreement to have been incorporated in this Agreement by this reference as if separately
spelled out and set forth in this Agreement. The words “hereby,” “herein,” “hereof,”
“hereto,” “hereunder,” and “herewith” when used in this Agreement shall refer to and mean
a reference to this entire Agreement unless restricted to a reference in context to a
particular portion of this Agreement.
	 
	 	3.2	 	“Ancillary Items” means all piping, fittings, pumps, charge pumps, exchangers,
mixers, furnaces, compressors, booster compressors, separators, sulfur detectors, H2 surge
tanks, run down tanks, foundations, labor relating thereto, and other items connected to
or directly used by Silver Eagle in connection with the operation of the Hydrocracking
Unit.
	 
	 	3.3	 	“Build Completion and Delivery Date” means August 31, 2004 (or such other date as
shall be mutually agreed upon by the Parties), the date by which the completed
Hydrocracking Unit shall be delivered by Genoil to the Woods Cross Refinery.
Anything herein to the contrary notwithstanding, if delivery of the completed Hydrocracking
Unit shall be accepted by Silver Eagle, then and in such event the actual date of delivery
of the completed Hydrocracking Unit by Genoil to the Woods Cross Refinery shall be the
Build Completion and Delivery Date for all purposes of this Agreement.

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Page 1 of 15

 

 

	 	3.4	 	“Closing” means the completion and closing of all of the actions and delivery of all
of the documents and other items called for by this Agreement by closing, which shall
occur on Friday, October 31, 2003, at 10:00 am local time, at the offices of Silver Eagle,
or such other day, date, time, and place as shall be mutually agreed upon by the Parties.
	 
	 	3.5	 	“Feedstock Cost” means the actual current month weighted average crude purchase and
freight in cost per barrel for bow river crude, “U” crude, and “LY” crude (and any other
crude actually used in the current month) plus the current month Woods Cross
Refinery Expenses per barrel for the current month total crude charge at the Woods Cross
Refinery multiplied by the total current month cat feed charge to the Hydrocracking Unit.
	 
	 	3.6	 	“Genoil Capital Costs” means the actual, direct costs of Genoil including engineering
and staff costs in connection with the building, delivery, and testing of the Hydrocracking Unit, including transportation to Woods Cross Refinery. A pro forma estimate of
the Genoil Capital Costs as of the date of this Agreement is described and set forth in
attached exhibit B.
	 
	 	3.7	 	“Heavy Oil Upgrading Process” means Genoil’s proprietary heavy oil upgrading
technology, a process for the hydro cracking of heavy crude’s and possibly other hydro
cracking type applications as described in attached exhibit A.
	 
	 	3.8	 	“Hydrocracking Unit” means the skid mounted hydrocracking unit using and
incorporating the Heavy Oil Upgrading Process and designed for use at the Woods Cross
Refinery.
	 
	 	3.9	 	“Operating Costs” means those day-to-day costs and expenses directly paid or incurred
by Silver Eagle with respect to the operation of the Hydrocracking Unit and Ancillary
Items including Feedstock Costs, including those costs and expenses described in attached
exhibit D; provided, however, that Operating Costs shall not include any Genoil Capital
Costs or Silver Eagle Capital Costs.
	 
	 	3.10	 	“Parties” means the entities named in Part 2 hereof; and “Party” means either one of
such Parties.
	 
	 	3.11	 	“Silver Eagle Capital Costs” means the actual, direct costs of Silver Eagle including
staff costs in connection with the installation of the Hydrocracking Unit and Ancillary
Items pursuant to section 5.2 hereof. A pro forma estimate of the Silver Eagle Capital
Costs as of the date of this Agreement is described and set forth in attached exhibit C.
	 
	 	3.12	 	“Unit Revenue” means the sales revenue (net of fuel taxes, returns, and allowances)
of the products from the Hydrocracking Unit and Ancillary Items.

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Page 2 of 15

 

 

	 	3.13	 	“Woods Cross Refinery” means Silver Eagle’s refinery and other operations in
Woods Cross, Utah.
	 
	 	3.14	 	“Woods Cross Refinery Expenses” means the Woods Cross Refinery
expenses determined in accordance with generally accepted accounting principles (excluding, however, expenses relating to catalyst and
depreciation) as set forth in the monthly unaudited financial statements of Silver
Eagle, including those costs and expenses described in attached exhibit F.

	4.	 	RECITALS:

	 	4.1	 	Genoil is a public corporation in the province of Alberta, Canada and is
actively involved in the development and commercialization of its Heavy Oil
Upgrading Process. Genoil has had positive outcomes in standard and catalytic test
runs of its heavy oil pilot upgrader using the Heavy Oil Upgrading Process at its
test facilities in Canada.
	 
	 	4.2	 	Silver Eagle is a small petroleum refining company and has the
capability to block process various types of crude oil at its Woods Cross
Refinery.
	 
	 	4.3	 	Silver Eagle desires to utilize Genoil’s Heavy Oil Upgrading Process
to improve Silver Eagle’s product slate and to achieve a higher yield recovery at
its Woods Cross Refinery.
	 
	 	4.4	 	Genoil desires to test, prove, and gather data from the use of its
Heavy Oil Upgrading Process. Genoil also desires to display the hydrocracking
process operation to other potential customers.
	 
	 	4.5	 	The Parties desire to enter into an agreement whereby Genoil will
design, pay for, and build the Hydrocracking Unit for Silver Eagle to install at
its Woods Cross Refinery; provided, that the Parties acknowledge that the
Hydrocracking Unit as built by Genoil, as well as the Heavy Oil Upgrading Process,
shall be deemed for all purposes to be personal property and shall be and remain
the sole personal property of Genoil; and, provided further, that the Parties
acknowledge that all tanks, materials, piping, furnaces, and other items presently
owned by Silver Eagle or acquired and paid for by Silver Eagle in preparation for,
during, and after the Hydrocracking Unit installation shall be and remain the sole
property of Silver Eagle.
	 
	 	4.6	 	The Parties desire to enter into an agreement whereby Silver Eagle
will be responsible for the day-to-day operations of the Hydrocracking Unit after
its installation at the Woods Cross Refinery.

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Page 3 of 15

 

 

	 	4.7	 	The Parties desire to enter into an agreement to provide for the ongoing management of
the Hydrocracking Unit, the accounting for its operation, and the payment by Silver Eagle
of rents, royalties, or other compensation to Genoil for the use of the Hydrocracking Unit and the Heavy Oil Upgrading Process.

	5.	 	
Agreements: Now, Therefore, in consideration of the mutual agreements, representations, warranties, covenants, and provisions contained in this Agreement, together with
other good and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the Parties hereby adopt the definitions set forth in Parts 2 and 3 hereof,
acknowledge that the recitals in Part 4 are substantially correct, and further agree as
follows:

	 	5.1	 	Building of Hydrocracking Unit by Genoil; Delivery of Hydrocracking Unit by
Genoil to Woods Cross Refinery. Subject to the other provisions hereof, Genoil
hereby agrees to build the Hydrocracking Unit and deliver it at Genoil’s sole cost to the
Woods Cross Refinery on or before the Build Completion and Delivery Date. At no
additional cost to Silver Eagle, Genoil will supply the engineering, management, and
expertise to build, install, test, and operate the Hydrocracking Unit in a professional
and safe manner, including all operator training.

Genoil shall assure that all vessels included as a part of the Hydrocracking Unit shall
be properly engineered with applicable ASME stamps thereon. Engineering and
operational certification will be provided by a qualified third party engineering firm.
	 
	 	5.2	 	Installation of Hydrocracking Unit. Silver Eagle will arrange, pay, and be
responsible for the materials, including a furnace and process heating, and the labor to
install the Hydrocracking Unit and Ancillary Items at its Woods Cross Refinery. Silver
Eagle shall provide without cost the tankage necessary to allow the Hydrocracking Unit
and Ancillary Items to function within the agreed upon parameters set
by the Parties.

The Parties agree to work diligently to procure the necessary permits–with Silver Eagle
taking the lead in this effort, the cost of which will be advanced by Silver Eagle and
included in the Silver Eagle Capital Costs.
	 
	 	5.3	 	Genoil Capital Costs. The actual Genoil Capital Costs shall be determined by Genoil
with full accounting support and documentation delivered by Genoil to Silver Eagle within
forty-five (45) days after the Build Completion and Delivery Date. Silver Eagle shall have
thirty (30) days to review the full accounting support and documentation delivered by
Genoil to assure Silver Eagle that such full accounting support and documentation is
reasonable and complete. If Silver Eagle shall determine that such full accounting support
and documentation is not reasonable and complete, then it may give notice to Genoil of
such determination within such thirty (30) days review period, and in such event Genoil
shall have an additional thirty (30) days from such notice to

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Page 4 of 15

 

 

	 	 	 	provide Silver Eagle with additional information and documentation to support the
determination of the actual Genoil Capital Costs. If Silver Eagle is still not satisfied
with the full accounting support and documentation provided by Genoil, Silver Eagle may
elect to have the amount of the Genoil Capital Costs determined by binding arbitration
pursuant to section 5.19(o) hereof.
	 
	 	5.4	 	Silver Eagle Capital Costs. The actual Silver Eagle Capital Costs shall be determined
by Silver Eagle with full accounting support and documentation delivered by Silver Eagle
to Genoil within forty-five (45) days after the completion of the installation and
reasonable testing of the Hydrocracking Unit and Ancillary Items at the Woods Cross
Refinery. Genoil shall have thirty (30) days to review the full accounting support and
documentation delivered by Silver Eagle to assure Genoil that such full accounting support
and documentation is reasonable and complete. If Genoil shall determine that such full
accounting support and documentation is not reasonable and complete, then it may give
notice to Silver Eagle of such determination within such thirty (30) days review period,
and in such event Silver Eagle shall have an additional thirty (30) days from such notice
to provide Genoil with additional information and documentation to support the
determination of the actual Silver Eagle Capital Costs. If Genoil is still not satisfied
with the full accounting support and documentation provided by Silver Eagle, Genoil may
elect to have the amount of the Silver Eagle Capital Costs determined by binding
arbitration pursuant to section 5.19(o) hereof.
	 
	 	5.5	 	Day-to-day Operations of Hydrocracking Unit and Ancillary Items; Meetings of
Silver Eagle and Genoil. The day-to-day operation of the Hydrocracking Unit and Ancillary Items
shall be the responsibility of Silver Eagle. Silver Eagle shall supply the necessary personnel to
operate the Hydrocracking Unit and Ancillary Items as a part of the ongoing operations. Any
incremental operational staff required to provide these operations services shall be included as
part of the Operating Costs.
	 
	 	 	 	Update and status meetings of Silver Eagle and Genoil shall be held at least monthly until
installation of the Hydrocracking Unit and Ancillary Items–and at least quarterly thereafter. The
cost and expenses of attending such meetings shall be paid by Genoil and Silver Eagle, respectively
for their respective representatives, and shall be included in the Genoil Capital Costs and Silver
Eagle Capital Costs, respectively, if incurred before installation and completion of
testing. After operations commence these costs and expenses shall be considered and included as
Operating Costs.
	 
	 	 	 	Silver Eagle will determine which type of crude runs will be run through the Hydrocracking Unit and
Ancillary Items. All crude inputs and outputs to the Hydrocracking Unit and Ancillary Items will
be metered for custody transfer and profit calculations. If a blend of crude streams is being used
then the cost of the quantities will be prorated on a weighted average basis.

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Page 5 of 15

 

 

	 	5.6	 	Operating Costs (Including Feedstock Cost); Woods Cross Refinery Profit Center for
Hydrocracking Unit and Ancillary Items.
	 
	 	 	 	Genoil shall enter into an operating lease for a compressor for use as a part of the
Hydrocracking Unit or Ancillary Items. The lease costs for this compressor shall be
included as an Operating Cost, and Silver Eagle shall guarantee up to one half of such
operating lease.
	 
	 	 	 	Silver Eagle shall supply its available hydrogen for use in the Hydrocracking Unit,
the cost of which shall be based on the heating value of the hydrogen and included as
an Operating Cost.
	 
	 	 	 	Silver Eagle shall establish a profit center in its accounting for the operations of
the Hydrocracking Unit and Ancillary Items. The list of Operating Costs chargeable to
the Hydrocracking Unit and Ancillary Items profit center is defined herein and
generally described in exhibit D. The principle for these Operating Costs is that they
are only costs that can be directly attributed to the operations of the Hydrocracking
Unit and Ancillary Items. By following this principle, and as the operations become
more established, the list of Operating Costs chargeable to the Hydrocracking Unit and
Ancillary Items profit center is intended to be updated from time to time and as
mutually agreed by the Parties.
	 
	 	5.7	 	Rents, Royalties, or Other Compensation to Genoil. Fifty percent (50%) of the monthly net
profit from the operation of the Hydrocracking Unit and Ancillary Items will be paid to
Genoil until Genoil shall have been paid under this section of this Agreement a total equal
to twice the actual Genoil Capital Costs; and thereafter Genoil shall be paid thirty percent
(30%) of the monthly net profit from the operation of the Hydrocracking Unit and Ancillary
Items. This shift would allow Silver Eagle to maintain the facility for long-term safety and
environmental requirements.
	 
	 	 	 	The net profit calculation methodology is provided in exhibit E. Net profits will be
determined by subtracting the Feedstock Cost and Operating Costs from the revenue
generated by the actual product slate derived from the Hydrocracking Unit and
Ancillary Items. Genoil shall have the right to examine Silver Eagle’s books and
records relating to the revenues and expenses of the Hydrocracking Unit and Ancillary
Items at reasonable times.
	 
	 	 	 	Sales revenue will be net F.O.B. Silver Eagle minus any fuel taxes billed by law for
products sold.
	 
	 	 	 	All distributions hereunder will be made to Genoil on a monthly basis by the 45th day
after the end of the month of process deliveries.

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Page 6 of 15

 

 

	 	5.8	 	Showing of Hydrocracking Unit and Ancillary Items to Potential Customers of
Genoil. With the prior approval of Silver Eagle (which will not be unreasonably
withheld), Genoil will be permitted to show the Hydrocracking Unit and Ancillary
Items to other potential customers of Genoil.
	 
	 	5.9	 	Term of Agreement. Except as otherwise permitted hereunder, the obligations of
Silver Eagle and Genoil pursuant to this Agreement shall continue for a period of
fifteen (15) years starting with the date of Closing, and shall automatically
continue thereafter for five (5) year renewal periods unless either Party shall have
given at least one (1) year’s prior notice before the end of the current period.
	 
	 	5.10	 	Termination of Silver Eagle Obligations. If the operation of the Hydrocracking Unit
and Ancillary Items shall not prove to be economical on an annual basis, then Silver Eagle
shall have the option to terminate all of its ongoing obligations and commitments relating
to the Hydrocracking Unit. The determination of being economical shall be based on a break
even value for the Hydrocracking Unit and Ancillary Items compared to Silver Eagle
operating without the Hydrocracking Unit and Ancillary Items.
	 
	 	5.11	 	Termination of Genoil Obligations. If the internal rate of return of Genoil’s distributions
under section 5.7 of this Agreement is lower than seven percent (7%) after two years from the first
operating month of the Hydrocracking Unit and Ancillary Items hereunder, then Genoil shall have the
option to terminate all of its ongoing obligations and commitments relating to this Agreement.
	 
	 	 	 	It is agreed that while the Woods Cross Refinery is operating, the Hydrocracking Unit and Ancillary
Items will be operated to their maximum possible extent. It is also anticipated that the Woods
Cross Refinery will never operate for less than nine months per year. In the event that Silver
Eagle discontinues operation of the Hydrocracking Unit and Ancillary Items for more than 6 months
in any 12 month period then this Agreement will be deemed terminated unless confirmation of
continuation is agreed to by both Parties.
	 
	 	 	 	In the event of either alternative described in the preceding two paragraphs, all costs of closing
down and dismantling the Hydrocracking Unit shall be paid one-half by Silver Eagle and one-half by
Genoil, including the cancellation costs associated with any equipment lease.
	 
	 	 	 	Ownership of the Hydrocracking Unit supplied by Genoil will remain with Genoil. Genoil will have
the right to remove its Hydrocracking Unit at the termination of the Agreement; provided that
Silver Eagle shall have the option to purchase the Hydro-cracking Unit at its fair market value or
actual Genoil Capital Costs less book depreciation plus the cost of any improvements paid for
solely by Genoil, whichever is greater.

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Page 7 of 15

 

 

	 	 	 	In the event of the bankruptcy of Silver Eagle, Genoil shall have the right to remove
its Hydrocracking Unit. In the event of the bankruptcy of Genoil, Silver Eagle shall have
the option to purchase the Hydrocracking Unit at its fair market value or actual Genoil
Capital Costs less book depreciation plus the cost of any improvements paid for solely by
Genoil, whichever is greater.

In the event of either alternative described in the preceding two paragraphs, if Genoil
removes the Hydrocracking Unit then Genoil shall pay for such removal and restoring the
Woods Cross Refinery to the way it was operated before the installation of the
Hydrocracking Unit and Ancillary Items.
	 
	 	5.12	 	Insurance. Silver Eagle shall include in its insurance coverage all environmental
risks and other liability insurance, and Genoil (including the Hydrocracking Unit) shall
be named as an additional insured with respect thereto. The incremental cost of insurance
relating to the Hydrocracking Unit and Ancillary Items shall be an Operating Cost
hereunder. If the Hydrocracking Unit is damaged or destroyed, it shall be rebuilt using
the insurance proceeds. Normal course of business insurance will be the responsibility of
the individual Parties. Thus, any loss of business or business interruption occurrence
with the Hydrocracking Unit and Ancillary Items or the Wood Cross Refinery will be a
separate responsibility of the Parties and not part of the Operating Costs.
	 
	 	5.13	 	Confidential and Proprietary Information. The terms of this Agreement and all aspects of
Genoil’s Heavy Oil Upgrading Process, as well as the Hydrocracking Unit and Ancillary Items,
shall be regarded as confidential information. None of the confidential information shall be
released, other than as required by law, without written consent of the Parties.
	 
	 	5.14	 	Not Partnership; Not Joint Venture. The relationship between Genoil and Silver Eagle is
not and shall not be deemed to be a joint venture, partnership, or other association. Genoil
shall not have any authority or power to incur any obligation of Silver Eagle, nor shall
Silver Eagle have any authority or power to incur any obligation of Genoil. The Parties are
and shall remain separate and independent contracting entities.
	 
	 	5.15	 	No Other Genoil Hydrocracking Unit in Utah. Genoil agrees that it will not
participate in any way in the building, installing, testing, or operating of any other
hydrocracking unit in the state of Utah without the prior consent of Silver Eagle –which
consent may be unreasonably withheld.
	 
	 	5.16	 	Representations and Warranties of Silver Eagle. Silver Eagle represents and warrants
to Genoil that the following statements contained in this section 5.16 are true, correct, and
complete as of the date of this Agreement (except as noted) and will be true, correct, and
complete as of the date of Closing:

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Page 8 of 15

 

 

	 	(a)	 	Organization of Silver Eagle. Silver Eagle is a corporation, duly organized,
validly existing, and in good standing under the laws of the state of Utah.
	 
	 	(b)	 	Authorization of Transaction. Silver Eagle has full power and authority to execute
and deliver this Agreement and to perform its obligations hereunder, subject to Silver
Eagle’s board of directors approval. All corporate action on the part of Silver Eagle
necessary to execute and deliver this Agreement and to consummate the transactions
contemplated hereby, except the approval of Silver Eagle’s board of directors, has been
duly taken. Subject to Silver Eagle’s board of directors approval, this Agreement
constitutes the valid and legally binding obligation of Silver Eagle, enforceable in
accordance with its terms and conditions, subject to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors’ rights generally and to general equity principles.
	 
	 	(c)	 	Noncontravention. Neither the execution and the delivery of this Agreement nor the performance
of the obligations hereunder will violate any provision of any agreement to which Silver Eagle is a
party.
	 
	 	(d)	 	No Pending or Threatened Litigation or Claims. There is no pending or threatened litigation or
claim against Silver Eagle that could reasonably be expected to have a material adverse effect on
Silver Eagle’s operations.
	 
	 	(e)	 	No Representations. Except for the representations and warranties expressly set forth in this
Agreement, Silver Eagle has not and will not rely on any representation by Genoil regarding its
financial condition or operations.

	 	5.17	 	Representations and Warranties of Genoil. Genoil represents and warrants to Silver
Eagle that the statements contained in this section 5.17 are true, correct, and complete
as of the date of this Agreement and will be true, correct, and complete as of the date of
Closing:

	 	(a)	 	Organization of Genoil. Genoil is a corporation, duly organized, validly existing, and in
good standing under the laws in Canada.
	 
	 	(b)	 	Authorization of Transaction. Genoil has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of Genoil, enforceable in accordance with its terms and conditions,
subject to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors’ rights generally and to general equity principles.

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Page 9 of 15

 

 

	 	(c)	 	Noncontravention. Neither the execution and the delivery of this Agreement
nor the performance of the obligations hereunder will violate any provision
of any agreement to which Genoil is a party.
	 
	 	(d)	 	No Pending or Threatened Litigation or Claims. There is no pending or
threatened litigation or claim against Genoil that could reasonably be
expected to have a material adverse effect on Genoil’s operations.
	 
	 	(e)	 	No Patent Infringement. Neither the Heavy Oil Upgrading Process nor the
Hydrocracking Unit does or will infringe on any patent or patent pending
applicable in Canada or in the United States of America.

	 	5.18	 	Conditions Precedent to Closing. The following conditions must be met by the
Parties at or before Closing.

	 	(a)	 	Conditions Precedent to the Obligations of Silver Eagle. The obligations of
Silver Eagle to consummate and perform the transactions to be performed by it
in connection with this Agreement are subject to satisfaction of the following
conditions or waiver thereof by Silver Eagle at or before Closing:

	 	(1)	 	The board of directors of Silver Eagle shall have approved the
execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby; and
	 
	 	(2)	 	A commitment to reasonably finance the Silver Eagle Capital Costs
shall have been received in form and substance acceptable to Silver Eagle; and
	 
	 	(3)	 	Silver Eagle shall be reasonably satisfied as to the technical and
economic feasibility of the Heavy Oil Upgrading Process, Hydrocracking Unit, and
Ancillary Items.

	 	(b)	 	Conditions Precedent to the Obligations of Genoil. The obligations of Genoil to
consummate and perform the transactions to be performed by it in connection with this
Agreement are subject to satisfaction of the following conditions or waiver thereof by
Genoil at or before Closing:

	 	(1)	 	The executive officers of Genoil shall have approved the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby; and
	 
	 	(2)	 	A commitment to reasonably finance the Genoil Capital Costs shall
have been received in form and substance acceptable to Genoil; and

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Page 10 of 15

 

 

	 	(3)	 	Genoil shall be reasonably satisfied of the economic merits of installing the Genoil
Hydrocracking Unit within the Woods Cross Refinery.

	 	5.19	 	Miscellaneous:

	 	(a)	 	Entire Agreement; Integration. This Agreement constitutes the entire agreement between and among the Parties pertaining to the subject matter hereof,
and supersedes all written or oral, prior, or contemporaneous agreements,
representations, warranties, or understandings of the Parties pertaining or with respect
thereto. No covenant, representation, or condition not expressed herein shall
affect or be deemed to interpret, change, or restrict the express provisions
hereof.
	 
	 	(b)	 	Survival of Representations and Warranties. All representations, warranties,
covenants, and agreements of the Parties contained in this Agreement shall survive the
execution and delivery of this Agreement and shall not be deemed merged into any documents
delivered at the time of such execution and delivery of this Agreement or the closing
hereunder.
	 
	 	(c)	 	Binding Nature; No Assignments. The covenants and agreements contained
herein shall bind and inure to the benefit of the Parties hereto, their
respective heirs, executors, administrators, personal or legal representatives,
successors, or permitted assigns; provided, however, that nothing in this subsection shall be
deemed to permit the conveyance, transfer, assignment, or delegation, expressly,
by operation of law, or otherwise, by any Party of any right or interest herein
without the prior written consent of the other Party. Anything herein to the
contrary notwithstanding, however, no permitted assignment or other disposition
of all or any part of a Party’s interests herein shall relieve such Party of its
obligations hereunder.
	 
	 	(d)	 	Further Action. The Parties each agree to execute and deliver all documents,
provide all information, and take or forebear from all such action as may be
necessary and appropriate to achieve the purposes hereof.
	 
	 	(e)	 	Time is of the Essence. Time is of the essence in this Agreement.
	 
	 	(f)	 	Amendments, Modifications, Approvals, and Consents. Any amendment,
modification, alteration, or supplement hereto, or any approval or consent
requested of any Party, shall be ineffective unless it is in writing and signed
by the Party against whom enforcement is sought.
	 
	 	(g)	 	Parties in Interest; No Third-Party Beneficiaries. Except as specifically set
forth herein, nothing in this Agreement is intended to confer any right or
remedy under or by reason of this Agreement to any person other than the Parties to
this

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Page 11 of 15

 

 

	 	 	 	Agreement and their respective heirs, executors, administrators,
personal or legal
representatives, successors, or permitted assigns, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of any
third
person to any Party to this Agreement, nor shall any provision hereof give any
third person any right of subrogation or action over or against any Party to
this
Agreement.
	 
	 	(h)	 	Notices. Any notice, consent, request, directive, demand, or other communication
made hereunder, pursuant hereto, or in accordance herewith by any Party
intended for any other Party shall be in writing and shall be physically
delivered,
sent by facsimile (fax) if a fax number is included for the other Party in
part 2
hereof, or sent by registered or certified mail, properly addressed and return
receipt requested with postage prepaid, to such other Party at the address
set forth
in Part 2 hereof, unless such other Party shall have previously designated a
different address or fax number by due notice hereunder.
	 
	 	 	 	Notices hereunder that are physically delivered shall be deemed effective and
complete at the time of the delivery thereof with written evidence of such
delivery. Notices hereunder that are given by facsimile (fax) shall be deemed
effective and complete at the time such facsimile (fax) is successfully sent
with
printed or written evidence of such successful sending. Notices hereunder that
are given by mail shall be deemed effective and complete as of the third
business
day following the date of mailing.
	 
	 	(i)	 	Costs and Expenses. Except as may be otherwise specifically set forth herein
or as otherwise agreed to by the Parties, each Party shall bear its own costs
and
expenses (including attorneys and accountants fees and costs) in connection
herewith and in connection with all things required to be done by such Party
hereunder.
	 
	 	(j)	 	No Brokerage Commissions, Finders Fees, or Similar Costs. Each of the
Parties hereby represents and warrants to each other Party that there is no
claim
for brokerage commissions, finders fee, or similar costs or fees in
connection with
the transactions contemplated by this Agreement, other than interests held by
Foundation Energy Inc. as part of prior agreements with Genoil–with respect to
which there shall be no obligation or liability of Silver Eagle. Each of the
Parties
hereto will pay or discharge, and will indemnify, defend, and hold harmless
the
other Party from and against, any and all claims for any such brokerage
commissions, finders fees, or similar costs or fees incurred by reason of any
actions taken by such indemnifying Party.
	 
	 	(k)	 	Attorneys Fees. If any legal action or other proceeding is brought or commenced
by any Party to enforce any of the terms hereof because of an alleged

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Page 12 of 15

 

 

	 	 	 	dispute, breach, default, or misrepresentation in connection with any of the
provisions hereof, the successful or prevailing Party shall be entitled to
receive
as additional compensation hereunder or as additional damages under such action
all necessary and reasonable attorneys fees, expenses, and costs, both before and
after judgment, in addition to any other relief to which such Party may be
entitled.
	 
	 	(l)	 	Governing Law. This Agreement shall be governed in all respects and
construed according to the laws of the state of Utah applied to contracts made
and
to be fully performed entirely within the state of Utah between residents of the
state of Utah without giving effect to any choice or conflict of law provision or
rule (whether of the state of Utah or any other jurisdiction) that would cause
the
application of the laws of any jurisdiction other than the state of Utah, unless
any
obligations hereunder shall be invalid or unenforceable under such laws, in which
event the laws of the state whose laws can apply to and validate the obligations
hereunder shall apply. This Agreement shall be deemed executed in Woods
Cross, Utah.
	 
	 	(m)	 	Construction. The Parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the
Parties and no presumption or burden of proof shall arise favoring or disfavoring
any Party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context otherwise requires. Whenever used herein, the word “or” shall mean
“and/or,” unless the context clearly otherwise requires. Whenever used herein,
the word “including” shall mean “including without limitation,” and the word
“include” shall mean “include without limitation.”
	 
	 	(n)	 	Rights and Remedies. The rights and remedies of the Parties hereunder shall
not be mutually exclusive, and the exercise of one or more of the provisions
hereof shall not preclude the exercise of any other provisions. Each of the
Parties
confirms that damages may be an inadequate remedy for a breach or threatened
breach of any provision hereof. The respective rights and obligations hereunder
shall be enforceable by specific performance, injunction, or other equitable
remedy, but nothing herein contained is intended to or shall limit or affect any
rights at law or by statute or otherwise of any Party aggrieved as against the
other
Party for a breach or threatened breach of any provision hereof, it being the
intention of this subsection 5.19(n) to make clear the agreement of the Parties that
the
respective rights and obligations of the Parties hereunder shall be enforceable
in
equity as well as at law or otherwise.

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Page 13 of 15

 

 

	 	(o)	 	Arbitration. Anything herein to the contrary notwithstanding, any controversy
or dispute arising out of or relating to this Agreement or its subject matter
which
the Parties are unable to resolve within forty-five (45) days after written
notice
by one Party to the other Party of the existence of such controversy or dispute,
may be submitted to binding arbitration by any Party. If so submitted to
arbitration, the matter shall be finally settled by binding arbitration
conducted in
accordance with the then current rules and procedures of the American Arbitration Association. Such arbitration shall take place in Salt Lake City, Utah. The
decision by the arbitrator on any matter submitted to arbitration shall be
binding
and conclusive upon the Parties, their respective heirs, executors,
administrators,
personal or legal representatives, successors, or permitted assigns, as the case
may be, and they shall comply with such decision in good faith. Each Party
hereby submits itself to the jurisdiction of the state and federal courts
within the
state of Utah for the entry of judgment with respect to the decision of the
arbitrator hereunder. Judgment upon the award may be entered in any state or
federal court within the state of Utah or any other court having jurisdiction.
	 
	 	(p)	 	No Waiver. No failure by any Party to insist upon the strict performance of any
covenant, duty, agreement, term, or condition hereof or to exercise any right or
remedy upon a breach thereof shall constitute a waiver of any such breach or of
such or any other covenant, duty, agreement, term, or condition, whether or not
similar. Any Party by notice pursuant to the terms hereof may, but shall be
under
no obligation, waive any of its rights or any condition or conditions to its
obligations hereunder, or any covenant, duty, agreement, term, or condition of any
other Party. No waiver shall constitute a continuing waiver or affect or alter
the
remainder hereof, and each and every other covenant, duty, agreement, term, and
condition hereof shall continue in full force and effect with respect to any
other
then existing or subsequently occurring breach.
	 
	 	(q)	 	Severability. In the event that any condition, covenant, term, or other provision
contained herein is held to be invalid or void by any court of competent jurisdiction, the
same shall be deemed severable from the remainder hereof and shall in no way affect any
other condition, covenant, term, or provision contained herein. If such condition,
covenant, term, or other provision shall be deemed invalid due to its scope and breadth,
such provision shall be deemed valid to the extent of the scope or breadth permitted by
law.
	 
	 	(r)	 	Covenant of Good Faith. Each Party agrees to act reasonably and in good faith in the
performance of any acts required of such Party hereunder.
	 
	 	(s)	 	Force Majeure. No Party shall be responsible for delays or failure in performance resulting from acts beyond the reasonable control of such Party. Such acts
shall include acts of God, strikes, lockouts, riots, acts of war or terrorism,

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Page 14 of 15

 

 

	 	 	 	epidemics, governmental regulation imposed after the fact, fires, communication line failures, power failures, earthquakes, or other disasters.
	 
	 	(t)	 	Titles and Captions. All part, section, subsection, and other titles, headings, and captions herein are included for purposes of convenience only, and shall not be deemed a
part hereof and shall in no way define, limit, extend, or describe the scope or intent of any of the provisions hereof.
	 
	 	(u)	 	Pronouns and Plurals. Whenever the context may require, any pronoun used herein shall include the corresponding masculine, feminine, or neuter forms, and the singular form of
nouns, pronouns, and verbs shall include the plural and vice versa.
	 
	 	(v)	 	Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one Agreement binding on the executing Parties if each
Party named in Part 2 hereof shall have executed at least one counterpart signature page of this Agreement notwithstanding that all of the Parties are not signatories
of the same full copy of this Agreement or the same counterpart signature page of this Agreement.

In Witness Whereof, each of the Parties hereto has executed this Agreement on or as of the date first set forth above.

	 	 	 	 	 
	     “Silver Eagle”

	 	Silver Eagle Refining-Woods Cross Inc.
	 	 
	 

	 	A Utah Corporation	 	 

	 	 	 	 	 	 	 
	 

	 	By
	 	/s/ David W. McSwain	 	 
	 

	 	 	 	

	 	 
	 

	 	 	 	David W. McSwain	 	 
	 

	 	 	 	President	 	 

	 	 	 	 	 
	     “Genoil”

	 	Genoil Inc.
	 	 
	 

	 	A Canada Corporation	 	 

	 	 	 	 	 
	 

	 	By
	 	/s/ Thomas F. Bugg
	 

	 	 	 	 
	 

	 	 	 	Thomas F. Bugg
	 

	 	 	 	President

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining-Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil
Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Page 15 of 15

 

 

Exhibit A – Heavy Oil Upgrading Process

Simplified Upgrader Process Diagram

 

Genoil Upgrader Technology features;

	•	 	A hydrogen addition process that achieves improvement in product quality by destructive
and non-destructive hydrogenation with no coke production.

	•	 	Utilizes bullet technology that achieves full dispersion of a diluent fluid into
another fluid with super-saturation of gases into the liquids.

	•	 	Flexible controls that help optimizes the concentration of diluent fluid to achieve
desired results.

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Exhibit A

 

 

Exhibit B – Genoil Capital Costs–Pro Forma

Genoil Hydrocracking Skid – Capital Cost Estimate

	 	 	 	 	 
	Description	 	Estimated Amount	 
	Structural Steel
	 	$	165,687	 
	Machinery & Equipment
	 	 	785,665	 
	Piping & Valves
	 	 	554,008	 
	Electrical
	 	 	269,850	 
	Instrumentation
	 	 	438,480	 
	Insulation and Coating
	 	 	25,220	 
	Miscellaneous
	 	 	16,250	 
	 
	 	 	 
	Subtotal
	 	 	2,255,160	 
	 

	Engineering Services
	 	 	338,274	 
	Owners Support
	 	 	120,000	 
	 
	 	 	 
	Base Cost Estimate
	 	 	2,713,434	 
	 
	 	 	 	 
	Contingency @ 15% of Base Cost Estimate
	 	 	407,015	 
	 
	 	 	 
	 
	 	 	 	 
	Total Estimated Capital Costs
	 	$	3,120,449	 
	 
	 	 	 
	 
	 	 	 	 
	No amount permitted for interest or cost of capital.
	 	 	 	 
	 
	 	 	 	 
	Not Included Items:
	 	 	 	 
	 
	 	 	 	 
	Compressor B400Mx 450BHP @ 1800 rpm 2 stage
	 	$	505,550	 
	(Operating lease payments to be included in Operating Costs)
	 	 	 	 

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Exhibit B

 

 

Exhibit C – Silver Eagle Capital Costs–Pro Forma

	 	 	 	 	 	 	 
	Description	 	 	 	Estimated Amount	 
	Direct Fired Heater 4.6mm BTU/hr to 7.5mm BTU/hr range	 	 
	 	$	432,700.00	 
	Piping	 	Total Pipe
	 	 	11,629.16	 
	 	 	Fittings
	 	 	3,096.26	 
	 	 	Pipe Labor
	 	 	14,725.43	 
	 	 	 
	 	 	 	 
	Electrical	 	Run Wire
	 	 	10,000.00	 
	 	 	Soft Starter
	 	 	20,000.00	 
	 	 	MCC
	 	 	40,000.00	 
	 	 	MCC Building
	 	 	10,000.00	 
	 	 	 
	 	 	 	 
	Miscellaneous	 	Area Cleanup
	 	 	15,000.00	 
	 	 	Foundations
	 	 	32,500.00	 
	 	 	Run Down Tank
	 	 	151,000.00	 
	 	 	Reroute Piping
	 	 	14,600.00	 
	 	 	Rebuild Water Pumps
	 	 	60,000.00	 
	 	 	Sulfur Detector
	 	 	60,000.00	 
	 	 	Crane
	 	 	7,000.00	 
	 	 	Transportation
	 	 	3,000.00	 
	 	 	Welding Labor
	 	 	10,000.00	 
	 	 	 
	 	 	 	 
	Contingency	 	 
	 	 	125,000.00	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 	 
	 	 	Total (without Additional)
	 	$	1,020,250.85	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 	 
	Potential Additional	 	H2 Surge Tank
	 	$	180,000.00	 
	 	 	Charge Pumps
	 	 	18,000.00	 
	 	 	Booster Compressor
	 	 	80,000.00	 
	 	 	 
	 	 	 
	 	 	Total Potential Additional
	 	$	278,000.00	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 	 
	 	 	TOTAL (with Additional)
	 	$	1,298,250.85	 
	 	 	 
	 	 	 

No amount permitted for
interest or cost of capital.

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Exhibit C

 

 

Exhibit D — Operating Costs

Feedstock Cost.

Additional Direct Costs:

Hydrogen (from Silver Eagle, on BTU basis of gas cost or other costs if alternative sources of
Hydrogen become available)

Electricity (to be separately metered)

Natural gas (to be separately metered)

Personnel / Operations

Personnel / Maintenance

Consumables

Catalyst

Supplies

Disposal

Incremental Insurance

Cooling

Metered fuel gas coming back to Silver Eagle from the Hydrocracking Unit shall be credited to the
profit center for the Hydrocracking Unit and Ancillary Items or treated as a sale by the profit
center for the Hydrocracking Unit and Ancillary Items to Silver Eagle.

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Exhibit D

 

 

Exhibit E – Hydrocracking Unit – Profit Center Pro Forma

Two types of product runs are being considered for the unit although different crude types can be
run from time to time as market conditions dictate for maximum profit generation. Estimated annual
throughput based on 80% service factor vs. design capacity is 292,000 bbl/year.

Hydrocracking Unit and Ancillary Items Net Profit Formula = (Gasoline % yield in product * Gasoline
Price) + (Diesel % yield in product * Diesel Price) + (Overhead Gas % * butane price or other BTU
value to natural gas component price) + (bottoms % * greater of bottoms price or input crude price)
– Feedstock Cost – Operating Costs.

No amount permitted for interest or cost of capital.

Example calculations using 800 bbl throughput per day. Actual volumes processed may vary depending
on the available supply of hydrogen and operating service factors.

	 	 	 	 	 	 	 
	Gasoline Component
	 	45% @ $42.42/bbl	 	$	15,271.20	 
	 
	 	 	 	 	 	 
	Diesel Component
	 	40% @ $38.64/bbl	 	 	12,364.80	 
	 
	 	 	 	 	 	 
	Overhead Gas
	 	5% @ $33.60/bbl	 	 	1,344.00	 
	 
	 	 	 	 	 	 
	Bottoms Component
	 	10% @ $23.94/bbl	 	 	1,915.20	 
	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Total Pro Forma Daily Revenue
	 	 	 	 	30,895.20	 
	 
	 	 	 	 	 	 
	Minus Feedstock Cost
	 	@       $33.22	 	 	26,576.00	 
	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Gross Pro Forma Daily Profit
	 	 	 	 	4,319.20	 
	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Pro Forma Monthly Gross Profit
	 	 	 	 	129,576.00	 
	 
	 	 	 	 	 	 
	Less Pro Forma Monthly Operating Costs
	 	 	 	 	48,500.00	 
	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Pro Forma Net Profit Per Month
	 	 	 	$	81,076.00	 
	 
	 	 	 	 	 

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Exhibit E

 

 

Exhibit F – Woods Cross Refinery Expenses

Automobile / Mileage

Engineering and Consulting

Environmental

Equipment Leases

401(k) Expenses

Insurance — Health

Insurance — Other

Lab

Office Supplies

Operating

Postage

Repairs and Maintenance

Safety 

Salaries and Wages

Taxes — Other Permits

Taxes — Payroll

Taxes — Property

Telephone

Training

Turn Around Expenses

Utilities

Waste and Trash Removal

Waste Water Removal

	 	 	 	 	 
	Hydrocracking Process Agreement between
	Silver Eagle Refining–Woods Cross Inc., a Utah Corporation (“Silver Eagle”)
	Genoil Inc., a Canada Corporation (“Genoil”)

	 	September 3, 2003
	 	Exhibit Fexv4w5

 

Exhibit 4.5

Thursday, June 3, 2004

	 	 	 	 	 
	Thomas F. Bugg, President

	 	 	 	Via Federal Express
	 Genoil
Inc.

	 	 	 	v(403)750-3450
	    101 6th Avenue SW, Suite 650

	 	 	 	 
	       Calgary, Alberta T2P 3PA

	 	 	 	 
	         Canada

	 	 	 	 

	 	 	 	 	 
	 

	 	Re:
	 	First Amendment
	 

	 	 	 	Hydrocracking Process Agreement dated September 3,2003 (“Agreement”)
	 

	 	 	 	Between Silver Eagle Refining–Woods Cross Inc. (“Silver Eagle”)
	 

	 	 	 	and Genoil Inc. (“Genoil”)

Dear Tom:

We have discussed the need to amend the Agreement to set a closing date thereunder and for other
purposes. This letter shall serve as such amendment (“First
Amendment”) to our Agreement. Please
review the changes set forth herein and indicate your approval and acceptance thereof by signing
in the box provided below and faxing a copy hereof with your signature thereon to me at your
earliest convenience. As we have discussed, our new banking relationship with Bank One, NA
(“Bank”), requires that Bank approve in writing any amendments to the Agreement before they become
effective; therefore, this First Amendment shall not be binding or of any force or effect until
such written approval shall have been obtained from Bank.

The changes to the Agreement are as follows:

	1.	 	Section 3.4 of the Agreement is amended in its entirety to read as follows:

“Closing” means the date that written approval of this First Amendment by
Bank One, NA, shall have been obtained by the Parties.

	2.	 	The caption and the first paragraph of Section 5.7 of the Agreement are amended in their
entirety to read as follows:

“Rent,
Royalties, and Other Compensation to Genoil. If actual Genoil
Capital Costs are $5,000,000 or greater, then sixty percent (60%) of the

Silver
Eagle Refining–Woods Cross Inc. — 2355 South
1100 West • Woods Cross Utah 84087 USA •
(801)298-3211 • Fax (801)298-1112

 

 

Thomas F. Bugg, President                    Via Federal Express

 Genoil Inc.

	 	 	 
	Re:

	 	First Amendment
	 

	 	Hydrocracking Process Agreement
dated September 3, 2003 (“Agreement”)
	 

	 	Between Silver Eagle Refining–Woods Cross Inc. (“Silver Eagle”)
	 

	 	and Genoil Inc. (“Genoil”)

Thursday, June 3, 2004

 Page 2 of 4

monthly net profit from the operation of the Hydrocracking Unit and
Ancillary Items will be paid to Genoil until Genoil shall have been paid
under this section of this Agreement a total amount equal to twice the
actual Genoil Capital Costs or if actual Genoil Capital Costs are $3,500,000
or less, then fifty percent (50%) of the monthly net profit from the
operation of the Hydrocracking Unit and Ancillary Items will be paid to
Genoil until Genoil shall have been paid under this section of this
Agreement a total amount equal to twice the actual Genoil Capital
Costs.
However, if actual Genoil Capital Costs are greater than $3,500,000 but less
than $5,000,000, then the applicable percentage of the monthly net profit
from the operation of the Hydrocracking Unit and Ancillary Items to be paid
to Genoil until Genoil shall have been paid under this section of this
Agreement a total amount equal to twice the actual Genoil Capital Costs
shall be adjusted proportionally from fifty percent (50%) up to sixty
percent (60%) based on the amount above $3,500,000 up to $5,000,000.

“After Genoil shall have been paid under this section of this Agreement a
total amount equal to twice the actual Genoil Capital Costs, Genoil shall
be paid thirty percent (30%) of the monthly net profit from the operation
of the Hydrocracking Unit and Ancillary Items. This shift would allow
Silver Eagle to maintain the facility for long-term safety and
environmental requirements.”

	3.	 	Section 5.14 of the Agreement is amended by adding thereto at the end thereof the following:

“This Agreement constitutes a lease of the Hydrocracking Unit from Genoil
to Silver Eagle. The payments to Genoil required by Section 5.7 constitute
rental payments owed by Silver Eagle- Genoil shall retain title to the
Hydrocracking Unit at all times. By entering into the Agreement, Genoil
does not acquire any ownership interest, security interest, or lien in any
of the real or personal property of Silver Eagle, including, without
limitation, any of the hydrocarbon products processed by the Hydrocracking
Unit or the accounts receivable resulting from the sale of such products.”

	4.	 	It is intended that Bank shall be and hereby is a third-party beneficiary of the Agreement
and
the agreements and amendments set forth in this First Amendment, and Bank may enforce
the terms of the Agreement as amended hereby. Anything in the Agreement as amended by

 

 

Thomas F. Bugg, President                    Via Federal Express

  Genoil Inc.

	 	 	 
	Re:

	 	First Amendment
	 

	 	Hydrocracking Process Agreement dated September 3, 2003 (“Agreement”)
	 

	 	Between Silver Eagle Refining—Woods Cross Inc. (“Silver Eagle”)
	 

	 	and Genoil Inc. (“Genoil”)

Thursday, June 3, 2004

   Page 3 of 4

this First Amendment to the contrary notwithstanding, the Parties agree that no
further amendments to the Agreement as amended by this First Amendment shall have any force
or effect unless and until such further amendments shall have been approved in writing by
Bank.

Except as specifically changed by this First Amendment, all other terms and provisions of the
Agreement shall continue in full force and effect.

In connection with the
closing of the Agreement as amended by this First Amendment – and
conditioned upon your signing in the box provided below, Silver Eagle hereby represents and
warrants that all conditions precedent to the obligations of Silver Eagle (as set forth in
subsection 5.18(a) of the Agreement as amended by this First Amendment) have been met and fully
satisfied, or are hereby waived.

Please review the changes set forth herein and indicate your approval and acceptance thereof by
signing in the box provided below and faxing a copy hereof with your signature thereon to me at
your earliest convenience.

Please contact me or Krege if you have any questions.

Sincerely,

Silver
Eagle Refining, Inc.

	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/
David W. McSwain	 	 
	 

	 	 	 	 
	 	 
	 

	 	 	 	David W. McSwain	 	 
	 

	 	 	 	President and Chief Operating Officer	 	 
	 

	 	 	 	dmcswain@silvereaglerefining.com	 	 

 

 

Thomas F. Bugg, President                    Via Federal Express

  Genoil Inc.

	 	 	 
	Re:

	 	First Amendment
	 

	 	Hydrocracking Process Agreement dated September 3, 2003 (“Agreement”)
	 

	 	Between Silver Eagle Refining–Woods Cross Inc. (“Silver Eagle”)
	 

	 	and Genoil Inc. (“Genoil”)

Thursday, June 3, 2004

    Page 4 of 4

I hereby represent and warrant that all conditions precedent to the
obligations of Genoil (as set forth in subsection 5.18(b) of the Agreement as
amended by this First Amendment) have been met and fully satisfied, or are hereby
waived, and that the changes to the Agreement set forth above are hereby approved
and accepted on or as of the date first set forth above.

Genoil Inc.

A Canada corporation

	 	 	 	 	 	 	 
	 

	 	By :
	 	/s/ Thomas F. Bugg	 	 
	 

	 	 	 	

	 	 
	 

	 	 	 	Thomas F. Bugg	 	 
	 

	 	 	 	President

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