COOPERATION AGREEMENT

 

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                                                                   Exhibit 10.14

 

                              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 Testing with Third Parties

provided that any Third Parties to whom Ivanhoe gives access to such data that

constitutes Confidential Information within the meaning of such term in the

Confidentiality Agreement 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.

 

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         (f) It is understood that prior to or during discussions with Third

Parties, at its own expense, Ivanhoe will have completed an analysis of the oil

proposed to be the raw material, the characteristics of the upgraded product

based on testing, the markets for the upgraded product, and transportation

studies regarding delivery of the products to the market ("Ivanhoe Analysis").

If Ivanhoe delivers the Testing Notice, as soon as it is available, but in no

case later than the end of the Project Data Period, Ivanhoe shall also deliver

t