STRATEGIC MARKETING, MANUFACTURING AND TECHNOLOGY LICENSING AGREEMENT

 

                                                                   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 1970 S. Starpoint Drive, Houston, Texas 77032 and Stone & Webster

Management Consultants, Inc., a Louisiana corporation ("SWMC") whose address is

4171 Essen Lane, Baton Rouge, LA 70809. 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 bill 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 Shaw 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, bill 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

conditi