Fixed and Floating Charge Debenture between Ivanhoe Energy Inc. and Talisman Energy Canada dated July 11, 2008
Ivanhoe Energy Inc. has entered into a debenture agreement with Talisman Energy Canada, promising to repay a principal sum of $67,500,000 CAD plus interest. The agreement grants Talisman Energy Canada a fixed and floating charge over Ivanhoe’s assets as security for the debt. It outlines the rights and obligations of both parties, including terms for default, remedies, and the appointment of a receiver if necessary. The debenture is governed by Canadian law and includes provisions for notices, assignments, and indemnities.
Article 1 PROMISE TO PAY | 1 | |||
1.1 Promise to Pay | 1 | |||
1.2 Interest | 1 | |||
Article 2 INTERPRETATION | 1 | |||
2.1 Defined Terms | 1 | |||
2.2 Industry Terms | 5 | |||
2.3 Time | 6 | |||
2.4 Schedules | 6 | |||
2.5 References | 6 | |||
2.6 Headings | 6 | |||
2.7 Currency | 6 | |||
2.8 Usage | 6 | |||
2.9 Knowledge or Awareness | 7 | |||
Article 3 REPRESENTATIONS AND WARRANTIES | 7 | |||
3.1 Representations and Warranties | 7 | |||
3.2 Survival | 9 | |||
Article 4 COVENANTS | 9 | |||
4.1 Covenants | 9 | |||
Article 5 SECURITY | 14 | |||
5.1 Mortgage, Charge and Security Interest | 14 | |||
5.2 Last Day of Leases | 15 | |||
5.3 Contractual Rights | 15 | |||
5.4 The Secured Party Not Liable | 15 | |||
5.5 Valid Irrespective of Incurring Obligations | 15 | |||
5.6 Separate Security | 15 | |||
5.7 Amalgamations | 16 | |||
5.8 Guarantees | 16 | |||
Article 6 SECURED PARTY RIGHTS | 16 | |||
6.1 The Secured Partys Right to Perform | 16 | |||
6.2 Payment of Costs | 17 | |||
6.3 Further Security | 17 | |||
Article 7 PARTIAL RELEASES | 18 | |||
7.1 Eminent Domain | 18 | |||
7.2 Partial Release | 18 | |||
Article 8 SUPPLEMENTAL DEBENTURES AND MODIFICATIONS | 18 | |||
8.1 Supplemental Debentures | 18 | |||
8.2 One Debenture | 18 | |||
Article 9 DEFAULT | 19 | |||
9.1 Security Becomes Enforceable | 19 | |||
9.2 Receiver Appointed by the Secured Party | 20 | |||
9.3 Receiver Appointed by the Court | 21 | |||
9.4 Consultant Appointed by the Secured Party | 22 | |||
9.5 Right of Possession, Collection, Sale, etc. | 22 | |||
9.6 Retention of Mortgaged Property | 22 | |||
9.7 Remedies under the PPSA | 23 | |||
9.8 Specific Performance, Foreclosure, etc. | 23 |
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9.9 Effect of Appointment of Receiver | 23 | |||
9.10 Costs and Expenses | 23 | |||
9.11 Notice | 24 | |||
9.12 Power of Attorney | 24 | |||
9.13 Remedies Cumulative, Waiver of Defaults | 24 | |||
9.14 Disposition of Amounts | 24 | |||
9.15 Collection of Accounts | 25 | |||
9.16 Trust During Stay | 25 | |||
9.17 Rights of Third Parties | 25 | |||
9.18 Judgment Against the Corporation | 26 | |||
9.19 Conflict with Laws | 26 | |||
9.20 Insolvency Proceedings | 26 | |||
Article 10 DEFEASANCE | 27 | |||
10.1 Defeasance | 27 | |||
Article 11 SEVERABILITY | 27 | |||
11.1 Severability | 27 | |||
Article 12 NOTICES | 28 | |||
12.1 Notices | 28 | |||
Article 13 ASSIGNMENTS | 28 | |||
13.1 Assignments | 28 | |||
Article 14 INDEMNITIES | 29 | |||
14.1 No Liability for Error of Judgment | 29 | |||
14.2 No Liability in Receivership | 29 | |||
14.3 Indemnity respecting Payments | 29 | |||
14.4 General Indemnity | 30 | |||
Article 15 GENERAL | 30 | |||
15.1 Enurement | 30 | |||
15.2 Waiver | 30 | |||
15.3 Waiver of Presentment | 31 | |||
15.4 Delay Not Waiver | 31 | |||
15.5 Further Assurances | 31 | |||
15.6 Governing Law | 31 | |||
15.7 Pledge | 31 | |||
15.8 Time is of the Essence | 31 | |||
15.9 No Set-off or Counterclaim | 32 | |||
15.10 Additional Security | 32 | |||
15.11 Copy Received | 32 | |||
15.12 Dealings by Secured Party | 32 | |||
15.13 Acknowledgement | 32 |
DATE: | July 11, 2008 | |
SECURED | Talisman Energy Canada | |
PARTYS | Suite 2000, 888-3rd Street SW | |
ADDRESS: | Calgary, Alberta T2P 5C5 |
PROMISE TO PAY
1.1 | Promise to Pay | |
IVANHOE ENERGY INC. (the Corporation), a corporation incorporated under the laws of the Yukon Territory, for value received hereby acknowledges itself indebted and promises to pay, on demand, to or to the order of the Secured Party (as hereinafter defined), the principal sum of Sixty Seven Million Five Hundred Thousand Dollars ($67,500,000) (the Principal Sum) in lawful money of Canada, together with all accrued and unpaid interest thereon and all other amounts due to the Secured Party under the terms hereof at the Secured Partys address hereunder, or at such other place as the Secured Party may designate by notice in writing to the Corporation. Notwithstanding the Principal Sum of this Debenture and the interest rate provided for herein on such Principal Sum, the obligations secured by the deposit to the Secured Party of the Debenture as provided for herein shall not exceed the amount of the Liabilities. | ||
1.2 | Interest | |
The Principal Sum shall bear and accrue interest at the Interest Rate from the date hereof until paid, both before and after default and/or judgment (to the extent permitted by Applicable Law). |
INTERPRETATION
2.1 | Defined Terms |
(a) | the words Accessions, Accounts, Chattel Paper, Documents of Title, Goods, Instruments, Intangibles, Inventory, Money, Proceeds, and Investment Property (including any singular or plural variation thereof whenever used herein) shall have the respective meanings given to such words in the PPSA; | ||
(b) | Account Debtor shall mean a Person who is obligated to pay any Account, Chattel Paper and Instrument forming part of the Mortgaged Property; |
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(c) | Applicable Law shall mean any statute, law, bylaw, rule or regulation or any judgment, order, writ, injunction, decree or direction of any Governmental Entity to which a specified person or property is subject; | ||
(d) | Applicable Securities Laws means all applicable Canadian and U.S. securities regulations, including the rules, regulations, notices, instruments and policies of the Securities Commissions; | ||
(e) | Asset Transfer Agreement shall mean that certain asset transfer agreement dated July 11, 2008 between the Corporation and the Secured Party; | ||
(f) | Business Day shall mean a day, excluding Saturday and Sunday, on which banking institutions are open for business in Calgary, Alberta, Toronto, Ontario and Vancouver, British Columbia; | ||
(g) | Contractual Rights shall have the meaning ascribed thereto in Section 5.3; | ||
(h) | Corporation shall mean Ivanhoe Energy Inc. and its successors and permitted assigns; | ||
(i) | Crude Bitumen means a viscous mixture, mainly of hydrocarbons heavier then pentane, that may contain sulphur compounds; | ||
(j) | Debenture shall mean this Debenture, as same may be amended, modified, supplemented or restated from time to time; | ||
(k) | Encumbrance shall mean any mortgage, pledge, lien, charge, assignment, hypothecation, security interest, title retention or any other security arrangement howsoever created or arising and whether perfected or not; | ||
(l) | Event of Default shall have the meaning ascribed thereto in Section 9.1; | ||
(m) | Excluded Securities means all present and after-acquired shares or other securities of the Corporation in the capital of: |
(i) | every existing Subsidiary (as defined in the Asset Transfer Agreement); and | ||
(ii) | every subsidiary of the Corporation created, acquired or coming into existence after the date hereof, |
but excluding in all events the shares, partnership interests and other equity interests in and to the Affiliates, partnerships and subsidiaries as set forth in Section 4.1(r); | |||
(n) | Governmental Entity shall mean any court or tribunal in any jurisdiction or any federal, territorial, provincial, municipal or other governmental body, agency, authority, department, commission, board or instrumentality; |
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(o) | Hedging Arrangements has the meaning ascribed to that term in Section 4.1(u); | ||
(p) | Indebtedness shall mean all present and future indebtedness and liability of the Corporation to the Secured Party arising in connection with or pursuant to, or as evidenced by, the Asset Transfer Agreement and the Notes; | ||
(q) | Intellectual Property means all present and after acquired intellectual or industrial property of the Corporation, including, without limitation, all, Canadian and Non-Canadian, patents, patent applications, inventions, copyright (whether registered or not), copyright applications, trademarks, (whether registered or not), trademark applications, trade names, moral and personality rights, industrial designs (whether registered or not), industrial design applications, trade secrets, know-how, confidential and other proprietary information, and contractual rights and any and all covenants not to compete in favour of the Corporation, and all income, royalties, damages, payments and claims now and hereafter due and or payable to the Corporation with respect thereto; including, but without limitation, the Intellectual Property, if any, described in Schedule B. | ||
(r) | Interest Rate shall mean the annual rate of interest equal to the Prime Rate plus five (5) percent, calculated daily and not compounded; | ||
(s) | LaSalle Credit Agreement means the credit agreement dated as of October 30, 2006 among Ivanhoe Energy (USA) Inc., as borrower, the Corporation and certain other persons, as guarantors, LaSalle Bank, National Association, as administrative agent and issuing lender, and the financial institutions from time to time party thereto; | ||
(t) | LaSalle Guaranty means the continuing guaranty agreement dated as of October 30, 2006 from the Corporation and certain other persons, as guarantors, to LaSalle Bank, National Association; | ||
(u) | LaSalle Security Agreement means the security agreement and pledge dated as of October 30, 2006 from the Corporation to LaSalle Bank, National Association; | ||
(v) | Liabilities shall mean the liabilities and obligations, present or future, direct or indirect, absolute or contingent, matured or not, at any time owing by the Corporation to the Secured Party under or in connection with each of the Transaction Documents and every party of such liabilities and obligations; | ||
(w) | Material Adverse Effect means an effect which, taking into account all relevant circumstances would reasonably be expected to be: |
(i) | materially adverse to the Corporations ability to perform its obligations under the Transaction Documents; or |
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(ii) | materially prejudicial to the validity, enforceability or intended priority of the Security. |
(x) | Mortgaged Property has the meaning ascribed to that term in Section 5.1; | ||
(y) | Notes shall mean the two promissory notes dated as of the date hereof granted by the Corporation in favour of the Secured Party in the amounts of $12,500,000 and $40,000,000 respectively, as such notes may be amended, modified, supplemented or restated from time to time; | ||
(z) | Oil Sands shall mean: |
(i) | sands and other rock materials containing Crude Bitumen; | ||
(ii) | the Crude Bitumen contained in those sands and other rock materials; and | ||
(iii) | any other hydrocarbon or mineral substances, other than natural gas, in association with that Crude Bitumen or those sands and other rock materials referred to in subsections (i) and (ii); |
(aa) | Oil Sands Leases shall mean those leases described in Exhibit 1 to Schedule A hereto, as such leases may be amended, modified, supplemented, restated or replaced from time to time, together with all other instruments that may be issued pursuant thereto or in connection therewith from time to time; | ||
(bb) | PPSA shall mean the Personal Property Security Act (Alberta) as amended; | ||
(cc) | Permitted Encumbrances shall have the meaning ascribed thereto in the Asset Transfer Agreement; provided that Permitted Encumbrances shall include (i) any liens or security on the Specifically Mortgaged Property ranking subsequent to or subordinate to the Security where the holder of such lien or security has entered into an intercreditor or subordination agreement satisfying the requirements set forth in clause 13.1(a) of the Asset Transfer Agreement and (ii) such Encumbrances on the Mortgaged Property other than the Specifically Mortgaged Property (which for greater certainty shall include any personal property that may form part of, or constitute proceeds from, such Specifically Mortgaged Property) or the Pledged Shares (as that term is defined in the Asset Transfer Agreement); | ||
(dd) | Person shall mean an individual, firm, partnership, company, corporation, Governmental Entity, unincorporated body of persons or association or other entity recognized by law; | ||
(ee) | Principal Sum shall mean Sixty Seven Million Five Hundred Thousand Dollars ($67,500,000) in lawful money of Canada; | ||
(ff) | Product shall mean any products obtained pursuant to the Oil Sands Leases by: |
(i) | processing Oil Sands, Crude Bitumen or derivatives of Crude Bitumen, or |
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(ii) | by reprocessing a product referred to in subclause (i), |
and includes any products obtained by any subsequent reprocessing of the products obtained under subclauses (i) and (ii); |
(gg) | Receivables shall mean all debts, claims and choses in action (including, without limitation, Accounts and Chattel Paper) now or in the future due or owing to or owned by the Corporation; | ||
(hh) | Receiver shall mean any receiver appointed (whether pursuant to court order or otherwise) as hereinafter contemplated or provided for, and shall include a receiver, manager and a receiver manager; | ||
(ii) | SEC means the United States Securities and Exchange Commission; | ||
(jj) | Secured Party shall mean Talisman Energy Canada, and its successors and permitted assigns; | ||
(kk) | Securities Commissions means the securities commissions or securities regulatory authorities in each of the provinces of Canada and the Yukon Territory, and the SEC; | ||
(ll) | Security shall mean the mortgages, charges and security interests referred to in Section 5.1, created or intended to be created by this Debenture; | ||
(mm) | Specifically Mortgaged Lands shall mean the lands described in Exhibit 1 to Schedule A hereto, together with any and all lands which may now or hereafter be pooled, unitized or otherwise combined therewith, and including all Oil Sands and other hydrocarbons within, upon or under such lands; | ||
(nn) | Specifically Mortgaged Property has the meaning ascribed thereto in Section 5.1(a); | ||
(oo) | Taxes shall mean all ad valorem, property, occupation, gathering, pipeline, regulating, windfall profit, severance, gross production, sales, GST, excise and other taxes and governmental charges and assessments imposed upon the Corporation or its assets excluding income taxes; | ||
(pp) | Transaction Documents shall mean this Debenture, the Asset Transfer Agreement and the Notes; and | ||
(qq) | Wells shall mean the wells now or hereafter located on the Specifically Mortgaged Lands. |
2.2 | Industry Terms |
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2.3 | Time |
2.4 | Schedules |
Schedule A | | Specifically Mortgaged Property, Specifically Mortgaged Lands and Oil Sands Leases | |
Schedule B | | Intellectual Property |
2.5 | References |
2.6 | Headings |
2.7 | Currency |
2.8 | Usage |
(a) | words importing the singular shall include the plural and vice versa; | ||
(b) | words importing gender shall include the masculine, feminine and neuter genders; and | ||
(c) | references to any statute shall extend to any orders-in-council or regulations passed under and pursuant thereto, or any amendment or re-enactment of such statute, orders-in-council or regulations, or any statute, orders-in-council or regulations substantially in replacement thereof. |
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2.9 | Knowledge or Awareness |
REPRESENTATIONS AND WARRANTIES
3.1 | Representations and Warranties |
(a) | the Corporation is a corporation duly organized, validly subsisting and in good standing under the laws of its jurisdiction of incorporation and duly registered, validly subsisting and authorized to carry on business in the jurisdictions in which the Specifically Mortgaged Property is located; the Corporation has all requisite corporate authority and power to carry on its business and to own its properties and assets; | ||
(b) | the Corporation has taken all necessary corporate actions and has all requisite capacity, power and authority to enter into this Debenture and the other Transaction Documents, and to perform all other obligations of the Corporation under this Debenture and the other Transaction Documents (including the issuance of securities upon the conversion of the convertible Note); | ||
(c) | this Debenture and the other Transaction Documents have been duly executed and delivered by it and constitute legal, valid, binding and enforceable obligations of the Corporation subject to the qualification that such enforceability may be subject to: |
(i) | bankruptcy, insolvency, fraudulent preference, reorganization or other laws affecting creditors rights generally; and | ||
(ii) | general principles of equity (regardless of whether such enforceability is considered in a proceeding at equity or law); |
(d) | the consummation by the Corporation of the transactions contemplated herein will not, in any material respect, violate, be in breach of, or conflict with any of the constating documents, charter, by-laws or other governing documents of the Corporation or any provision of any material agreement or instrument to which the Corporation is party or by which the Corporation, its shares or the Specifically Mortgaged Property are bound, or any Applicable Law; |
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(e) | the Corporation meets all qualification requirements of all Governmental Entities and under Applicable Laws to purchase, accept and hold the Specifically Mortgaged Property; | ||
(f) | none of the Securities Commissions, the Toronto Stock Exchange and NASDAQ has issued any order which is currently outstanding preventing or suspending trading in any securities of the Corporation, and the Corporation is not in default of any material requirement of Applicable Securities Laws except where such default could not reasonably be expected to have a Material Adverse Effect; | ||
(g) | upon conversion of the Convertible Note in accordance with its terms, the securities so issued will be validly issued as fully paid and non-assessable securities of the Corporation; | ||
(h) | this Debenture is granted in accordance with resolutions of the directors of the Corporation and all necessary corporate action has been taken so as to authorize and make the execution and delivery of this Debenture and the performance of the obligations of the Corporation hereunder legal, valid and binding and enforceable by the Secured Party against the Corporation and the Mortgaged Property in accordance with its terms; | ||
(i) | the Corporation confirms that, except for the Permitted Encumbrances, |
(i) | it has not assigned, mortgaged or in any way alienated or encumbered all or any portion of its interest in the Specifically Mortgaged Property; and | ||
(ii) | it has good right and lawful authority to charge the Mortgaged Property in accordance with Section 5.1; |
(j) | as of the date hereof, the address of the Corporations chief executive office is Vancouver, British Columbia and the Corporation, through its subsidiaries, carries on business only in the Province of Alberta, the States of California and Texas and in the Peoples Republic of China; | ||
(k) | the Specifically Mortgaged Property is free and clear of all Encumbrances and adverse claims created by, through or under the Corporation other than (i) the Security and (ii) the Permitted Encumbrances; except for the Permitted Encumbrances, there is no fact or circumstance in existence which could support the registration, exercise or enforcement of any Encumbrance created by, through or under the Corporation against the Mortgaged Property; | ||
(l) | the Corporation has obtained all consents, waivers and other similar instruments that may be required under the LaSalle Credit Agreement, the LaSalle Guaranty and the LaSalle Security Agreement (and any instruments issued in connection therewith) in connection with the execution and delivery of this Debenture and the other Transaction Documents, and the performance of the Corporations obligations hereunder and thereunder; |
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(m) | no default or Event of Default exists or would be reasonably expected to result from the incurring of the Indebtedness by the Corporation or the execution, delivery or performance of this Debenture and the other Transaction Documents; | ||
(n) | upon the occurrence of an Event of Default the Secured Party shall be entitled to quiet possession of the Specifically Mortgaged Property free from all Encumbrances except for the Permitted Encumbrances subject to bankruptcy and insolvency laws and other similar laws of general application affecting the enforcement of creditors; to the discretion of the courts in granting equitable remedies, and to general principles of law and equity; and | ||
(o) | the Corporation is the owner of the Intellectual Property applications and registrations (if any) described in Schedule B; to the best knowledge of the Corporation, there are no outstanding claims of ownership by third parties in respect of such registrations and applications; and all are valid and in good standing. |
3.2 | Survival |
COVENANTS
4.1 | Covenants |
(a) | to pay the Indebtedness and other monies hereby secured in accordance with the terms of this Debenture and the other Transaction Documents; | ||
(b) | to advise the Secured Party promptly in reasonable detail of: |
(i) | any change in the location of the chief executive office of the Corporation; | ||
(ii) | any additional places where the Corporation is carrying on business; | ||
(iii) | any acquisition of any additional lands in connection with the Specifically Mortgaged Property and any rights acquired in connection therewith; |
(c) | to comply with each and every term, covenant, condition and agreement under the Transaction Documents and to not do anything which would result in a breach of the Transaction Documents that may have a Material Adverse Effect; |
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(d) | that it will furnish to the Secured Party: |
(i) | annual audited consolidated financial statements of the Corporation within ninety (90) days after each fiscal year end, together with notes thereto as required by Canadian generally accepted accounting principles; | ||
(ii) | such periodic reports (including any reserve reports it obtains or receives in connection with all or any of the Specifically Mortgaged Property) and filings the Corporation makes with securities commissions, if any, that the Corporation is also obligated to provide to any of its shareholders; and | ||
(iii) | a quarterly report within forty-five (45) days after each fiscal quarter end containing a copy of any reserve reports it obtains or receives in connection with all or any of the Specifically Mortgaged Property, and such other production, exploration, development, financial, environmental and other information pertaining to the Specifically Mortgaged Property as customarily prepared by the Corporation for its own purposes or for disclosure to the public or which relates to a material matter in respect of the Specifically Mortgaged Property, |
provided that the Corporation shall be deemed to have made such delivery of such information if it shall have made timely disclosure of such information on SEDAR (at the date of this Debenture located on the world wide web at http://www.sedar.com); | |||
(e) | that it will give the Secured Party prompt notice of any Event of Default or any event which, with notice or lapse of time, or both, could reasonably be expected to have a Material Adverse Effect or could reasonably be expected to constitute (with the passage of time or otherwise) an Event of Default and specify in such notice the nature of the event and the steps taken or proposed to be taken to remedy same; | ||
(f) | that it will: (i) maintain its properties and title thereto (including the Specifically Mortgaged Property); (ii) maintain, repair and keep in good working order and condition its property and assets; (iii) carry on and continuously conduct its business; and (iv) operate its hydrocarbon assets for which it is operator, in accordance with good oilfield practices, accepted industry standards except to the extent failure to do so would not reasonably be expected to have, singly or in the aggregate, a Material Adverse Effect; | ||
(g) | that it will comply with all Applicable Laws including, without limitation, all Applicable Laws relating to the environment, and it will obtain and maintain in good standing at all times those permits, licenses, instruments and other authorizations which are required pursuant to Applicable Law to operate its business, including all necessary environmental permits, except to the extent failure to do so would not reasonably be expected to have, singly or in the aggregate, a Material Adverse Effect; |
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(h) | that it will provide to the Secured Party as soon as reasonably practicable upon receiving a request therefor from the Secured Party, any and all reports, studies, information and documents the Secured Party may reasonably request respecting the environmental condition of the Specifically Mortgaged Land, or any liability the Corporation may have for environmental claims or damage relating thereto; | ||
(i) | that it will promptly upon acquiring knowledge thereof, notify the Secured Party of the discovery of any contaminant or of any release of a contaminant into the environment from or upon the Specifically Mortgaged Land which contaminant or release could reasonably be expected to have a Material Adverse Effect; | ||
(j) | that it will obtain and maintain in full force and effect such policies of insurance in such amounts, with such deductibles and issued by insurers of recognized standing covering the Specifically Mortgaged Property as are customarily maintained by Persons engaged in the same or a similar business in the localities where its properties and operations are located and it will deliver to the Secured Party upon request evidence that all such policies of insurance are in full force and effect; the loss payable clauses or provisions in said insurance policies insuring any of the Specifically Mortgaged Property shall be endorsed in favor of and name the Secured Party as the first loss payee, and such policies shall also name the Secured Party as an additional insured and provide that the insurer will give at least thirty (30) days prior notice of any cancellation to the Secured Party; | ||
(k) | that it will file all income tax returns which are or will be required to be filed, pay or make provision for payment of all taxes, levies (including without limitation income taxes, GST, withholding taxes and property taxes), assessments, deductions at source (including without limitation Canada Pension Plan and Employment Insurance deductions, and Workers Compensation Board premiums, assessments, claims and charges), crown royalties, severance taxes and all other financial obligations (including interest and penalties) to any Governmental Entity, to any regulatory authority or agency, and to any other Person having similar lien rights which are or will become due and payable, and provide adequate reserves in accordance with Canadian generally accepted accounting practices for the payment of any of the aforementioned items if the payment thereof is being contested, with concurrent notice thereof to the Secured Party of such contest; | ||
(l) | that it will defend the Specifically Mortgaged Property from all adverse claims where the failure to do so could reasonably be expected to have, singly or in the aggregate, a Material Adverse Effect; | ||
(m) | that it will forthwith notify the Secured Party of the receipt by the Corporation or any agent or trustee on its behalf, of any notification respecting a pending or actual refusal, variation, rescission or cancellation of any of the leases (including the Oil Sands Leases), permits, licenses, approvals, consents or inspections required by or relating to the Specifically Mortgaged Property if any such refusal, variation, rescission or cancellation could reasonably be expected to have, singly or in the aggregate with any other refusal, variation, rescission or cancellation, a Material Adverse Effect; |
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(n) | that it will perform all obligations under all leases (including the Oil Sands Leases), title documents, licenses, permits, contracts, agreements and other instruments relating to the Specifically Mortgaged Property, including payment of rentals, royalties, taxes or other charges in respect thereof which are necessary to maintain all such leases, title documents, licenses, permits, contracts and agreements in good standing in all respects, except to the extent failure to do so would not have a Material Adverse Effect; | ||
(o) | that it will do all things reasonably requested by the Secured Party to protect and maintain the Security and the priority thereof with respect to the Specifically Mortgaged Property (as contemplated herein) in relation to other Persons; that it will promptly cure any defects in the creation, issuance execution or delivery of this Debenture or any other Transaction Documents; and that it will satisfy all claims and charges which in the reasonable opinion of the Secured Party might prejudice, impair or otherwise have a Material Adverse Effect on any of the Specifically Mortgaged Property or the Encumbrances thereon in favor of the Secured Party; | ||
(p) | that it will keep and maintain proper books of account and records covering its business and affairs respecting the Specifically Mortgaged Property in accordance with generally accepted industry standards except to the extent failure to do so would not have a Material Adverse Effect; | ||
(q) | that it will forthwith notify the Secured Party of: |
(i) | any actual, pending or threatened exercise of any Encumbrance against the Corporation or any of its property or assets, including any actual, pending or threatened filing or registration of any builders or operators lien and any certificate of lis pendens against the Specifically Mortgaged Property; and | ||
(ii) | any actual, pending or threatened action or proceeding against the Corporation or any of its property or assets, which could reasonably be expected to have, singly or in the aggregate, a Material Adverse Effect; |
(r) | that it will not, without the prior written consent of the Secured Party, which consent may be withheld in the Secured Partys sole discretion, sell, transfer, convey, lease or otherwise dispose of any interest in and to the Specifically Mortgaged Property; provided that, upon written notice, it shall be entitled assign an interest to a wholly owned Affiliate (as such term is defined in the Asset Transfer Agreement) or a partnership with respect to which the Corporation and one or more direct or indirect wholly owned subsidiaries of the Corporation are the only partners thereof if, and only if: |
(i) | the Corporation first pledges in favor of the Secured Party the shares, partnership interests and other equity interests in each such Affiliate, |
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partnership, and subsidiary pursuant to a securities pledge agreement in form and substance satisfactory to the Secured Party, acting reasonably; and |
(ii) | each such Affiliate, partnership and subsidiary: |
(A) | first agrees with the Secured Party and the Corporation pursuant to an agreement in form and substance satisfactory to the Secured Party, acting reasonably, to be jointly and severally liable for all obligations and liabilities of the Corporation under this Debenture and each other Transaction Document; such agreement shall also confirm that notwithstanding any such assignment the Corporation shall at all times remain responsible for all, and shall not be released from any, obligations and liabilities under this Debenture and each other Transaction Document and that the Corporation shall do all such things required to cause such Affiliate, partnership and subsidiary to perform all obligations and liabilities assumed by them; and |
(B) | first executes and delivers to the Secured Party a debenture and deposit agreement that is substantially in the form of this Debenture and the associated deposit agreement, pursuant to which each such Affiliate, partnership and subsidiary inter alia grants to the Secured Party a first priority mortgage, charge and security interest in all of its right, title, estate and interest in and to the Specifically Mortgaged Property; |
(s) | that it will not provide, create, grant, assume or otherwise allow a security interest or Encumbrance over any of the Specifically Mortgaged Property or any of its right, title, estate or interest therein, except for the Permitted Encumbrances; |
(t) | that it will not be a party to any amalgamation, merger, plan of arrangement, consolidation, non-arms length transaction, or any transaction not in the ordinary course of business, that may have a Material Adverse Effect; |
(u) | that it will not enter into any other arrangements respecting the sale of any hydrocarbons within, upon or under the Specifically Mortgaged Lands or any Products on a fixed price basis for a term in excess of thirty (30) days, including forward sale arrangements, commodity swap arrangements or other hedging arrangements (collectively, Hedging Arrangements); and |
(v) | that it will not enter into any contract respecting Hedging Arrangements the effect of which is to monetize or settle any amount that may at any time be owing under any of such Hedging Arrangements for an amount that is less than the fixed amounts payable under such Hedging Arrangements over the full term thereof. |
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SECURITY
5.1 | Mortgage, Charge and Security Interest |
(a) | mortgages and charges as and by way of a fixed and specific mortgage and charge to and in favour of the Secured Party, and grants to the Secured Party a security interest, in and to all of the Corporations present and afteracquired right, title, estate and interest in and to the Specifically Mortgaged Lands, the Oil Sands Leases, all Oil Sands and other hydrocarbons produced from the Specifically Mortgaged Lands, the Products, and all proceeds arising from or in connection with any of the foregoing, together with any and all accretions and accessions to the Specifically Mortgaged Lands, substitutions for the Oil Sands Leases, and any and all fixtures and attachments as may be necessary for the effective use and operation of the Specifically Mortgaged Lands, and including all of the Corporations present and after-acquired right, title, estate and interest in and to: (i) the interests in the Specifically Mortgaged Lands and the Oil Sands Leases as set forth in Exhibit 1 to Schedule A hereto; (ii) the property, rights, interests and other items described in Schedule A hereto; (iii) the Wells; and (iv) all Proceeds derived from any of the foregoing (collectively, the Specifically Mortgaged Property); | ||
(b) | mortgages, charges, grants and assigns to and in favour of the Secured Party as and by way of a floating mortgage, charge and security interest all of its present and after-acquired right, title, estate and interest in and to all real property that is not subject to the fixed and specific mortgage, charge and security interest provided for in Section 5.1(a), including proceeds thereof together with any and all accretions and accessions thereto, substitutions therefor and any and all fixtures and attachments and other property at any time or times placed upon or associated with, or as may be necessary for the effective use and operation of, such property; and | ||
(c) | mortgages, charges, grants, creates and assigns to and in favour of the Secured Party as and by way of a fixed and specific mortgage, charge and security interest, and the Secured Party hereby takes a continuing security interest, in all of the Corporations present and after-acquired personal property of whatsoever nature and kind and wheresoever situate including, without limitation, all of its right, title, estate and interest in its Goods, Chattel Paper, Investment Property (other than the Excluded Securities), Documents of Title, Instruments, Money, Intangibles, Receivables and Intellectual Property, together with any and all other property and undertakings not included in Section 5.1(a) or (b) above. |
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5.2 | Last Day of Leases |
5.3 | Contractual Rights |
5.4 | The Secured Party Not Liable |
5.5 | Valid Irrespective of Incurring Obligations |
5.6 | Separate Security |
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5.7 | Amalgamations |
5.8 | Guarantees |
SECURED PARTY RIGHTS
6.1 | The Secured Partys Right to Perform |
(a) | The Corporation agrees that if it fails punctually to perform any act or to take any action under this Debenture or the other Transaction Documents which it is required to perform or take or to pay timely any money which the Corporation is required to pay under this Debenture or the other Transaction Documents, the Secured Party, in the Corporations name or its own name, may (but shall not be obligated to) perform or cause to be performed such act or take such action or pay such money, and any expenses incurred by the Secured Party in regard thereto and any money so paid by the Secured Party shall be payable by the Corporation to the Secured Party on demand, shall bear interest from the date of the making of payment thereof by the Secured Party until paid at the Interest Rate (with all provisions pertaining to the calculation and payment of interest in this Debenture applying thereto) and shall form part of the Indebtedness secured hereby. The Secured Party, upon making any such payment, shall be subrogated to all of the rights of the Person receiving such payment. The exercise of the privileges granted in this Section 6.1 shall in no way be considered or constitute a waiver of the right of the Secured Party to at any time demand payment of the Principal Sum, interest thereon and all other monies secured hereby, but is cumulative of such right and all other rights herein given. |
(b) | The Corporation agrees that the Secured Party, in the Corporations name or its own name, may (but shall not be obligated to) pay or satisfy all or any part of any Encumbrance (other than a Permitted Encumbrance unless an Event of Default |
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has occurred and is continuing) now existing or hereafter created or claimed on any part of the Specifically Mortgaged Property or any amount secured thereby, where in the Secured Partys opinion such Encumbrance ranks, purports to rank or may be capable of ranking in priority to or pari passu with the Security on any of the Specifically Mortgaged Property or may impair the value to the Secured Party of the Security, may impair in any way the Secured Partys flexibility, discretion, rights or options in regard to the Security or the enforcement of the same in respect of any of the Specifically Mortgaged Property; and any amount so paid by the Secured Party shall be payable by the Corporation to the Secured Party on demand, shall bear interest from the date of the making of payment thereof by the Secured Party until paid at the Interest Rate (with all provisions pertaining to the calculation and payment of interest in this Debenture applying thereto), and shall form part of the Indebtedness secured hereby. The Secured Party, upon making any such payment, shall be subrogated to all of the rights of the Person receiving such payment. |
6.2 | Payment of Costs |
6.3 | Further Security |
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PARTIAL RELEASES
7.1 | Eminent Domain |
7.2 | Partial Release |
SUPPLEMENTAL DEBENTURES AND MODIFICATIONS
8.1 | Supplemental Debentures |
8.2 | One Debenture |
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DEFAULT
9.1 | Security Becomes Enforceable |
(a) | if the Corporation makes a default in the payment, in whole or in part, of the Indebtedness or any other monies secured hereby (including without limitation any principal or interest amounts payable pursuant to either of the Notes) when due and payable to the Secured Party and such amount is not paid within two (2) Business Days following notice from the Secured Party; | ||
(b) | if the Corporation institutes proceedings for its winding up, liquidation or dissolution or to be adjudicated a voluntary bankrupt, or consents to the filing of a bankruptcy proceeding against it, or files a petition, application, proposal, answer or consent seeking reorganization, readjustment, arrangement, composition, protection from creditors or similar relief under any bankruptcy or creditors arrangement laws or any other similar Applicable Law (or delivers or files any notice of an intention to do any of the foregoing) or consents to the filing of any such petition, proposal, answer or consent or consents to the appointment of a receiver, liquidator, trustee or assignee in bankruptcy or insolvency of any of its property or makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts generally as they become due or if it takes any corporate action approving, consenting to or authorizing any of the foregoing; | ||
(c) | if a court having jurisdiction in the circumstances enters a decree or order adjudging the Corporation bankrupt or insolvent, or grants a petition seeking reorganization, readjustment, arrangement, composition, protection from creditors or similar relief with respect to the Corporation under any bankruptcy law, creditors arrangement law or any other similar Applicable Law, or if a decree or order of a court having jurisdiction in the circumstances for the appointment of a receiver, liquidator, trustee or assignee in bankruptcy or insolvency of any of the property of the Corporation or for the winding up, dissolution or liquidation of its affairs, is entered; | ||
(d) | if, for a period of three (3) Business Days after written notice from the Secured Party this Debenture shall for any reason be invalid or no longer in effect; | ||
(e) | if any representation or warranty in this Debenture shall be false or inaccurate in any material respect and is not remedied to the satisfaction of the Secured Party within twenty (20) days after written notice of the same from the Secured Party where such false or inaccurate representation or warranty could reasonably be expected to have a Material Adverse Effect; |
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(f) | if a final judgment or judgments (in respect of which all appeal periods have expired) are obtained against the Corporation for an amount in excess of $500,000 in the aggregate, and any or all of such judgments remain unsatisfied for a period of thirty (30) days from the issuance thereof; | ||
(g) | if a writ, execution or attachment or similar process is issued or levied against the property of the Corporation in connection with any judgment or judgments aggregating in excess of $500,000 and such writ, execution, attachment or similar process is not released, bonded, satisfied, discharged, vacated or stayed within thirty (30) days after its entry, commencement or levy; | ||
(h) | default by the Corporation under any obligation (including without limitation guaranteed obligations) to repay indebtedness for borrowed money when due (including pursuant to the LaSalle Credit Agreement) other than those amounts so due which, in the aggregate, are less than $500,000; | ||
(i) | failure of the Corporation to cure or remedy any non-observance or non-performance of any of the covenants set forth in Section 4.1 of this Agreement within twenty (20) days after written notice of same from the Secured Party to the Corporation; and | ||
(j) | the Corporation ceases or proposes to cease carrying on business. |
9.2 | Receiver Appointed by the Secured Party |
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(a) | to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in connection with the Mortgaged Property; | ||
(b) | to require the Corporation to deliver possession of the Mortgaged Property at such place or places as directed by the Receiver; | ||
(c) | to receive, endorse and collect any drafts or other Instruments, Documents of Title and Chattel Paper in connection with Section 9.2(a) above; | ||
(d) | to file any claims or take any action or institute any proceedings which the Receiver may deem to be necessary or desirable for the collection of the Mortgaged Property or to enforce compliance with the terms and conditions of any contract or any account; and | ||
(e) | to perform the obligations of the Corporation hereunder and under any of the other Transaction Documents. |
9.3 | Receiver Appointed by the Court |
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9.4 | Consultant Appointed by the Secured Party |
9.5 | Right of Possession, Collection, Sale, etc. |
9.6 | Retention of Mortgaged Property |
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9.7 | Remedies under the PPSA |
9.8 | Specific Performance, Foreclosure, etc. |
9.9 | Effect of Appointment of Receiver |
9.10 | Costs and Expenses |
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9.11 | Notice |
9.12 | Power of Attorney |
9.13 | Remedies Cumulative, Waiver of Defaults |
9.14 | Disposition of Amounts |
(a) | first, to the payment in full of all fees of the Secured Party and all out-of-pocket costs, fees and expenses (including reasonable legal fees on a solicitor and his own client full indemnity basis) incurred by the Secured Party and any Receiver or other enforcement agent appointed by the Secured Party or a court of competent jurisdiction, as the case may be, in connection with the collection or enforcement of the Indebtedness owed to the Secured Party, as applicable, the enforcement of the security interest created hereby or the preservation of the Mortgaged Property; |
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(b) | second, to the payment in full of the Indebtedness; and | ||
(c) | third, the balance, if any, will be paid, subject to Applicable Law, to the Corporation. |
9.15 | Collection of Accounts |
9.16 | Trust During Stay |
9.17 | Rights of Third Parties |
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9.18 | Judgment Against the Corporation |
9.19 | Conflict with Laws |
9.20 | Insolvency Proceedings |
(a) | the Corporation shall not commence any insolvency proceedings which would have the effect of staying or otherwise delaying or restricting in any way the rights of the Secured Party or under which the Secured Party would be an affected creditor in any other respect; | ||
(b) | if the Corporation seeks the appointment of a trustee or monitor in any insolvency proceedings, the proposed appointee shall be subject to the Secured Partys prior approval; | ||
(c) | in the case of any insolvency proceedings, the Corporation does hereby and will consent to an application by the Secured Party to a court of competent jurisdiction for an order to appoint an interim receiver pursuant to the provisions of the Bankruptcy and Insolvency Act (Canada) or a similar official appointed under similar legislation of any other jurisdiction; | ||
(d) | if the exercise of any of the Secured Partys rights are stayed or otherwise delayed or restricted in any way pursuant to any insolvency proceedings, the Corporation |
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does hereby and will consent to an application by the Secured Party to a court of competent jurisdiction for an order to lift the stay or other restrictions; and | |||
(e) | in the case of any commencement by the Corporation of any insolvency proceeding, the Corporation hereby authorizes and consents (to the extent not already previously done by the Corporation and without any requirement for any notice or demand whatsoever) to the Secured Party notifying and directing all debtors of the Corporation to make payment to the Secured Party directly and the Corporation acknowledges, confirms and agrees that such amounts shall be the sole and exclusive property of the Secured Party, that any such actions, in and of itself, shall not constitute or be regarded in any way as an enforcement of any of the Secured Partys security or remedies and that in the event that, notwithstanding the above, any amounts are received by the Corporation, such amounts shall be, and shall be deemed to be, held separate and apart and in trust for the exclusive benefit of the Secured Party. |
DEFEASANCE
10.1 | Defeasance |
SEVERABILITY
11.1 | Severability |
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NOTICES
12.1 | Notices |
If to the Corporation, addressed to: |
Ivanhoe Energy Inc. 654 999 Canada Place Vancouver, BC V6C 3E1 Attention: Corporate Secretary Fax No.: (604)  ###-###-#### | |||
If to the Secured Party, addressed to: | |||
Talisman Energy Canada 2000 888 3rd Street SW Calgary, AB T2P 5C5 | |||
Attention: Executive Vice President, Legal Fax No.: (403)  ###-###-#### |
ASSIGNMENTS
13.1 | Assignments |
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(a) | assign, mortgage, charge or grant a security interest in the Secured Partys interest in and under this Debenture in whole or in part to a financial institution, or to such other entity consented to by the Corporation in writing, such consent not to be unreasonably withheld; |
(b) | assign this Debenture and all of its rights hereunder to Talisman Energy Inc. or any of its direct or indirect wholly owned subsidiaries. |
INDEMNITIES
14.1 | No Liability for Error of Judgment |
14.2 | No Liability in Receivership |
14.3 | Indemnity respecting Payments |
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14.4 | General Indemnity |
GENERAL
15.1 | Enurement |
15.2 | Waiver |
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15.3 | Waiver of Presentment |
15.4 | Delay Not Waiver |
15.5 | Further Assurances |
15.6 | Governing Law |
15.7 | Pledge |
15.8 | Time is of the Essence |
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15.9 | No Set-off or Counterclaim |
15.10 | Additional Security |
15.11 | Copy Received |
15.12 | Dealings by Secured Party |
15.13 | No Subordination |
15.14 | Acknowledgement |
(a) | value has been given by the Secured Party; | ||
(b) | the Corporation has rights in the Mortgaged Property; and |
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(c) | notwithstanding that the mortgage, charge and security interest created pursuant to Section 5.1(b) is stated to be a floating charge, the time for attachment of the mortgage, charge and security interest created pursuant to this Debenture has not been postponed and is intended to attach when this Debenture is signed by the Corporation, and attaches at that time to property in which the Corporation then has any right, title or interest and attaches to property in which the Corporation subsequently acquires any right, title or interest at the time when the Corporation first acquires such right, title or interest. |
IVANHOE ENERGY INC. | ||||
Per: | /s/ Ian S. Barnett | |||
Name: | Ian S. Barnett | |||
Title: | Executive Vice-President, Corporate Development and Finance | |||
(a) | all Crude Bitumen, petroleum, natural gas and related hydrocarbons or minerals in place or in storage within, upon or under the Specifically Mortgaged Lands (the interest of the Corporation therein being represented to be not less than that set forth in Exhibit 1 to this Schedule A); |
(b) | all rights, licences, agreements, leases, permits, servitudes, privileges, easements, rights of way, rights of entry, rights of ingress and egress, and other surface rights, governmental or administrative authorizations, licenses, permits and consents and other rights now owned or hereafter acquired by the Corporation under which the Corporation derives, holds or maintains the right to enter upon, occupy and use the Specifically Mortgaged Lands and any other lands whatsoever used in connection with operations relating to such lands, including without limitation the right to drill for, produce, store, gather, treat, process, ship, or transport hydrocarbons and associated waste products now or hereafter produced or allocated to the Specifically Mortgaged Lands; |
(c) | all leases, licenses, permits, reservations, agreements, authorizations and other instruments (including, without limitation, such as may be described in Exhibit 1 attached hereto) under which the Corporation derives, holds or maintains rights in and to the Specifically Mortgaged Lands or any Products, including agreements respecting the right to drill for, produce, store, gather, treat, process, ship, or transport hydrocarbons and associated waste products now or hereafter produced or allocated to the Specifically Mortgaged Lands, and all rights, benefits, privileges and advantages of the Corporation thereunder or derived therefrom; |
(d) | all the estate or interest of the Corporation in or to any of the said hydrocarbons or minerals, rights, licences, permits and lands; |
(e) | all the right, title and interest of the Corporation in and to all surface and subsurface machinery, apparatus, equipment, field facilities and other property and assets of whatsoever nature and kind (including without limitation all wells, casing, tubing, rods, pumps and pumping equipment, wellhead equipment, separators, flow lines, pipelines, tanks, treaters, heaters, plans and systems to gather, treat, compress, process and/or upgrade hydrocarbons, plants and systems to treat, dispose of or inject water or other substances, power plants, poles, lines, transformers, starters, controllers and machine shops) used, useful, or intended to be used in connection with operations on or relating to the Specifically Mortgaged Lands, including with respect to the |
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production, injection, compression, treatment, processing, storage, upgrading, measuring, gathering or transportation of hydrocarbons therefrom or allocated thereto to the extent such property and assets constitute a fixture on or serving the Specifically Mortgaged Property; and | |||
(f) | all buildings, structures, improvements, expansions, erections, works and fixtures now or hereafter brought, built, erected, constructed, placed or otherwise situate on or serving the Specifically Mortgaged Lands; |
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RTP Heavy Oil Upgrading Method and Product | ||||||
Patent # or | ||||||
Patent | Application # | Jurisdiction | Ownership | |||
Rapid Thermal Processing of Heavy Hydrocarbon Feedstocks | 09/958,261 (Pending) | United States | Ivanhoe Energy Inc. | |||
(Pending) | Kuwait | Ivanhoe Energy Inc. | ||||
(Pending) | Libya | Ivanhoe Energy Inc. |
RTP Heavy Oil Upgrading Product | ||||||||
Patent # or | ||||||||
Patent | Application # | Jurisdiction | Ownership | |||||
Products Produced from Rapid Thermal Processing of Heavy Hydrocarbon Feedstocks | 7,270,743 | United States | Ivanhoe Energy Inc. | |||||
11/713,520 | United States | Ivanhoe Energy Inc. |
Modified RTP Process Upgrading Method | ||||||
Patent # or | ||||||
Patent | Application # | Jurisdiction | Ownership | |||
Modified Thermal Processing of Heavy Hydrocarbon Feedstocks | 10/269,538 (Pending) | United States | Ivanhoe Energy Inc. | |||
10/419,053 (Pending) | United States | Ivanhoe Energy Inc. |
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Low Resid Application | ||||||
Patent # or | ||||||
Patent | Application# | Jurisdiction | Ownership | |||
Methods and Systems for Producing Reduced Resid and Bottomless Products from Heavy Hydrocarbon Feedstocks | 12/046363 (Pending) | United States | Ivanhoe Energy Inc. | |||
08-8261 (Pending) | Brazil | Ivanhoe Energy Inc. | ||||
(Pending) | Canada | Ivanhoe Energy Inc. | ||||
(Pending) | China | Ivanhoe Energy Inc. | ||||
(Pending) | Columbia | Ivanhoe Energy Inc. | ||||
(Pending) | Ecuador | Ivanhoe Energy Inc. | ||||
(Pending) | EP | Ivanhoe Energy Inc. | ||||
(Pending) | Eurasian Patent | Ivanhoe Energy Inc. | ||||
479/KOL/2008 (Pending) | India | Ivanhoe Energy Inc. | ||||
p.00200800144 (Pending) | Indonesia | Ivanhoe Energy Inc. | ||||
52/2008 (Pending) | Iraq | Ivanhoe Energy Inc. | ||||
2008-61888 (Pending) | Japan | Ivanhoe Energy Inc. | ||||
(Pending) | Kuwait | Ivanhoe Energy Inc. | ||||
3580/2008 (Pending) | Libya | Ivanhoe Energy Inc. | ||||
MX/A/2008/003534 (Pending) | Mexico | Ivanhoe Energy Inc. | ||||
42/2008 (Pending) | Oman | Ivanhoe Energy Inc. | ||||
455.2008 (Pending) | Peru | Ivanhoe Energy Inc. | ||||
(Pending) | Saudi Arabia | Ivanhoe Energy Inc. | ||||
2008-000463 (Pending) | Venezuela | Ivanhoe Energy Inc. |