Exhibit 10(i)
FIRST AMENDED AND RESTATED AGREEMENT TO DEVELOP NATURAL
GAS
TREATMENT PROJECTS USING MEHRA GAS TREATING UNITS
This FIRST
AMENDED AND RESTATED AGREEMENT TO DEVELOP NATURAL GAS
TREATMENT
PROJECTS USING MEHRA GAS
TREATING UNITS ("Agreement") effective this 1st day of
January, 2004 is between
ADVANCED EXTRACTION TECHNOLOGIES, INC., ("AET"), a
corporation organized under
the laws of the State of Texas and having a usual
place of business at Two
Northpoint Drive, Suite 820, Houston, Texas 77060, and
GATEWAY PROCESSING COMPANY
("Gateway"), a corporation organized under the laws
of the State of Texas, and
having a usual place of business at 500 Dallas
Street, Suite 2615, Houston,
Texas 77002. AET and Gateway are sometimes
hereinafter individually
referred to as a "party" and collectively referred to
as "parties".
This Agreement
includes Annexes which are appended to this Agreement
and
which are incorporated by
reference in this Agreement for all purposes. Terms
defined in Article I shall
have the same meaning throughout this Agreement
including the Annexes.
Defined terms may be used in the singular or in the
plural.
WHEREAS, the
parties have previously entered into that Agreement to
Develop
Natural Gas Treatment
Projects Using Mehra Gas Treating Units dated April 27,
1994, as amended on January
6, 1997, July 1, 1998 and October 1, 2000
("Development Agreement"),
and the parties desire to enter into this Agreement
in order to incorporate the
amendments, amend Paragraphs 2.3 and 4.3, delete
Paragraph 2.13, renumber
Paragraph 2.14 to Paragraph 2.13 and amend Annex II,
and to restate the
Development Agreement in its entirety; and
WHEREAS, AET has
developed a proprietary gas treating unit (referred to
herein as "Mehra Gas Treating
Unit") using a proprietary process ("Mehra
Processsm") for purifying
natural gas and recovering valuable coproducts; and
WHEREAS, AET
owns "Patent Rights" and valuable "Know-How" concerning
the
design, construction and
operation of Mehra Gas Treating Units; and
WHEREAS, AET
desires to license Mehra Gas Treating Units for treating
natural gas to earn licensing
fees and royalties; and
WHEREAS, Gateway
desires to design, construct, operate and otherwise
commercialize Mehra Gas
Treating Units either individually or jointly with
others;
NOW, THEREFORE,
it is mutually agreed as follows:
ARTICLE 1: DEFINITIONS
As used in this
Agreement:
1.1 "Affiliate" shall mean any Person
(i) which, directly or indirectly through
one or more
intermediaries, controls or is controlled by or is under
common
control with
another Person or (ii) where such Person has substantially
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same executive
officers as one or more other Persons. For the purposes
of
this definition,
"control" shall mean ownership of 25% or more of the
equity interest
and/or voting power of the Person.
1.2 "Detailed Design" shall mean the
process and instrumentation drawings,
mechanical,
electrical, civil, structural and equipment design
specifications,
and mechanical and process and instrumentation
specification
sheets and all other specifications that a construction
contractor
requires to build a Mehra Gas Treating Unit.
1.3 "Know-How" shall mean confidential
information, data, and trade secrets
represented to
Gateway to be owned by AET concerning the design,
construction,
installation and operation of a Mehra Gas Treating Unit,
generally
discussed in Annex III.
1.4 "Maximum Rated Feed Capacity"
shall mean the sustainable maximum feed rate
for a Unit,
measured in Standard Cubic Feet per day, which is
established
as part of the
Performance Guarantees for the Unit pursuant to Article
4.
1.5 "Mehra Gas Treating Unit" or
"Unit" shall mean a process unit which uses
the Mehra
Process technology generally discussed in Annex I to
treat
natural gas.
Treating natural gas includes:
i. Upgrading natural gas to
marketable quality by rejecting nitrogen from
natural gas; and
ii. Recovering associated natural gas
liquids or other hydrocarbon liquids
from natural gas when present and, in Gateway's sole judgment, it
is
economical to do so; and
iii. Recovering
helium from natural gas when present and, in Gateway's
sole
judgment, it is economical to do so.
A Mehra Gas
Treating Unit includes three sections which are integrated
and
generally
discussed in Annex I:
i. A Mehra Process Section;
and
ii. A Compression Section providing,
where applicable, compression for
feed gas to the Unit and/or compression for sales gas from the
Unit;
and
iii. A Refrigeration Section
including a propane refrigeration compressor.
As an option, a
Helium Recovery Section comprised of membrane and/or
pressure swing
adsorption systems may be added as a fourth section as
generally
discussed in Annex I.
1.6 "Mehra Process Section" shall mean
a process train comprising an
absorber-stripper tower, one or more flash drums in series, solvent
pumps
and heat
exchangers. A Mehra Gas Treating Unit may contain two or
more
Mehra Process
Sections operating in parallel.
1.7 "Natural Gas" or "Gas", whether
capitalized or not, shall mean a naturally
occurring
mixture of hydrocarbon and non-hydrocarbon gases containing
3
mol% or more of
nitrogen found in porous geologic formations beneath the
earth's surface,
often in association with petroleum. The principal
desirable
constituent is methane. As used herein, this term shall
also
include coalbed
methane and landfill gases.
1.8 "Patent Rights" shall mean the
rights to design, build, construct, operate,
sell, assign,
lease, rent, install, repair, maintain, revise, and
revamp
Units falling
into or within the scope of any claim in the U.S.
Patents
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listed in Annex
II and all continuations, continuations-in-part,
divisions,
reissues,
reexaminations, substitutes and other U.S. Patents related to
the
Mehra Process
for Units owned or licensed directly or indirectly by or
to
AET or its
Affiliates, including all improvements to the Mehra
Process.
1.9 "Person" shall mean an individual,
a corporation, voluntary association,
joint stock
company, business trust, partnership, proprietorship, or
other
legal entity
(excluding any governmental body) however constituted.
1.10 "Process Design Basis
Package" shall mean process basis specifications,
information,
data and instructions, including Know-How, deemed by AET to
be
necessary,
sufficient and useful to ensure that the Mehra Gas Treating
Unit
process basis is
properly employed in the process and instrumentation
drawings and
other parts of the Detailed Design of the Mehra Gas
Treating
Unit by the
fabricator of the Unit. The scope of this information is
specified in
Annex IV.
1.11 "Proposal Activities"
shall mean activities conducted between Gateway and
third parties to
develop business opportunities to treat natural gas
using
the Mehra Gas
Treating Unit.
1.12 "Proposal Technical
Support" shall mean the technical information, data,
alternative
comparison studies, answers to queries, participation in
sales
promotions and
other support activities and functions relating to Mehra
Gas
Treating Units
that AET may provide to Gateway to support Proposal
Activities,
including where the specialized knowledge of AET is
required.
Proposal
Technical Support shall include preliminary planning
engineering,
flow plans,
energy and material balance and product yields for
alternative
feed rates and
compositions, evaluation of process alternatives and
process
optimization,
major equipment specifications, and utility requirements
done
in sufficient
detail so that Gateway and third parties can make
preliminary
estimates of
investments and operating costs.
1.13 "Standard Cubic Foot" of
gas is the amount of gas in a volume of one cubic
foot at 760 mm
Hg (seven hundred and sixty millimeters of mercury)
absolute
pressure at a
temperature of 60 (sixty) degrees Fahrenheit.
1.14 "Start-up" shall mean
the period of time after the Unit is mechanically
complete in the
field and natural gas flow to the Unit is initiated.
Start-up shall
be considered complete when the Mehra Gas Treating Unit
operates for 200
(two hundred) continuous hours in steady state at design
conditions with
no more than 20 hours cumulative downtime during the
200-hour
period.
ARTICLE 2: GRANTS AND CONDITIONS
2.1 AET hereby grants to Gateway,
subject to terms, covenants, conditions and
limitations set
forth in this Agreement, the exclusive rights and
licenses,
including
Know-How and Patent Rights, in the United States to
design,
construct,
build, license, operate, sell, install, assign, lease,
rent,
repair,
maintain, revise and revamp Mehra Gas Treating Units
either
individually or
jointly with others including by sublicense and
subcontract
for individual
Units ("Grant"). Furthermore, AET shall grant the rights
and
licenses set
forth in this Agreement to any purchasing entity or
assignee
if such rights,
licenses or grants are required to consummate the
transaction or
to operate or maintain the Unit.
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2.2 The Grant to Gateway shall apply
to Mehra Gas Treating Units used in, or in
anyway involved
with, the production of natural gas. AET hereby agrees
that
it shall not
design, construct, build, operate, install, lease, sell,
rent
or assign a
Mehra Gas Treating Unit for treating natural gas in the
United
States nor grant
a right or license for a Mehra Gas Treating Unit to any
other party for
treating natural gas in the United States for as long as
Gateway's
exclusive Grant is in force and effect.
2.3 If as of December 31, 2004 or as
of any December 31st thereafter Gateway
(including any
sublicensee, subcontractor, purchasing entity or assignee
of
Gateway pursuant
to Paragraph 2.1, and including any grantee or assignee
of
AET approved by
Gateway) has not installed, sold or leased a Unit or
Units,
which have
initiated Start-up, with a combined Maximum Rated Feed
Capacity
at least equal
to the Target Capacity as defined below, then AET shall
have
the right to
cause this Agreement to be modified as set forth herein
by
giving written
notice to Gateway within sixty (60) days after the end
of
the calendar
year for which the Target Capacity has not been met. If
such
written notice
is given on a timely basis, then effective at the end of
a
thirty-day
period following receipt of said notice by Gateway, the
first
sentence of
Paragraph 2.1 of this Agreement will be modified by
deleting
the word
"exclusive". The Target Capacity for December 31, 2004 is
20,000
Mcf per day. The
Target Capacity will increase by 10,000 Mcf per day as
of
the end of each
calendar year thereafter.
The Maximum
Rated Feed Capacity (15,300 Mcf per day) of the Unit
installed
at a facility
near Madisonville, Texas pursuant to License Agreement
to
Practice
Nitrogen Rejection Technology dated December 24, 2001 among
AET,
Gateway and
Hanover Compression Limited Partnership ("Hanover") is to
be
included in the
combined Maximum Rated Feed Capacity of Units as of
December 31,
2004 and each December 31 thereafter in determining whether
or
not the Target
Capacity has been achieved.
Furthermore, if
Hanover or a third party enters into a license agreement
in
2004 for one or
more additional Units at the facility near Madisonville,
Texas and part
or all of the license fees payable to AET pursuant to
said
license
agreement are paid prior to December 31, 2004, then the
Maximum
Rated Feed
Capacity of said Unit or Units shall be included in the
combined
Maximum Rated
Feed Capacity of Units as of December 31, 2004 and each
December 31
thereafter in determining whether or not the Target
Capacity
has been
achieved, notwithstanding the fact that the Unit or Units do
not
initiate Start-up in
2004.
2.4 In the event a non-exclusive Grant
is in effect pursuant to Paragraph 2.3,
the fees to be
paid and the timing of such payments by Gateway to AET
and
all other terms
and conditions with respect to Mehra Gas Treating Units
shall be no less
favorable to Gateway than to any other grantee, licensee
or user of the
Patent Rights and Know-How.
2.5 As between AET and Gateway,
Gateway is solely responsible for developing
and negotiating
agreements with third parties to treat natural gas
employing the
Mehra Gas Treating Units. During Proposal Activities,
Gateway
may request
reasonable Proposal Technical Support from AET to
facilitate
negotiations
between Gateway and the third party, such third parties
including
Gateway Affiliates. AET will provide reasonable Proposal
Technical
Support requested by Gateway in a timely manner. AET and
Gateway
shall agree on
the scope of the Proposal Technical Support that AET
will
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provide, the
fixed price that Gateway will pay AET for the Proposal
Technical
Support and the time when payment is to be made. It is
also
agreed that the
fixed price for the Proposal Technical Support will
reimburse AET
for the incremental costs incurred for performing the
work,
including
professional time and travel, and other direct expenses.
AET
assumes no
responsibility or liability for Gateway's use or application
of
Proposal
Technical Support Information.
2.6 When Gateway elects to construct a
Mehra Gas Treating Unit, AET will
provide Gateway
with a certified Process Design Basis Package for the
Unit
under
consideration within thirty (30) days after Gateway gives AET
the
information
specified in Annex IV under the heading "Mehra Gas
Treating
Unit Duty
Specifications". Gateway will pay AET $45,000.00
(Forty-Five
Thousand
Dollars) for the Process Design Basis Package for the first
Mehra
Gas Treating
Unit it constructs and $30,000.00 (Thirty Thousand
Dollars)
for the Process
Design Basis Package for each subsequent Mehra Gas
Treating
Unit it
constructs. Fifty percent of the applicable payment will be
made
when the Process
Design Basis Package is initiated for a Unit and the
remaining fifty
percent of the payment will be paid upon completion of
the
Process Design
Basis Package.
It is not
contemplated that AET will perform functions of an
engineering
and construction
contractor or take on any responsibility for directing
the
work of the
engineering and construction contractor that Gateway selects
to
design and build
a Mehra Gas Treating Unit. It is contemplated that the
certified
"Process Design Basis Package" shall be adequate and complete
to
permit a
qualified engineering and construction contractor to develop
the
process and
instrument drawings (P&ID), mechanical flow diagrams, and
do
the detailed
engineering and construction of the Mehra Gas Treating
Unit.
The engineering
and construction contractor selected by Gateway will
prepare in
consultation with AET the P&ID's, which are typically the
first
step in the
detailed engineering of a process plant. Gateway and AET
shall
use their
reasonable efforts to have the certified Process Design
Basis
Package
incorporated in the P&ID's. For a new Mehra Gas Treating Unit
which
is a close
derivative of a previous Mehra Gas Treating Unit, the
Process
Design Basis
Package for the new Unit that AET prepares may be
transferred
in the form of
revisions and modifications to a set of P&ID's for
an
existing Unit.
AET shall use P&ID's and the other portions of the
Detailed
Design produced
by the engineering and construction contractor solely
for
those
purposes.
Notwithstanding
the requirements in Paragraphs 2.5 and 2.6 of this
Article
2, AET will
provide Proposal Technical Support and the Process Design
Basis
Package to
Gateway for two Mehra Gas Treating Units selected by Gateway
at
no initial
charge to Gateway; provided, however, that if either of
said
Units is
constructed, Gateway will pay AET the respective
Proposal
Technical
Support and Process Design Basis Package fees for that Unit
at
Start-up of the
Unit. Gateway will advise AET prior to commencement of
the
Proposal
Technical Support for a Unit whether or not the Proposal
Technical
Support and the
Process Design Basis Package for that Unit will be
subject
to this
provision.
2.7 AET agrees to provide reasonable
technical assistance, consultation, and
oversight to
Gateway and/or to Gateway's engineering and construction
contractor for
the sole purpose of properly incorporating the Process
Design Basis
Package into the Detailed Design of the Mehra Gas
Treating
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Unit. AET will
not charge Gateway for this technical assistance;
however,
Gateway will
reimburse AET the cost of reasonable travel and living
expenses when
the work is done away from AET's office.
2.8 During the preparation of the
Detailed Design of the Mehra Gas Treating
Unit, AET will
timely review the Detailed Design specifications as they
are
released by the
engineering and construction contractor retained by
Gateway
and promptly
point out to Gateway in writing all material deviations
from
proper
implementation of the Process Design Basis Package in the
Detailed
Design; and
Gateway will advise the contractor to bring the Detailed
Design
into conformance
with the certified Process Design Basis Package.
It is
contemplated that the Mehra Process Sections will be standardized
as
much as possible
for all applications. However, the performance of the
Mehra Process
Sections will vary with feed composition and conditions
and
product
specifications. It is also contemplated that the compression
and
refrigeration
sections will be designed and built by equipment vendors
to
duty specifications provided by
AET as part of the certified Process Design
Basis
Package.
2.9 Before Gateway approves the final
Detailed Design specifications of a Mehra
Gas Treating
Unit for construction, AET shall state in writing that
the
certified
Process Design Basis Package has been properly incorporated
into
the Detailed
Design for the Unit.
2.10 AET must preapprove any
contractor or consultant retained by Gateway to
work with AET's
technical information. AET will not unreasonably
withhold
approval.
2.11 AET, at Gateway's
request, will provide one employee skilled in the Mehra
Process
technology at the plant site during the installation and
Start-up
period for
consultation up to a maximum of sixty (60) days at no charge
to
Gateway, except
Gateway will pay the cost of reasonable travel and
living
expenses for
AET's employee.
2.12 If it is mutually agreed
by AET and Gateway that a consultant who is not an
employee of AET
is required to perform any of the services of AET
required
or permitted
under this Agreement, the cost for the consultant shall
be
paid by AET,
except that the cost of reasonable transportation and
living
expenses of the
consultant shall be paid by Gateway.
2.13 While an exclusive Grant
is in existence pursuant to this Agreement,
Gateway agrees
that if nitrogen must be removed from natural gas in the
United States to
make the natural gas marketable Gateway will have an
ownership
interest only in a Mehra Gas Treating Unit for said
purpose.
ARTICLE 3: CONFIDENTIALITY
3.1 Gateway agrees to receive and
maintain the Know-How, and all documentation
of it in secret
and confidence. This means Gateway will take reasonable
care to ensure
that the Know-How is (i) not made available to
individuals
other than those
required to implement this Agreement, and (ii) the
Know-How will
not be used for purposes other than those contemplated
in
this Agreement.
However, Gateway will have no such obligations with
respect
to Know-How and
documentation which:
(a) was known to Gateway at the time
of disclosure as evidenced by records
which were then in the possession of Gateway and its employees;
or
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(b) is or has become publicly
available through no fault of Gateway; or
(c) is subsequently disclosed to
Gateway, its employees, or other duly
assigned representatives, by a party not under a secrecy obligation
to
AET.
3.2 Gateway agrees that information
relating to the Mehra Gas Treating Unit
technology
provided by AET will be disclosed or made available only
to
those
representatives of Gateway and its consultants and contractors
who
agree to receive
the information under conditions set forth above and who
may require such
information to assist Gateway to prepare venture
proposals
and to design,
build, construct, license, operate, install, sell,
assign,
lease, rent,
repair, maintain, revise and revamp Mehra Gas Treating
Units
and to perform
all other functions permitted under this Agreement.
3.3 AET agrees to receive and maintain
all written information received from
Gateway and its
consultants and contractors concerning the Mehra Gas
Treating Unit in
secret and confidence. This means AET will take
reasonable
care to ensure
that such written information is (i) not made available
to
individuals
other than those required to implement this Agreement, and
(ii)
will not be used
for purposes other than those contemplated in this
Agreement.
However, AET will have no such obligations with respect to
such
written
information which:
(a) was known to AET at the time of
disclosure as evidenced by records
which were then in the possession of AET and its employees;
or
(b) is or has become publicly
available through no fault of AET; or
(c) is subsequently disclosed to AET,
its employees, or other duly
designated representatives, by a party not under a secrecy
obligation
to Gateway.
AET agrees that
information relating to such written information
provided
by Gateway, its
consultants and contractors will be disclosed or made
available only
to those representatives of AET who agree to receive the
information
under the conditions set forth above and who may require
such
information to
assist AET to prepare venture proposals for Gateway an
