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
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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.
<PAGE>
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
<PAGE>
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")
