Exhibit 10.12
SECURITY DEPOSIT PAYMENT FORBEARANCE AGREEMENT
THIS Agreement, effective as of the Eighth day of June, 2004 ("Effective
Date"), is between Successor in Interest to MTC (herein referred to as Successor
in Interest to MTC), a corporation of the State of New York and Imperial
Petroleum Recovery Corporation (herein referred to as IPRC), a company formed
under the laws of Nevada.
WITNESSETH THAT:
WHEREAS, Mobil Technology Company ("MTC") and IPRC entered into an
agreement, effective October 6th, 1999 ("Prior Agreement") pursuant to which MTC
provided IPRC with security deposit of one million United States Dollars (U.S.
$1,000,000) ("Security Deposit); and
WHEREAS, the Prior Agreement terminated on October 6, 2001; and
WHEREAS, IPRC was to repay the Security Deposit on August 10, 2003, which
obligation survived termination of the Prior Agreement; and
WHEREAS, IPRC has not repaid the Security Deposit as of the effective date
of this Agreement and is currently in default of its obligation to repay the
Security Deposit under the Prior Agreement and as a result of such default, IPRC
further owes interest on the Security Deposit as specified in the Prior
Agreement, which obligation further survived termination of the Prior Agreement;
and
WHEREAS, the right under the Prior Agreement to receive the Security
Deposit and accrued interest from IPRC was assigned from MTC to Successor in
Interest to MTC on December 6, 2002 and as a result of that assignment,
Successor in Interest to MTC is a secured creditor of IPRC; and
WHEREAS, to avoid creating a situation that could cause IPRC to file for
bankruptcy, Successor in Interest to MTC is willing to forebear its collection
of the Security Deposit as a single payment and to allow IPRC to make six
payments totaling one million United States Dollars (U.S.$1,000,000) as set
forth herein and further, if IPRC makes all of such Security Deposit payments on
or before the specified timetable, Successor in Interest to MTC is willing to
forgive the accrued interest on the Security Deposit.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
1.01 Terms defined in this Agreement shall have the definitions provided
herein. Terms not defined in this Agreement shall have the meaning defined for
them in the Prior Agreement. In the event of any conflict between the terms of
this Agreement and the Prior Agreement, the terms of this Agreement shall
control.
ARTICLE II- PAYMENTS
2.01 As used herein, "Financial Trigger Event" shall mean the effective
date of the first agreement between IPRC (or any affiliate, agent or licensee
with rights to sublicense MST) and any third party for the lease, sale, or
license of one or more MST Units after the Effective Date. IPRC agrees to
promptly notify Successor in Interest to MTC in writing of the execution of any
agreement on or before October 31, 2004 between IPRC or any affiliate, agent, or
licensee with rights to sublicense MST and any third party for the lease, sale,
or license of one or more MST Units.
2.02 Provided that the Financial Trigger Event occurs on or before October
31, 2004, Successor in Interest to MTC and IPRC agree that the Security Deposit
payment schedule is changed from that specified in Sections 6.3, 6.4 and 6.5 of
the Prior Agreement to that specified below. Payment will be made by IPRC to
Successor in Interest to MTC according to the specified schedule and no invoices
will be required from Successor in Interest to MTC to IPRC before making such
payments.
Until lPRC shall fully repay the Security Deposit, thirty (30) days
after the conclusion of each calendar quarter (January to March, April to June,
July to September and October to December or any portion thereof) after the
Financial Trigger Date, IPRC shall pay Successor in Interest to MTC at least
Sixty Thousand United States Dollars (U.S.$60,OOO.00) for each MST Unit sold,
leased or licensed after the Financial Trigger Date. Failure to make the
specified payments on time shall be a default. Examples of the application of
this payment schedule are shown in Appendix I.
2.03 If the Financial Trigger Event occurs on or before October 31, 2004
and IPRC repays the entire Security Deposit on or before December 1, 2005 as
specified in Section 2.02, Successor in Interest to MTC will forgive any
interest accrued and due under the Prior Agreement, however if anyone or more of
the payments called for in Section 2.02 are not made as specified or if the
Security Deposit was not entirely repaid by December 1, 2005, IPRC shall
continue to be obligated to pay the Security Deposit payments as specified in
Section 2.02 and shall pay Successor in Interest to MTC interest on the Security
Deposit as follows:
Interest due on the Security Deposit, including accrued interest, from
August 10, 2003 up to the date IPRC pays the Security Deposit and accrued
interest in full will be charged upon the unpaid Security Deposit plus any
accrued interest at a rate equal to the prime rate of Citibank (New York) at the
close of business on the last business day of the calendar year immediately
preceding each respective year (or portion thereof) that the Security Deposit
remains unpaid, plus four percent (4%) per annum. The interest will be added to
the amount that IPRC owes Successor in Interest to MTC.
2.04 If the Financial Trigger Event does not occur on or before October 31,
2004, IPRC shall continue to be obligated to pay the Security Deposit, including
accrued interest, charged upon the unpaid Security Deposit plus any accrued
interest, at a rate equal to the prime rate of Citibank (New York) at the close
of business on the last business day of the calendar year immediately preceding
each respective year (or portion thereof) that the Security Deposit remains
unpaid, plus four percent (4%) per annum beginning on August 10, 2003 and ending
when the Security Deposit plus accrued interest has been paid in full to
Successor in Interest to MTC and failure to pay the Security Deposit, including
any accrued interest, by October 31, 2004 shall be a default. The interest will
be added to the amount that IPRC owes Successor in Interest to MTC.
2.05 Payments made by IPRC to Successor in Interest to MTC shall be first
credited to repayment of the Security Deposit without accrued interest and then
to payment of accrued interest. IPRC shall pay Successor in Interest to MTC
accrued interest in successive fifty thousand United States dollar (U.S.$50,OOO)
payments every thirty (30) days beginning upon the repayment of the Security
Deposit and continuing until all accrued interest due Successor in Interest to
MTC has been paid. Failure to make accrued interest payments on time shall be a
default.
2.06 All amounts specified in this Agreement are in U.S. Dollars and are
net of any value added taxes (VAT), and all payments provided for in this
Agreement shall be paid in United States Dollars and be remitted preferably by
wire transfer, or by check or draft, to the following banking address, or to
such other new banking address provided by Successor in Interest to MTC upon
ninety (90) days prior written notice thereof to IPRC. Payments by wire shall be
to:
For the account of: Successor in Interest to MTC
Or if by check or draft to:
Successor in Interest to MTC
All payments due from IPRC shall be equal to one hundred percent (100%) of
the invoice amount or the amount specified in this Agreement without deductions
for any taxes, assessments or charges levied, assessed or imposed (other than by
the Government of the U.S.A.) which IPRC or Successor in Interest to MTC or any
other party shall be required to payer withhold in respect to or calculated with
reference to such payment due Successor in Interest to MTC. Any such taxes,
assessments, and/or charges shall be paid by IPRC, on behalf of and in the name
of Successor in Interest to MTC, and receipts for such taxes, assessments or
charges shall be forwarded to Successor in Interest to MTC.
ARTICLE III - ADDITIONAL COVENANTS
3.01 IPRC represents and warrants that it has not paid any dividends or
other capital distributions or made any other distribution or payment on account
of or in redemption, retirement, or purchase of any capital stock (collectively,
"Distributions") to any of its shareholders during the time period from August
10, 2002 to the Effective Date.
3.02 Until the Security Deposit, including any accrued interest, is paid to
Successor in Interest to MTC in full, without Successor in Interest to MTC's
express written consent:
(a) IPRC agrees that no Distributions shall be made to any of its
shareholders, however an already agreed payment of up to three hundred thousand
United States Dollars (U.S.$300,000.00) total may be made to IPRC's three
largest shareholders; and
(b) IPRC agrees that it shall pay no other creditor a greater
percentage of its indebtedness to such creditor than it shall pay to Successor
in Interest to MTC, however IPRC may pay its creditors its actual costs that are
reasonable for office rent, office supplies, office equipment, utilities, taxes,
wages and salaries for employees other than officers or IPRC shareholders and
travel and entertainment expense associated with marketing MST Units up to a
maximum of fifty thousand United States Dollars (U.S.$50,000.00) per month,
which maximum shall be increased by up to an additional twenty-five thousand
United States Dollars (U.S.$25,000.00) per month if needed to support expanded
marketing efforts for MST Units.
3.03 Beginning with the Financial Trigger Date, IPRC shall deliver to
Successor in Interest to MTC as soon as available, but in any event within 30
days after the end of each calendar quarter, a company prepared consolidated
balance sheet and income statement covering IPRC's consolidated operations
during such period, in a form acceptable to Successor in Interest to MTC and
certified by a responsible officer of IPRC.
ARTICLE VI - ADDITIONAL REQUIREMENTS
4.01 The obligation of Successor in Interest to MTC to forbear its rights
to receive the Security Deposit from the Prior Agreement is subject to the
condition precedent that Successor in Interest to MTC shall have received, in
form and substance satisfactory to it, the following:
(a) this Agreement;
(b) an officer's certificate of IPRC with respect to incumbency and
resolutions authorizing the execution and delivery of this Agreement;
(c) annual consolidated balance sheet and income statement covering
IPRC's consolidated operations during 2002 and 2003 (unaudited ones acceptable)
as soon as practical after the Financial Trigger Date; and
(d) such other documents, and completion of such other matters, as
Successor in Interest to MTC may reasonably deem necessary or appropriate.
4.02 Should IPRC have an opportunity to sell, lease or otherwise transfer
the Torrance MST Equipment ("Collateral") to a third party for fair value, IPRC
shall promptly notify Successor in Interest to MTC and Successor in Interest to
MTC, at its sole discretion under terms acceptable to Successor in Interest to
MTC, may provide IPRC with a written waiver of its security interest.
4.03 Successor in Interest to MTC (through any of its or its affiliates'
officers, employees, or agents) shall have the right, upon reasonable prior
notice, from time to time during IPRC's usual business hours but no more than
once a year (unless IPRC is in default of any of its obligations under this
Agreement), to inspect IPRC's Books and to make copies thereof and to check,
test, and appraise the Collateral in order to verify IPRC's financial condition
or the amount, condition of, or any other matter relating to, the Collateral.
ARTICLE V - REPRESENTATIONS AND WARRANTIES
5.01 IPRC represents and warrants as follows:
(a) IPRC has good title to the Collateral, free and clear of liens,
except for liens to Successor in Interest to MTC and its affiliates. All
inventory is in all material respects of good and marketable quality, free from
all material defects, except for inventory for which adequate reserves have been
made.
(b) There are no actions or proceedings pending by or against IPRC or
any of its affiliates before any court or administrative agency in which a
likely adverse decision could reasonably be expected to have a material adverse
effect on IPRC's interest or Successor in Interest to MTC's security interest in
the Collateral.
(c) All consolidated financial statements related to IPRC and any of
its affiliates that are delivered by IPRC to Successor in Interest to MTC fairly
present in all material respects IPRC's consolidated financial condition as of
the date thereof and IPRC's consolidated results of operations for the period
then ended. Since the date of the most recent of such financial statements
submitted to Successor in Interest to MTC, no event or circumstance has occurred
or exists, which individually or in the aggregate has resulted or could
reasonably be expected to result in a material adverse effect.
(d) IPRC is. in default of its obligation to repay the Security
Deposit under the Prior Agreement.
(e) Successor in Interest to MTC , through its predecessor, MTC,
holds a valid, perfected first priority lien against the Collateral, which lien
will continue in full force and effect until repayment of the Security Deposit
is made in full.
(f) Successor in Interest to MTC, through its predecessor, MTC, has
the present right to exercise all of the remedies available to MTC under the
Prior Agreement.
ARTICLE VI - ASSIGNMENT
6.01 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and the successors to substantially the entire assets and
business of the respective parties hereto. This Agreement shall be assignable by
Successor in Interest to MTC to any of its affiliates but shall not otherwise be
assignable by either party without the prior written consent of the other party.
Any and all assignments of this Agreement or of any interests therein not made
in accordance with this Paragraph shall be void.
ARTICLE VII- DEFAULT
7.01 If IPRC shall be in default of any obligation hereunder, Successor in
Interest to MTC may give written notice to IPRC specifying the claimed
particulars of such default and in the event IPRC shall not have remedied such
default within sixty (60) days after the date of such notice,
(a) The entire unpaid principal sum of the Security Deposit plus any
and all interest accrued thereon shall, at the option of Successor in Interest
to MTC, become due and payable immediately without presentment, demand, notice
of payment, protest, notice of protest, or other notice of dishonor, all of
which are expressly waived by IPRC.
(b) Successor in Interest to MTC shall have with respect to the
Collateral all of the rights and remedies of a secured party under the Uniform
Commercial Code or any other applicable law and all rights provided herein or in
any other applicable security, loan or other agreement, all of which rights and
remedies shall, to the full extent permitted by law, be cumulative.
(c) Successor in Interest to MTC may require IPRC at its expense to
assemble the Collateral and make it available to Successor in Interest at a
place to be designated by Successor in Interest to MTC which is reasonably
convenient to Successor in Interest to MTC and IPRC.
(d) Successor in Interest may sell the Collateral or any part thereof
at public or private sale, at any of Successor in Interest to MTC's offices or
elsewhere, for cash, on credit or for future delivery, and at such prices and
upon such other terms as Successor in Interest to MTC may deem commercially
reasonable.
(e) Any notice of sale, disposition or other intended action by
Successor in Interest to MTC, sent to IPRC at the address specified below, or
such other address of IPRC as may from time to time be shown on Successor in
Interest to MTC's records, at least five (5) days prior to such action, shall
constitute reasonable notice to IPRC.
(f) The rights and remedies provided to Successor in Interest herein
are not exclusive and are in addition to any other rights and remedies Successor
in Interest already has under the Prior Agreement and may now or hereafter have
at law or in equity, and each and every such right or remedy shall be cumulative
and concurrent, and in addition to every other such right or remedy, and may be
pursued singly, concurrently, successively or together, at the sole discretion
of Successor in Interest to MTC, and shall not be exhausted by anyone exercise
thereof but may be exercised as often as occasion therefore shall occur. The
failure to exercise or delay in exercising any such right or remedy shall not be
construed as a waiver or release thereof.
ARTICLE VIII - MISCELLANEOUS
8.01 The validity and interpretation of this Agreement and the legal
relations of the parties to it shall be governed by the laws of the Commonwealth
of Virginia, U.S.A. without recourse to its conflicts of law rules.
8.02 None of the provisions of this Agreement shall be construed so as to
require the commission of any act contrary to law, and wherever there is any
conflict between any provision of this Agreement and any material statute, law
or ordinance, the latter shall prevail; but in such event the provision of this
Agreement affected shall be curtailed and limited only to the extent necessary
to bring it within the legal requirements.
8.03 IPRC shall not cause or permit the release of any advertising,
publicity, news release or other public announcement referring to this Agreement
or having or containing any reference to Successor in Interest or its affiliates
or in which the name of Successor in Interest Research and Engineering Company,
Successor in Interest to MTC, Successor in Interest to MTC, Successor in
Interest to MTC, Successor in Interest to MTC or Successor in Interest appears
until written approval has been obtained from Successor in Interest to MTC,
however IPRC may re-release or refer to previously published information that
refers to Successor in Interest or its affiliates.
8.04 The headings in this Agreement are for informational purposes and
should not be construed as altering the terms of the Agreement.
ARTICLE IX - ADDRESSES
9.01 The addresses of the parties hereto are as follows, but either party
may change its address for the purpose of this Agreement by notice in writing to
the other party:
Successor in Interest to MTC:
Imperial Petroleum Recovery Corporation 0000\
Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxx XX 00000
Telephone: 000 000 0000
Attn: Xxxx Xxxxxxxx
In the event notices, statements, payments received under this Agreement by a
party hereto are sent by certified or registered mail to the party entitled
thereto at the address provided for in this Agreement, they shall be deemed to
have been given or made as of the date so mailed, and if sent by wire then as of
the date transferred.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their respective corporate names by their respective officers thereunto duly
authorized.
IMPERIAL PETROLEUM SUCCESSOR IN INTEREST TO MTC
RECOVERY CORPORATION
By By
Name: Name:
Title Title
Date: Date:
APPENDIX I
Payment Calculation Examples:
Example 1:
A. Assume Financial Trigger Date is May 1, 2004
B. Assume IPRC sells one (1) MST Unit in the May 1 transaction C. IPRC should
pay Successor in Interest at least $60,000 on each July 30, October 30,
January 30, and April 30 thereafter until the Security Deposit and accrued
interest have been paid in full.
Example 2:
D. Assume Financial Trigger Date is May 1, 2004
E. Assume IPRC sells two (2) MST Units in the May 1 transaction F. IPRC should
pay Successor in Interest at least $120,000 on each July 30, October 30,
January 30, and April 30 thereafter until the Security Deposit and accrued
interest have been paid in full.
Example 3:
G. Assume Financial Trigger Date is May 1, 2004
H. Assume IPRC sells three (3) MST Units in the May 1 transaction
I. IPRC should pay Successor in Interest to MTC at least $180,000 on each July
30, October 30, January 30, and April 30 thereafter until the Security
Deposit has been paid in full. Under the terms of the Agreement, if IPRC
makes the specified payments on time, Successor in Interest to MTC will
forgive the accrued interest.
Example 3a:
J. Assume Financial Trigger Date is May 1, 2004
K. Assume IPRC sells three (3) MST Units in the May 1 transaction
L. IPRC should pay Successor in Interest to MTC at least $180,000 on each July
30, October 30, January 30, and April 30 thereafter until the Security
Deposit has been paid in full, and if IPRC should fail to make one or more
payments on time, then also until the accrued interest has been paid in
full.
