Exhibit 10.18
STRATEGIC MARKETING, MANUFACTURING AND TECHNOLOGY LICENSING AGREEMENT
This Strategic Marketing, Manufacturing and Technology Licensing
Agreement ("Agreement") dated August 26 , 2005 (the "Effective Date") between
Imperial Petroleum Recovery Corporation, a Nevada corporation ("IPRC") whose
address is 0000 X. Xxxxxxxxx Xxxxx, Xxxxxxx, Xxxxx 00000 and Stone & Xxxxxxx
Management Consultants, Inc., a Louisiana corporation ("SWMC") whose address is
0000 Xxxxx Xxxx, Xxxxx Xxxxx, XX 00000. IPRC and SWMC are sometimes collectively
referred to as the "Parties".
RECITALS
A. IPRC has developed and owns the intellectual property rights to
Microwave Separation Technology (MST), for treating oil/water/solids emulsions.
The MST optimizes crude oil production, refining and transport, enhances
bio-diesel and alternative fuels production while lessening environmental
hazards
B. IPRC has worked closely with SWMC to manufacture and integrate MST
throughout refineries in the USA.
C. SWMC or SWMC's affiliates are involved in the Consulting, Financing,
Engineering, Procurement, and Construction in various industries worldwide,
including refineries and petrochemical plants.
D. IPRC desires to grant SWMC the exclusive right to fabricate all MST
Units to be delivered to customers in the United States and to give SWMC the
right to integrate the MST in refineries throughout the United States in
exchange for marketing and sales contributions.
AGREEMENT
1. DEFINITIONS. For purposes of this Agreement, the following
definitions apply:
(a) "Cost" means the cost represented on the xxxx of materials
supporting the most current Unit price at the time of cancellation or
termination.
(b) "Inventory" means any materials used to fabricate the Units ordered
by SWMC pursuant to a purchase order from the IPRC.
(c) "Materials" means labor, components and supplies used in the
manufacturing, testing, packaging, and distribution of the Units.
(d) "MST Unit" means any microwave system that utilizes IPRC's patented
applicator and process to treat emulsions with microwave energy. An "MST Unit"
does not include any separations device or software control system to integrate
the microwave and separator, or any software control system to operate a
stand-alone "MST Unit" without a separations device, unless explicitly stated as
being included.
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(e) "Primary Seller" refers to either IPRC or SWMC in situations where
one party has taken a clear lead in making an initial contact, progressing
negotiations, and finalizing a sale or lease agreement. This distinction, where
appropriate, should be substantially clear to both parties and shall be agreed
to by both parties in good faith. This distinction is relevant for Section 12
(IPRC Open Bid Fabrication Option and SWMC Matching First Right of Refusal) and
Sections 21 and 22(Revenue Sharing).
2. TERM. This Agreement commences on the Effective Date and shall
continue for four years thereafter (the "Initial Term"). After the expiration of
the Initial Term (unless this Agreement has otherwise been terminated), this
Agreement shall be automatically renewed for separate but successive two-year
terms unless either party provides written notice to the other party that it
does not intend to renew this Agreement ninety days or more prior to the end of
the current term.
3. APPLICABILITY AND EXCLUSIONS. This Agreement will apply to all MST
sales and leases completed by contract during the term of this Agreement except
those specifically excluded in this Agreement. This Agreement will not apply to
any MST sale or lease to either IPRC or SWMC made for the purpose of entering
into business either individually or jointly as an MST service contract provider
or made for the purpose of entering into the biodiesel business as a producer
rather than as a technology provider to a third party biodiesel producer. The
parties agree that an addendum to this Agreement will be drafted to cover the
biodiesel production and/or the sale or lease of MST relating to biodiesel to a
third party biodiesel producer.
4. "PIONEER" PRICING EXCLUSIONS. Both IPRC and SWMC recognize it may be
necessary or desirable to offer a special "pioneer" sale or lease price to the
first three potential MST users to gain entry in the marketplace. Both IPRC and
SWMC agree they will accept reduced net income on the first three MST units in
equal percentage proportions if either party determines a low cost "pioneer"
rate is required to make any of the first three MST unit sales or leases. This
reduction will apply to all phases of the project, including fabrication, sale
and lease income, but neither party will be required to perform any service for
a price below its actual cost. Each party agrees it will not unreasonably
withhold its cooperation or performance of otherwise obligated services should
either party request a "pioneer" rate. Both parties agree their primary emphasis
in making the first three MST unit sales or leases shall be on gaining market
entry and acceptance rather than meeting the income targets stated elsewhere in
this Agreement. Both parties also agree this "pioneer" option will only be
invoked after all reasonable efforts have been made to achieve a sale or lease
price in line with the standard MST unit pricing targets. Special "pioneer"
pricing shall not be available to either IPRC or SWMC for the sale or lease of
an MST unit for its own use unless specifically agreed to without prior
obligation by the other party.
5. EXCLUSIVE U.S. FABRICATOR. IPRC hereby grants SWMC the exclusive
right to fabricate all MST Units to be delivered to customers in the United
States through the term of the Agreement provided SWMC fulfills the marketing,
sales and fabrication obligations established by this Agreement. The preferred
fabricator will be Xxxx Maintenance, Inc.
6. PREFERRED OVERSEAS FABRICATOR. IPRC also grants SWMC the exclusive
right to fabricate all MST Units to be delivered to customers outside of the
United States through the term of the Agreement provided SWMC fulfills the
marketing, sales and fabrication obligations established by this document
provided the use of SWMC as Fabricator does not conflict with local requirements
or inhibit the sale, lease or collective economic returns to the Parties related
to use of MST outside the United States.
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7. MICROWAVE APPLICATOR FABRICATION. IPRC will fabricate all patented
MST microwave applicator components, and SWMC shall obtain all patented MST
applicator components from IPRC at a cost that reflects IPRC's standard margins.
At its sole discretion, IPRC may elect to utilize the services of SWMC or a
third party contractor to fabricate the patented MST microwave applicator
components.
8. SEPARATION SYSTEM FABRICATION AND MST UNIT / SEPARATOR CONTROL
INTEGRATION. Some MST users will require both an MST Unit microwave system and a
product separator system to achieve their process goals. Since many separator
providers produce their own skid mounted systems, IPRC will generally contract
separately with these providers to obtain the separator equipment, and IPRC will
complete the integration of the mechanical and software control components of
the microwave and separator systems. At its sole discretion, IPRC may elect to
utilize the services of SWMC or a third party fabricator to complete integration
of the microwave and control components. In situations where this is impractical
or impossible, such as when an MST unit is part of a substantially larger
project, but not limited to that example, IPRC shall grant SWMC permission in
writing to enter into an appropriate contract to sell or lease MST technology
and shall not unreasonably withhold such permission.
9. LICENSE. IPRC hereby grants SWMC a non-exclusive license during the
term of this Agreement to use IPRC's patents; trade secrets and other related
intellectual property related to the MST Units as necessary to perform SWMC's
obligations under this Agreement.
10. MARKETING. Both parties agree to use reasonable effort to promote
the commercial success of the MST technology. Commercial success is defined as
the fabrication of at least one MST unit each calendar year during the term of
the Agreement. In consideration for these efforts, IPRC hereby grants SWMC the
right to market MST to potential MST customers within the fields of crude oil
production, refining and transport, biodiesel and alternative fuels production,
bilge water treatment and environmental clean up projects. IPRC will provide to
SWMC marketing material that can be utilized for marketing purposes. When
appropriate, the parties will continue to develop the current marketing
materials as well as future marketing materials in order to enhance current and
future opportunities.
11. FABRICATION PRICE AND PAYMENT TERMS. The price to be paid by IPRC
to SWMC for the MST Units will be negotiated and agreed to by the parties;
provided, that the price must at a minimum reflect SWMC's standard margins. The
price for Units will be reviewed periodically by the parties. Any changes and
timing of changes shall be agreed to by the parties. Prices quoted are exclusive
of federal, state and local excise sales use and similar taxes, and any other
duties, and the contract holder (either SWMC or IPRC) shall be responsible for
all such items. Payment for any related materials, services or other costs not
incorporated into the MST Unit(s) as part of the purchase order to be paid by
IPRC will be agreed to by the parties.
12. IPRC OPEN BID FABRICATION OPTION AND SWMC MATCHING FIRST RIGHT OF
REFUSAL. For any MST sale or lease in which SWMC is not the Primary Seller, IPRC
will have the right to obtain an open market bid for work essentially equal to
that proposed by SWMC. If a legitimate open market bid is less than the SWMC
cost by 10% or more, SWMC will have the right to match that bid and perform the
work with first right of refusal, and IPRC will have the right to select the
open bid proposal if SWMC declines to match the open bid.
13. WORK. SWMC agrees to use reasonable commercial efforts to perform
the Work pursuant to purchase orders or changes thereto issued by IPRC and
accepted by SWMC. "Work" means to procure Materials and to fabricate, assemble,
and test the MST Units pursuant to detailed written Specifications for each such
unit, which are provided by IPRC and accepted by SWMC, and to deliver and
install such units (depending on the specific scope of work that has been agreed
to). "Specifications" means for each MST Unit or revision thereof written
requirements that include, but are not limited to, xxxx of materials, designs,
schematics, assembly drawings, process documentation, test specifications and
other specification materials.
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14. PURCHASE ORDERS. IPRC, potentially in conjunction with Customer or
end-user will issue written purchase orders, which specify all Work to be
completed within a commercially reasonable period commencing on the date of the
purchase order. Each purchase order shall reference this Agreement and the
applicable Specifications. IPRC may use its standard purchase order form to
release items, quantities, prices, schedules, change notices, specifications, or
other notice provided for hereunder. The parties agree that the terms and
conditions contained in this Agreement shall prevail over any inconsistent terms
and conditions of any purchase order, acknowledgment form or other instrument.
15. SHIPMENTS. The MST Units are sold FOB SWMC's facility. Title to and
the risk of loss for the MST Units shall pass to IPRC upon delivery by SWMC to
an IPRC-specified carrier at the SWMC's delivery dock.
16. ENGINEERING CHANGES. IPRC may request in writing SWMC incorporate
engineering changes into MST Units. Such request will include a description of
the proposed engineering change sufficient to permit SWMC to evaluate its
feasibility and cost. SWMC's evaluation shall be in writing and shall state the
costs to include their standard margins and be in sufficient detail to include
material, anticipated labor costs, time for implementation and the impact on the
delivery schedule and pricing of the MST Units. SWMC will not be obligated to
proceed with the engineering change until (a) the parties have agreed upon the
changes to the MST Unit's Specifications, delivery schedule and unit pricing and
(b) IPRC has issued a purchase order for the implementation costs agreeing what
costs are to be borne by IPRC including, without limitation, one-time charges,
and the Cost of Inventory and Special Inventory on-hand and on-order that
becomes obsolete. Engineering changes deemed necessary by SWMC will be reviewed
and approved by IPRC before implementation.
17. UNIT ACCEPTANCE. The MST Units delivered by Fabricator will be
inspected and tested as required by IPRC within 60 days of receipt unless
customer schedules prohibit acceptance testing within 60 days, in which case
IPRC shall notify SWMC in writing and a suitable remedy shall be agreed to in
writing. If any MST Units are found to be defective in material or workmanship,
then IPRC has the right to reject such Units during said period. MST Units not
rejected during said period will be deemed accepted. IPRC may return defective
MST Units, freight collect, after obtaining a return material authorization
number from SWMC to be displayed on the shipping container and completing a
failure report. Rejected MST Units will be promptly repaired or replaced, at
SWMC's option, and returned freight pre-paid. If the Unit is source-inspected by
IPRC prior to shipment, IPRC will inspect goods five days prior to the requested
shipment date.
18. EXPRESS LIMITED WARRANTY. SWMC warrants MST Units will have been
fabricated in accordance with IPRC's applicable Specifications and will be free
from defects in workmanship for a period of 365 days from the date of
acceptance. Materials are warranted to the same extent that the original
manufacturer warrants the Materials. This express limited warranty does not
apply to (a) Materials consigned or supplied by IPRC to SWMC; (b) defects
resulting from failure due to IPRC's Specifications or the design of the MST
Units; (c) MST Units that have been abused, damaged, altered, not handled in
accordance with SWMC's instructions or misused by any person or entity after
title passes to IPRC. Upon any failure of a MST Unit to comply with the above
warranty, SWMC's sole obligation to IPRC, and IPRC's sole remedy, is for SWMC,
at its option, to promptly repair or replace such unit, at its cost up to the
compensation received for the deficient services or materials, and return it to
IPRC freight prepaid. IPRC shall return MST Units covered by the warranty
freight pre-paid after completing a failure report and obtaining a return
material authorization number from SWMC to be displayed on the shipping
container. IPRC will provide its own warranties, as applicable, directly to any
of its end users or other third parties. SWMC's express warranty set forth in
this paragraph shall be SWMC's exclusive warranty in lieu of any other warranty,
whether express or implied.
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19. END-USER CONTRACTS. In general, regardless of which party is the
Primary Seller, the contract for the sale or lease of an MST Unit to a third
party user will be made between IPRC and the third party user. In situations
where this is impractical or impossible, such as when an MST unit is part of a
substantially larger project, but not limited to that example, IPRC shall grant
SWMC permission in writing to enter into an appropriate contract to sell or
lease MST technology and shall not unreasonably withhold such permission. This
agreement includes a "most favored nation" relationship whereby SWMC will
receive the lowest prices offered from IPRC for products and services.
20. TRAINING AND ROUTINE MAINTENANCE RESPONSIBILITY. IPRC will be
responsible to provide training on MST unit operation and routine maintenance to
protect its contract and warranty obligations and IPRC will retain any profit
from these operations. IPRC shall, by mutual agreement, transfer the actual
execution of these responsibilities to SWMC in situations where both parties
agree this is desirable and SWMC will retain any profit from these operations.
21. REVENUE SHARING FROM MST SALES CONTRACTS. MST units sold to
customers will generate a lump sum payment in the form of a capital sale markup,
which includes a one-time technology licensing fee per unit, and a monthly
income in the form of a standard capacity-based technology use fee per unit.
SWMC will receive a lump sum payment for the fabrication of the MST and retain
100% of the fabrication markup whereas IPRC will receive 100% of the fees
relating to technology licensing and use. When the lump sum payment from the
customer is received:
(a) SWMC will receive an amount to cover fabrication cost of the MST to
include their standard margin. IPRC will receive an amount to cover the cost
plus their standard margin of any centrifuge and separator equipment delivered
plus other costs required for the sale including, but not limited to
non-recovered laboratory and demonstration unit expenses, applicator
fabrication, microwave and separator mechanical and software control
integration, unit transport, insurance and start-up costs
(b) IPRC will receive AN AGREED UPON AMOUNT of the remaining lump sum
payment as a one-time technology licensing fee
(c) Any remaining funds from the lump sum payment will be split equally
between both parties
(d) IPRC will receive future monthly technology use fee payments
22. REVENUE SHARING FROM MST LEASE CONTRACTS. MST units leased to
customers will generate monthly income in the form of a lease payment and a
standard capacity-based technology use fee. The parties shall enter into a sales
leaseback arrangement with a third party financing company in order to satisfy
items 21(a) and 21(b) (as if it were a sale). Any lease revenue above the lease
payment to the third financing company will be split equally.
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23. TERMINATION. This Agreement may be terminated by SWMC or IPRC for
any reason upon 90 days written notice to either party if (a) the other party
defaults in any payment to the terminating party and such default continues
after a cure for a period of 60 days after the delivery of written notice
thereof by the terminating party to the other party; or (b) if the other party
defaults in the performance of any other material term or condition of this
Agreement and such default continues un-remedied for a period of 60 days after
the delivery of written notice thereof by the terminating party to the other
party. Expiration or termination of this Agreement under any of the foregoing
provisions shall not affect the amounts due under this Agreement by either party
that exist as of the date of expiration or termination for any completed work
for any completed work or ongoing revenue sharing commitments
24. LIMITATION OF LIABILITY. Notwithstanding anything to the contrary,
neither IPRC nor SWMC (including SWMC's or IPRC's respective affiliates,
subcontractors, vendors, suppliers, and employees) shall be liable for any
indirect, incidental, or consequential loss or damage (including loss of
profits), whether arising in contract, tort or otherwise, and irrespective of
fault or negligence. IPRC and SWMC's total aggregate liability in connection
with all claims related to any purchase order issued by IPRC under this
Agreement shall in no event exceed the compensation received under the specific
purchase order.
25. INDEMNITY. Each party agrees to indemnify, defend and hold harmless
the other party from any and all losses, claims, expenses, damages asserted
against or suffered by the other party to the extent caused by the party.
26. CONFIDENTIALITY. Both IPRC and SWMC recognize the importance of the
other parties' Confidential Information (as defined below). The receiving party
agrees (i) to hold the disclosing party's Confidential Information in strict
confidence and to take all reasonable precautions to protect such Confidential
Information (including, without limitation, all precautions the receiving party
employs with respect to its confidential materials), (ii) not to divulge any
such Confidential Information or any information derived therefrom to any third
person, and (iii) not to make any use whatsoever at any time of such
Confidential Information except as expressly authorized in this Agreement. Any
employee, agent or contractor given access to any Confidential Information must
have a legitimate "need to know" and shall be bound by confidentiality
obligations similar to those contained herein. Without granting any right or
license, the disclosing party agrees that the foregoing clauses (i), (ii) and
(iii) shall not apply with respect to information the receiving party can
document: (A) is in or (through no improper action or inaction by the receiving
party) enters the public domain; (B) was rightfully in its possession or known
by it prior to receipt from the disclosing party; (C) was rightfully disclosed
to it by another person without restriction; or (D) is required to be disclosed
by the receiving party to comply with applicable laws or regulations, to defend
or prosecute litigation or to comply with governmental regulations, provided
that the receiving party provides prior written notice of such disclosure to the
disclosing party, takes reasonable and lawful actions to avoid or minimize the
degree of such disclosure and provides the disclosing party a reasonable
opportunity to seek a protective order or injunction to limit such disclosure.
For purposes of this Agreement, "Confidential Information" of a disclosing party
shall mean, any information relating in any way to the properties, products,
processes or business of the disclosing party (including, without limitation,
source code, computer programs, algorithms, names and expertise of employees and
consultants, trade secrets, know-how, formulas, processes, inventions (whether
patentable or not), schematics and other technical, business, financial,
customer and product development plans, forecasts, strategies and information).
Where appropriate the parties agree that some information, which may be
considered confidential, may need to be presented within marketing material. For
that purpose both parties agree the information will not be confidential and can
be disclosed. Specifically, the parties agree that information included in
presentations, brochures and other marketing material including hard-copy and
electronic version developed by IPRC or jointly by the parties will not be
considered Confidential Information unless they are clearly marked
"Confidential".
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Immediately upon termination or expiration of this Agreement, the
receiving party will turn over to the disclosing party all Confidential
Information of the disclosing party and all documents or media containing any
such Confidential Information.
The receiving party acknowledges and agrees that due to the unique
nature of the disclosing party's Confidential Information, there can be no
adequate remedy at law for any breach of its obligations hereunder, that any
such breach may allow the receiving party or third parties to unfairly compete
with the disclosing party resulting in irreparable harm to the disclosing party,
and therefore, that upon any such breach or any threat thereof, the disclosing
party shall be entitled to appropriate equitable relief in addition to whatever
remedies it might have at law. Any breach of this Section will constitute a
material breach of this Agreement.
27. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Parties with respect to the transactions contemplated hereby and
supersedes all prior agreements and understandings between the parties relating
to such transactions.
28. AMENDMENTS. This Agreement may be amended only by written consent
of both Parties.
29. INDEPENDENT CONTRACTOR. Neither party shall, for any purpose, be
deemed to be an agent of the other party. The relationship between the parties
shall only be that of independent contractors. Neither party shall have any
right or authority to assume or create any obligations or to make any
representations or warranties on behalf of any other party, whether express or
implied, or to bind the other party in any respect whatsoever.
30. EXPENSES. In the event a dispute between the parties hereunder with
respect to this Agreement must be resolved by litigation or other proceeding or
a party must engage an attorney to enforce its right hereunder, each party shall
pay its legal fees.
31. INSURANCE. SWMC and IPRC agree to maintain appropriate insurance to
cover their respective risks under this Agreement with coverage amounts
commensurate with levels in their respective markets. IPRC specifically agrees
to maintain insurance coverage for any finished MST Units or Materials the title
and risk of loss of which passes to IPRC pursuant to this Agreement and that are
stored on the premises of IPRC.
32. FORCE MAJEURE. In the event that either party is prevented in good
faith from performing or is unable to perform any of its obligations under this
Agreement (other than a payment obligation) due to any Act of God, fire,
casualty, flood, earthquake, war, strike, lockout, epidemic, destruction of
production facilities, riot, insurrection, Materials unavailability, or any
other cause beyond the reasonable control of the party invoking this section,
and if such party shall have used its commercially reasonable efforts to
mitigate its effects, such party shall give prompt written notice to the other
party, its performance shall be excused, and the time for the performance shall
be extended for the period of delay or inability to perform due to such
occurrences. Regardless of the excuse of Force Majeure, if such party is not
able in good faith to perform within 90 days after such event, the other party
may terminate the Agreement.
33. SUCCESSORS, ASSIGNMENT. These Agreements shall be binding upon and
inure to the benefit of the parties hereto and there respective successors,
assigns and legal representatives. Neither party shall have the right to assign
or otherwise transfer its rights or obligations under this Agreement except with
the prior written consent of the other party, not to be unreasonably withheld.
Notwithstanding the foregoing, SWMC may assign this Agreement to any of its
affiliates with IPRC approval which will not be unreasonably withheld
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34. NOTICES. All notices required or permitted under this Agreement
will be in writing and will be deemed received (a) when delivered personally;
(b) when sent by confirmed facsimile; (c) five days after having been sent by
registered or certified mail, return receipt requested, postage prepaid; or (d)
one day after deposit with a commercial overnight carrier. All communications
will be sent to the addresses set forth above or to such other address as may be
designated by a party by giving written notice to the other party pursuant to
this section.
35. PRESS RELEASES. A party shall not issue any press release, circular
or announcement in relation to this Agreement without the prior written consent
of the other Party; provided, however, that a party may make such disclosures as
required by law or by the rules of any stock exchange.
36. EVEN-HANDED CONSTRUCTION. The terms and conditions as set forth in
this Agreement have been arrived at after mutual negotiation, and it is the
intention of the parties that its terms and conditions not be construed against
any party merely because it was prepared by one of the parties.
37. GOVERNING LAW. This Agreement shall be governed and construed in
all respects in accordance with the domestic laws and regulations of the State
of Louisiana, without regard to its conflicts of laws provisions.
IMPERIAL PETROLEUM RECOVERY CORPORATION
By: /s/ Xxxx X. Xxxxxxxx
--------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
STONE & XXXXXXX MANAGEMENT CONSULTANTS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
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