SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended June 30, 1997
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________ to _________
Commission File Number 33-17598-NY
The Tirex Corporation
(Name of Small Business Issuer in its charter)
Delaware 22-3282985
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
740 St. Maurice
Montreal, Quebec H3C 1L5
(Address of Principal executive offices) (Zip Code)
(514) 878-0727
(the Company's telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
NONE NONE
Securities registered under Section 12(g) of the Exchange Act:
NONE
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the Company was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X] No[ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and if no disclosure will be
contained, to the best of the Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
<PAGE>
-0-
(Issuer's revenues for its most recent fiscal year)
$7,719,202
(Aggregate market value of the voting stock
held by non-affiliates of the Company)
38,774,625 shares, $.001 par value
(Number of shares outstanding of each of the Company's classes of common stock,
(as of October 10, 1997)
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
into Part I
Registration statement on Form S-18, as amended
File No. 33-17598-NY
Annual Report on Form 10-K of the Company for
the year ended December 31, 1988
Transition Report on Form 10-K of the Company
for the transition period
January 1, 1989 through June 30, 1989
Annual Reports on Forms 10-K of the Company for
the years ended June 30,
1989, 1990, 1991, 1992, 1993, 1994
Annual Report of Forms 10-KSB of the Company for
the years ended June 30, 1995 and 1996
Quarterly Reports of Forms 10-QSB of the Company
for the quarters ended September 30, 1996, December 31, 1996,
and March 31, 1997
Current Reports on Forms 8-K of the Company
Dated, December 22, 1996, January 10, 1997, February 5, 1997, March 7, 1997,
June 24, 1997, July 11, 1997
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ITEM 1. DESCRIPTION OF BUSINESS
Business Development
The Tirex Corporation (hereinafter, the "Company" or "Tirex") was
incorporated in Delaware on August 19, 1987 under the name "Concord Enterprises,
Inc." Its name was changed to "Stopwatch Inc." on June 20, 1989(1) and to the
"Tirex America Inc." on March 10, 1993. On July 11, 1997, during the period
subsequent to that covered herein, in order to encompass the current and
projected international scope of its operations, the Company's name was changed
to "The Tirex Corporation". The Company, directly and through its subsidiary
"Tirex Canada Inc.",(2) is presently engaged in the business of developing,
manufacturing, selling, and leasing a cryogenic tire disintegration system (the
"TCS-1 System") which integrates proprietary disintegration technology with
established conventional mechanical and technologies. It is also currently
conducting negotiations with C.G. Tire, Inc., a wholly-owned subsidiary of
Continental General Tire Inc., respecting a five-year tire shredding project for
the province of Quebec. In addition, the Company is exploring, with the Montreal
operation of Solutia Inc. (a successor to part of the business of Monsanto
Canada Inc.), the feasibility of expanding the Company's operations to include
thermoplastic/rubber compounding operations at the former Monsanto Montreal
facility.
The Company acquired its proprietary tire disintegration technology (the
"Tirex Technology") in the fall of 1992(3). Since the beginning of 1993, it has
devoted the bulk of its efforts to completing the design and development, and
commencing the manufacture, of the TCS-1 System and raising the financing
required for such project. In August of 1995, the Company moved its corporate
headquarters to Quebec and formed its subsidiary, 3143619 Canada Inc. (known and
doing business, and hereinafter referred to, as "Tirex Canada Inc.").
Construction of the first full scale prototype of the TCS-1 began in February of
1997 and is expected to be
- ----------
(1) For a discussion of the merger with Stopwatch, the healthcare business
which was intended, but was never commenced, by Stopwatch, and the reasons for
the termination of the Stopwatch business plan, reference is made to Item 1 of
Registrant's annual report on Form 10-K for the fiscal year ended December 31,
1988, its transition report on Form 10-K for the transition period ended June
30, 1989, and its annual report on Form 10-KSB for the fiscal year ended June
30, 1995.
(2) Unless context necessarily requires otherwise, references hereinafter
to the "Company" refer to The Tirex Corporation and its subsidiary, Canadian
Corporation 3143619 (known and doing business as "Tirex Canada Inc."),
collectively.
(3) For discussions in detail of the Company's acquisition of the Tirex
Technology and the associated corporate and management changes which took place
between the autumn of 1992 and January of 1995, reference is made to the
discussions thereof included in Item I of the Company's annual reports of Forms
10-KSB for the fiscal years ended June 30, 1995 and June 30, 1996.
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completed by the end of November 1997. The Company began taking orders on the
TCS-1 System in October of 1995 and, to date, has received deposits of $25,000
each on five Systems. The Company has located and entered into written and oral
agreements with various engineering and manufacturing subcontractors and
component suppliers, which Management believes will supply it with sufficient
production capacity to meet all current and projected orders, on a timely basis,
commencing upon satisfactory completion of testing operations of the initial
TCS-1 System (see "Products and Services" below, in this Item I).
The Scrap Tire Disposal Business
Scrap Tire Disposal Problems and Development of New Uses for Scrap Tires
The company's management believes that there is a need to find alternatives
to conventional methods for disposing of the vast amounts of solid waste which
are continually being dumped into fast disappearing land-fill space or burnt in
incinerators. Even though scrap tires represent only about 1.2% of the total
tonnage of solid waste annually produced in North America, the disposal of scrap
tire can pose serious environmental problem. Among the numerous problems
relating to landfilling or stockpiling scrap tires, is the fact that whole tires
cannot be successfully buried in landfills because the combination of their
size, configuration, and weight causes buried tires eventually to work their way
up to the surface. Moreover, when stockpiled above ground, tires can create
serious fire, public health, and environmental hazards ranging from dump fires
which generate large and dense clouds of black smoke and are very difficult to
extinguish, to the creation of vast breeding grounds for mosquitoes and vermin.
According to the Scrap Tire Management Council ("STMC") "Scrap Tire Use/Disposal
Study - 1996 Update", current estimates for scrap tire stockpiles run from
approximately 700 million to 800 million, which would correspond to a tire-to
person ratio in the United States of America between 2.5 and 3.0.
As a result, many states have either passed or have pending legislation
regarding discarded tires, including legislation limiting the dumping of used
tires to specifically designated areas. Also in recognition of the serious
environmental problems created by discarded tires, there has been a shift from
the dumping or landfilling of waste tires to development of various market
applications. According to the STMC, there are currently three major markets for
scrap tires:
(a) using scrap tires as "tire derived fuel" or "TDF" which comprises
burning the tires, either whole or after reduction to approximately
two inch chips;
(b) exporting scrap tires for refitting and re-use as tires; and
(c) disintegrating scrap tires into their components (rubber, steel wire,
and fiber) and recycling the salvageable steel and rubber into new
products;
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The STMC 1996 update report indicated that the largest use presently being
made of scrap tires is burning them as tire derived fuel. From 1994 to 1996,
this usage grew 50% to 152 million tires burned in 1996. The second largest use
of scrap tires was exporting them (15 million in 1996). But, while ground rubber
represented only the third largest use of scrap tires, the STMC study indicated
that this area enjoyed "the biggest surge" with an increase of 177% over 1994".
As a result, approximately 190 pounds of crumb rubber were produced in 1996 (vs.
69 million pounds in 1994) In addition, 210 million pounds of tire buffings (a
by-product from the retreading industry were also processed for an overall
market demand for size reduced rubber (crumb rubber and buffings) of around 400
million pounds at the end of 1996. A more detailed discussion is included.
The Company believes that modern waste disposal problems combined with the
considerable depletion of natural, non-renewable resources, such as raw material
used for tire manufacture, the decreasing availability of many cultivated raw
materials, and the resulting increases in the costs thereof, will make the
recycling of waste products such as used tires into reusable raw materials a
critical imperative for society and for the economy. The Company also believes,
however, that because present market conditions demonstrate that the capital and
operating costs of currently available tire recycling systems are high, and,
because of the inefficiency of the technologies being used, the by-products
therefrom, expensive to produce, that tire recycling will not be an economically
viable industry until such problems are addressed. The Company believes that the
TCS-1 System will successfully address these problems. The TCS-1 System has been
designed not only to cost less in terms of initial capital outlay required, but
to cut maintenance, operating, and energy costs drastically and to significantly
increase the quantity and quality of the by-products yielded by the recycling
process.
The Company believes that the advent of a greater and more dependable
supply of high quality rubber crumb could contribute to and encourage the
continuance of the kind of huge growth in the market for rubber crumb which is
currently occurring. Should the TCS-1 System be developed by the Company, the
Company hopes to participate in such market. (See "Potential Markets" below).
Products and Services
The TCS-1 System
Overview
The TCS-1 System comprises a complete, turn-key, environmentally safe,
cryogenic tire disintegration system which incorporates proprietary
disintegration and cryogenic technology with established conventional mechanical
and technological techniques. While the TCS-1 System is still in the research
and development stage, substantial progress has been made during and since the
end of the fiscal year ended June 30, 1997 with initial engineering design and
development
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nearing completion. Construction of the first full scale production model began
in February of 1997 and is expected to be completed by the end of 1997. A three
to six month test phase is scheduled to begin immediately upon completion of
such production model for the purpose of optimizing the performance of the
System and eliminating any problems which may arise under operating conditions.
This will also allow the Company to definitively test the limits of the System's
production capabilities.
The TCS-1 System is designed to: (i) disintegrate scrap tires, using
substantially less energy than is required by existing ambient methods (which
shred and/or chop tires at "ambient" or normal room temperatures) or other
currently available cryogenic methods (which reduce the temperature of the
materials for at least a portion of the process, but which still rely on
chopping and/or shredding the tire), and (ii) produce commercially exploitable,
high quality, clean rubber crumb and unshredded steel and fiber.
The principle features of the TCS-1 System which management believes make
it superior to other existing tire recycling systems on the market today
include:
* A cooling process which management believes will substantially reduce
the cost of refrigerants.
* A multiple stage tire disintegration unit which: (I) will not subject
the tire to shredding or hammer-milling operations; (ii) will be
environmentally safe; and (iii) is capable of yielding rubber powder
in a wide range of particle size, a capability which Management
believes will enable it to meet a variety of market demands.
* The ability to produce steel, fiber cord, and rubber powder with only
insignificant intermingling.
* Highly efficient utilization of energy resulting in low energy
requirements and usage (more than 90% of the cold air generated will
be used to cool the tires).
* Low capital cost.
* Low maintenance requirements.
Construction and Design of the TCS-1 System
The functions and mechanisms of the proposed TCS-1 System have been
designed for the exclusive purpose of disintegrating automobile and truck tires,
which basically consist of the following elements:
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* Two types of rubber. The sidewalls of tires are constructed of
material containing a higher percentage of natural, as opposed to
synthetic, rubber which is used in the treads. Management believes
that natural rubber, which is more flexible than synthetic rubber, is
capable of being reused in a significantly wider range of products
than is synthetic rubber. The TCS-1 System has been designed to take
advantage of these differences to produce a separate rubber powder
reclaimed exclusively from the sidewalls. Management believes that
such "sidewall" rubber powder will have a higher market value than
rubber produced today from a mixture of tread and sidewall rubber;
* Steel beads, which consist of steel wires tightly wound together to a
diameter of approximately 3/8 of an inch. These beads are imbedded
around the rims of the tire treads;
* Steel belting, which incorporates a thin layer of steel wires laid out
in a "herring bone" pattern and which underlies the entire surface of
the tread area, and
* Fiber threads which are incorporated into the rubber used throughout
the tire.
The TCS-1 System will comprise four main sections consisting of separation,
cryogenic, disintegration, and product handling systems. An internal computer
will monitor all essential wear points as well as certain other aspects of the
System.
The principal feature of the TCS-1 System will be the Company's
proprietary, non-shredding disintegration mechanism which will, under cryogenic
conditions, disintegrate used tires into: (i) two types of rubber powder (rubber
from the sidewalls of the tire will be processed separately from the tread
rubber); (ii) steel wire sections; and (iii) fiber cord sections. The steel and
fiber yielded by the System will normally contain insignificant amounts of
rubber.
The basic components of the TCS-1 System will include:
(a) a tire preparation assembly which will remove the steel beads, clean
the tires, separate sidewalls from the tread, and cut both treads and
sidewalls;
(b) a refrigeration unit, approximately eight feet wide, sixteen feet
high, and 40 feet long;
(c) a completely enclosed cryogenic tire disintegration unit approximately
20 feet wide, 16 feet high and 40 feet long;
(d) two freezing chambers, each ten feet wide, twenty feet high, and
twelve feet long;
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(e) a fiber baler used to bundle fibers into bales with steel bonds; and
(f) miscellaneous conveyors and fiber separation equipment
In April of 1997, the Company replaced its original, one-quarter scale
model with a new, larger sized (1/2 scale) working prototype of the TCS-1
System's proprietary disintegration unit. This scale model disintegration
mechanism will be used to run test operations to discover, identify, and cure
any problems which may arise, as well as to test the limits of the System's
productive capacity, under operating conditions. This will enable the Company's
engineering team to design and develop, under operating conditions, the
components of the disintegration mechanism for the full-scale production model
of the TCS-1 System, which is presently under construction. The scale model
disintegration mechanism is also being used to produce rubber crumb for the
purpose of testing the nature, quality, and potential marketability thereof.
The foregoing production schedule may not be met unless the Company
completes and closes a private placement of its securities in an amount of not
less than $700,000. Any failure or delay in the Company's ability to obtain such
financing will be directly reflected in a commensurate delay or failure in the
completion of the construction, and the commencement of the testing, of the
production model.
Economy of Operation
The TCS-1 System has been designed to substantially reduce the amount of
energy and equipment maintenance required to disintegrate tires, to increase the
ease and efficiency of separating the steel, rubber, and fiber components of
tires, and to produce what Management believes will be more saleable and more
highly valued by-products than are produced by other systems currently
available. Test operations indicate that the cost of disintegrating a tire using
the TCS-1 System will be about $.50 as compared with current tire disintegration
costs, using other technologies, of up to $2.00 per tire. Additionally all of
the end products which the TCS-1 System is designed to yield are expected to be
saleable
The TCS-1 System has been designed to operate continuously (with minimum
amounts of downtime for maintenance), and to consume approximately 650
horsepower operating at 460 volts, and is designed to require substantially less
energy than is used by presently existing equipment. TCS-1 System will be able
to process both automobile and truck tires in quantities equivalent to 180
automobile tires per hour, or 1,000,000 automobile tires per year.
Projected Functions, Operations, and Capabilities
The following discussion of the functions, operations, and capabilities of
the TCS-1 System are based upon engineering design plans and specifications and
test operations of: (i) the 1/2 scale prototype disintegration mechanism; (ii)
the automated front-end system; and (ii) various
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other components of the system which have already been completed and tested
separately. This discussion also assumes that the System, when complete and
fully integrated, will function as planned, of which there can be no assurance.
Furthermore, because the TCS-1 System is still in the development stage,
however, the Company cannot, as at the date hereof, guaranty how long after the
completion of the first full-scale production model, if ever, the System will
perform fully in accordance with Management's expectations.
Step-by-Step Operations
The projected step-by step operations of the TCS-1 System will encompass
the following:
(a) The two sidewalls will be cut off and the tread will be cut into
lengths of about one foot. (The sidewalls will be kept separate from
the tread sections throughout the process).
(b) The two steel beads which are contained within each tire will be
pulled out;
(c) Sidewall and tread sections will automatically be placed onto separate
conveying systems which will then feed them into the TCS-1 System's
freezing chambers through separate air locks. The temperature of the
air within the freezing chambers will be kept at approximately 170
degrees below zero by constant recirculation through a refrigeration
unit. The sidewall and tread sections will remain within the freezing
chambers until they are cooled to a point between 90 and 100 degrees
below zero (fahrenheit).
(d) The frozen sections will then pass through proprietary disintegrators
where the sidewall and tread rubber will be reduced to two separate
coarse powders. This operation will not involve any chopping,
shredding, or hammer-milling. Therefore, the steel wires will not be
cut or broken. Furthermore, although the fiber threads may be broken
into shorter lengths, they will still retain their basic shapes and
characteristics. No steel powder or fiber fluff will be produced.
(e) The steel wires will be magnetically removed from the rubber powders.
(f) The fiber and rubber powder will be passed through screens to separate
the powder from the fiber threads. The fiber threads will then be
conveyed out of the machine to a fiber baler.
(g) The rubber powders will then be conveyed out of the TCS-1 System.
(h) 100% of the rubber powders yielded by the TCS-1 System will pas
through a ten mesh screen. Supplementary grinders will be supplied for
customers desiring finer powders which can pass through 40 mesh or 80
mesh screens.
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Comparison of the Projected TCS-1 System
With Other, Existing Tire Recycling Equipment
There are two types of tire disintegration processes in use today which
produce rubber powder, normally referred to as "crumb"; cryogenic systems and
(ii) "ambient" systems. Management believes that the TCS-1 System will have the
distinct advantages over existing systems, as set forth in the comparisons
below. All references to "existing conventional cryogenic and ambient systems"
are to technologies which are widely available and known throughout the
industry. Such technologies include all mechanical, commercially feasible tire
disintegration systems of which the Company has knowledge. There can be no
assurance however that one or more new technologies, or improvements to existing
technologies, presently unknown to management, has not, or in the near future,
will not, become available. While it is conceivable that new technological
breakthroughs could provide benefits and advantages equal to or exceeding those
of the projected TCS-1 System, at this time, the Company is not aware of any
such tire disintegration system or technology.
Existing Conventional
Cryogenic and Ambient
Systems
Methods
Except for a small number of recyclers who remove the steel beads first, most
conventional cryogenic and ambient systems used today to produce rubber crumb
feed whole tires into chopping, shredding, grinding, or pulverizing mechanisms,
or a combination of any two or more of such mechanisms. Because the entire tire
is subject to these operations, the steel which makes up the beads as well as
the steel wires embedded in the belting and the fiber components of the tire are
also chopped, shredded, and ground. In both conventional cryogenic and ambient
systems, this initial chopping and shredding is effected at ambient temperatures
(normal climatic conditions). Tires, however, are designed to be tough and
durable at these temperatures. The difficulty in chopping or shredding the tires
at these temperatures is compounded by the fact that all of the steel in the
tire is also being chopped and shredded.
Projected
TCS-1
System
Methods
The projected TCS-1 System will be designed to remove and salvage the steel
beads of the tire before any other operation is commenced. Disintegration of the
tire will be accomplished solely by the exertion of pressure, in a proprietary
manner, on frozen rubber. This disintegration process will take place only after
the tire sections have been cooled to a temperature between 90 and 100 degrees
below zero, fahrenheit, at which point the material will take on a glass-like
brittleness. At no point in the process will the steel or fiber components be
subjected to any chopping, shredding, grinding, or pulverizing procedures which
would destroy the basic integrity of their respective wire-like and cord-like
configurations.
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Existing Conventional
Cryogenic and Ambient
Systems
Equipment, Energy and
Maintenance Requirements
Because of the toughness of rubber at ambient temperatures and the fact that
steel, as well as the rubber and fiber, are being chopped or shredded, very
large and powerful equipment and the application of substantial amounts of
energy are required to tear tires apart using conventional cryogenic or ambient
systems. Moreover, since tires are so tough and durable, they have to be
shredded in stages. The stages typically include: (i) initial shredding to
reduce the tire to strips of about 2 x 6 inches; (ii) a second shredding to
reduce such strips to pieces approximately 1 x 2 inches in size; (iii) a third
stage which further reduces the material to pieces of approximately 1/8 to 1/2
inches in size; and a fourth shredding operation which yields a coarse powder.
The foregoing shredding operations will consume a total of approximately one
thousand horsepower or more. Because of the foregoing requirements, the
machinery which is used to construct conventional cryogenic or ambient systems
has more bulk than the TCS-1 System. Moreover, there is great wear and tear on
the cutting edges of the chopping and shredding mechanisms which causes the
cutting edge to require constant maintenance, repair, and blade replacement.
Projected
TCS-1
System
Equipment, Energy and
Maintenance Requirements
The projected TCS-1 System is designed to remove the steel beads from the tires
before any disintegration process commences. Additionally, the rubber will be in
an extremely brittle and easy to break condition during the disintegration
process. Therefore, the equipment required to break down the tires will be
considerably smaller and lighter, and the energy requirements will be
drastically lower than those required by conventional cryogenic or ambient
systems in use today. The TCS-1 System will be comparatively light in terms of
bulk and weight. Moreover, the TCS-1 System will have no shredding or chopping
surfaces that would require continuous sharpening and repairing. This will
result in an additional significant reduction in maintenance expenses.
Existing Conventional
Cryogenic and Ambient
Systems
Cooling Techniques
As discussed below, conventional cryogenic systems use liquid nitrogen to cool
the rubber before subjecting it to knife or hammer-mill operations. Liquid
nitrogen is an expensive coolant and none of the systems with which Management
is acquainted make any attempt to recycle any of the cold energy generated
thereby.
Projected
TCS-1
System
Cooling Techniques
The TCS-1 System will be designed to use mechanical refrigeration to cool the
tires to the required temperatures. Mechanical refrigeration is normally less
expensive to use than liquid nitrogen and the Company expects this to further
reduce operating costs. Moreover, unlike conventional cryogenic systems which do
not attempt to recover the cold energy from the rubber powder, the TCS-1 System
has been designed to use 90% of the available cold energy to reduce the
temperature of tires entering the system. A specialized cooling chamber makes
this possible.
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Existing Conventional
Cryogenic and Ambient
Systems
Costs and Expenses
As a result of the foregoing, initial capital outlays for the equipment and
continuing energy and maintenance costs are high.
Projected
TCS-1
System
Costs and Expenses
The foregoing is expected to result in significantly smaller initial capital
requirements and drastically lower continuing energy and maintenance costs.
Existing Conventional
Cryogenic and Ambient
Systems
Problems Associated With Tire
Disintegration Methods In Current Use.
The initial operations described above will chop or shred a complete tire until
it is reduced to chips ranging in size from about 2 x 2 inches to 2 x 6 inches.
These chips can be used as "TDF" (tire derived fuel") and possibly as fill to
assist drainage. Unless destined for these limited uses, the chips are normally
then fed into a second shredder which reduces them to 1 x 1 inch or 1 x 2 inch
pieces. They are then fed into a knife or hammer mill where they are reduced to
rubber "crumb" consisting of particles of rubber, approximately 1/8 to 1/2 inch
in size. At this point, some of the steel will have been broken into small
pieces of wire, free of rubber, but much of the steel will remain embedded in
the rubber pieces. In addition, since the fiber will have been subject to the
chopping, shredding, and/or pulverizing operations, much of it will have been
broken, and its thread or cord-like configuration destroyed. The broken,
pulverized fibers will have formed a "fluff" which entraps and holds both rubber
and steel particles.
In order for this crumb to be useable, the steel will have to be separated and
removed. The use of strong magnets removes the free steel pieces, but such
magnets also remove all of the rubber particles in which the rest of the steel
is embedded, resulting in a loss of up to 15% of the rubber.
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To avoid losing the substantial amounts of steel-bearing rubber which were
magnetically removed, and to obtain a finer crumb (the coarse crumb has very few
uses), the crumb must be subjected to a second re-grinding, which may or may not
be cryogenic. This is normally done in a knife mill capable of disintegrating
the crumb into smaller particles or in a hammer-mill.
In using a hammer or knife-mill for this operation, however, the following
problems arise: (i) running at an efficient speed, the fiber fluff (which is
contained in the rubber crumb) may clog the mechanism; and (ii) the action of
the hammer or knife-mill will heat the rubber to the point where it will become
so soft that instead of being pulverized into a powder, it will simply be
softened and mashed and thereby will further clog the mechanism.
To avoid these problems, the hammer or knife-milling operations can be conducted
at low feed rates, which will reduce the foregoing problems, but which may not
be economically feasible. Conventional cryogenic systems deal with this problem
by using liquid nitrogen to cool the previously chopped and shredded material
before feeding it into the hammer or knife-mill. Some ambient systems do not
freeze the rubber, but instead inject liquid nitrogen directly into the mill to
keep the rubber from softening.
Knife-milling or hammer-milling operations will create further problems because
all of the fiber and steel, which is mixed in with the rubber crumb, will have
been ground up and pulverized along with the rubber, with the following results:
(i) the steel components of the tires will have been ground or pulverized into a
fine powder, which cannot be allowed to remain as a contaminant in the rubber
powder if the rubber is to have any economic value. The steel must therefore be
removed magnetically. However, the fine steel powder will be thoroughly mixed in
with the rubber powder, the magnetic action which is meant to pull out the
minute particles of steel, will necessarily also draw out substantial amounts of
the surrounding rubber particles. Losses of rubber powder resulting from the
magnetic removal of the steel powder are estimated to amount to approximately
15% percent of the total rubber powder produced. Such wastage adds substantially
to the cost of useable product yielded by these systems. The steel powder is not
useable for any purpose and has no economic value. It must be transported and
deposited in landfills which again adds to the cost of any useable product
produced. (ii) The thread or cord-like configuration of the fiber will have been
disintegrated into the cotton-like "fluff" described above. This fluff will
attract and hold significant amounts of the powdered rubber and steel.
Separation of the steel and rubber particles from the fiber fluff is nearly
impossible because the fine particles are trapped in the entangling strands and
adhere to them. It is estimated that up to 15% of the rubber powder will be
trapped in the fiber fluff and drawn out with it. The fluff has no current
economic value and actually constitutes a liability because it must be
transported and disposed of, usually as landfill.
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The wastage of up to 15% of the rubber powder, which results from losing the
rubber which is trapped in the fiber fluff, together with the additional 15%
percent of the rubber powder which clings to the pulverized steel particles when
they are removed magnetically, brings total losses of rubber powder to
approximately 30% percent, which is reflected in a concomitant increase in the
cost of the product produced.
Projected
TCS-1
System
Avoidance of Problems Associated With Tire
Disintegration Methods in Current Use.
The proposed TCS-1 System has been designed to avoid the problems described
opposite which arise out of current tire disintegration methods by insuring that
the steel and fiber components of the tire are not subjected, at any time, to
chopping, shredding, or hammer or knife-milling operations which destroy the
integrity of the wire or cord-like configurations of the steel and fiber. This
is expected to prevent the creation of steel powder and fiber fluff.
Disintegration will be accomplished solely through the exertion of pressure. The
TCS-1 System disintegration process is not expected to break the steel wires or
to affect their integrity in any way. Based upon performance tests of the TCS-1
System's proprietary disintegration mechanism, the Company expects that the
TCS-1 System's ability to prevent the creation of steel powder will result in
easy and efficient separation and removal of the steel by magnetic means,
without the substantial loss of rubber powder which occurs with the methods
described opposite.
The fiber, which will not lose its thread or cord-like configuration, will be
broken in the disintegration process into lengths of from 1/2 to 4 inches.
Rubber that is attached to the fiber creates a saleable product with unique
properties. Furthermore, tests indicate that, in this form, the fiber can be
easily separated from the rubber crumb by passing it through wire mesh screens.
The salvaged steel wire pieces and fiber threads will be useable and saleable.
Based on the foregoing and on test results, Management believes that: (i) the
rubber powder yielded by the TCS-1 System will contain only an insignificant
amount of fiber and steel; (ii) wastage of salvageable rubber powder will be
reduced from the approximately 30% associated with the use of conventional
cryogenic or ambient systems to an estimated 3%. (iii) instead of unusable steel
powder and fiber fluff, which recyclers must pay to have hauled away and
deposited in landfills, the TCS-1 System will yield clean useable, and saleable
reclaimed steel and fiber as well as two types of rubber powder containing only
insignificant amounts of fiber and steel.
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Existing Conventional
Cryogenic and Ambient
Systems
Recovery Ratio
Current shredding operations recover on average twelve pounds, representing 75
percent, of the rubber contained in every twenty pound tire. All of the fiber
and steel, and the balance of the rubber components of each tire are, in most
cases, not reclaimed, for the reasons described above. The result is a loss of
approximately eight pounds of unrecovered, unrecycled rubber, steel, and fiber,
representing 40% of the constituent materials of the tire, which must be
transported and disposed of in landfills or other solid waste disposal
facilities.
Projected
TCS-1
System
Recovery Ratio
For the reasons described above, and based on performance tests of the scale
model prototype of the TCS-1 System's proprietary disintegration mechanism,
Management expects that almost all of the rubber, steel, and fiber components of
the tire will be recovered in useable and saleable condition.
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Production and Supply
The Company has been engaged in designing and developing, and intends
within the current fiscal year to begin manufacturing, on a commercial basis,
its proprietary cryogenic tire disintegration system, referred to herein as the
"TCS-1 System". The Company's activities to date have focused on the design and
creation of the TCS-1 System. In connection with these activities, the Company
has been dependent on arrangements with its subcontractors for the manufacture
and assembly of the principal components incorporated into the TCS-1 System (see
"Agreements With Subcontractors", below).
If the Company is able to raise sufficient funding and if no presently
unforeseen problems with the technology develop, the Company expects to commence
manufacturing the TCS-1 System on a commercial basis prior to the end of 1997.
The Company intends to continue to effect all TCS-1 System manufacturing
operations through its subcontractors. It will therefore be substantially
dependent on the ability of such subcontractors to satisfy performance and
quality specifications and to dedicate sufficient production capacity for all
TCS-1 System scheduled delivery dates. The Company believes that all of its
subcontractors have the requisite manufacturing capabilities and the willingness
to dedicate sufficient amounts of their manufacturing capacity to allow the
Company to meet all TCS-1 System delivery dates, currently scheduled or expected
to be scheduled for not less than the next two years. However, no assurance can
be given that this will in fact be the case and failure on the part of the
Company's subcontractors in these regards would adversely affect the Company's
ability to manufacture and deliver TCS-1 Systems on a timely and competitive
basis. In such event the Company would have to replace or supplement its present
subcontractors. There can be no assurance that should it be necessary to do so,
the Company would be able to find capable replacements for its subcontractors on
a timely basis and on terms beneficial to the Company, if at all; The Company's
inability to do so would have a material adverse effect on its business.
Components of the TCS-1 Systems, which are not manufactured by the
Company's subcontractors specifically for the TCS-1 System, will be purchased,
either directly by the Company or indirectly through its subcontractors from
third-party manufacturers. The Company believes that numerous alternative
sources of supply for all such components are readily available.
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Agreements With Subcontractors
Agreement with Fedico, Inc.
In January of 1997, the Company entered into an agreement (the "Fedico
Agreement") with Fedico, Inc. of St-Hubert, Quebec ("Fedico"), a machinery
design firm located in Quebec. Prior thereto, Fedico had provided consulting and
other design engineering services to the Company since the spring of 1996.
Pursuant to the terms of the Fedico Agreement, Fedico will act as the project
leader, guiding the over-all design and engineering of the TCS-1 System. In
addition to supervising the over-all assembly and start-up procedures of the
first full-scale production model of the TCS-1 System, Fedico will design,
engineer, and fabricate certain peripheral equipment. The term of the Fedico
Agreement is for seven years, retroactively effective as of September, 1996.
The Agreement provides further that Fedico will:
(a) collaborate with the Company on development of initial specification
requirements, by way of: (i) researching and evaluating the available
applicable technologies; (ii) conceptualizing designs concepts; (iii)
preparing preliminary layout drawings of each component and of the
integration thereof into the TCS-1 System.
(b) Prepare detailed preliminary layout designs of each element of the
TCS-1 System;
(c) Prepare detailed drawings of each element of the TCS-1 System and
prepare the "bill of materials" which is a complete list of all
components of the System;
(d) Be present or available, during the assembly of the TCS-1 System to
correct any problems that may arise;
(e) Be present or available during start-up procedures upon completion of
the assembly of the TCS-1 System and correct any problems that arise
during the course of such procedures;
(f) Upon commencement of satisfactory operation of the TCS-1 System,
revise all drawings to produce complete, final, "as-built" designs and
prepare a documentation package for the facilitation of the operation
and maintenance of the System.
The Fedico Agreement also provides for the retention of Fedico for a
minimum of five hundred hours per year during the course of such agreement at
reasonable, competitive hourly rates for technicians, draftsmen, and
intermediate engineers, with overtime, on-site services, and travel expenses at
prevailing market rates. The terms of the Fedico Agreement are substantially
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as set forth in detail in the Company's annual report on Form 10-KSB for the
year ended June 30, 1996. For further details, reference is made to the
discussion contained in Item I of the 1996 10-K under "Proposed Product -
Proposed Agreement with Fedico, Inc."
Agreement with Lefebvre Freres Limitee
In January of 1997, the Company entered into an agreement (the "Lefebvre
Agreement") with Lefebvre Freres Limitee ("Lefebvre"), a subsidiary of Lefebvre
Inc., of Montreal, Quebec. Lefebvre, specializes in custom design and
fabrication of industrial machinery. With its sister companies, Foresteel
(specializing in pressure vessels and welding) and Atelier D'Usinage Trempe
(specializing in high precision machining), Lefebvre is widely recognized for
its extensive experience and expertise in designing and constructing equipment
used in the pulp and paper, metallurgy, fiber, power generation, and many other
industries. Lefebvre had been providing the Company with design consulting and
other valuable design engineering services to the Company since the spring of
1996. In recognition of services rendered by Lefebvre prior to the finalization
of the Lefebvre Agreement, it was made retroactively effective as of July 23,
1996. Services provided by Lefebvre prior to January 1997 included the
completion of the initial design specifications for the TCS-1 System's
Disintegration Unit Assembly.
Under the terms of the Lefebvre Agreement, Lefebvre was retained to design
and construct a prototype disintegration unit for the TCS-1 System at
competitive rates. Lefebvre agreed to accept payment of approximately one-third
of its price for the foregoing in 340,160 unregistered shares of the common
stock of the Company. The stock portion of such price was issued to Lefebvre on
January 17, 1997. Prior to such date, that part of the design work on the
disintegration system, which was allocated to the stock portion of the purchase
price, had been completed.
The terms of the Lefebvre Agreement are substantially as set forth in
detail in the Company's annual report on Form 10-KSB for the year ended June 30,
1996. For further details, reference is made to the discussion contained in Item
I of the 1996 10-K under "Proposed Product - Proposed Agreement with Lefebvre
Freres Limitee"
Agreement with Plasti-Systemes, Inc.
In January of 1997, the Company entered into an agreement (the
"Plasti-Systemes Agreement") with Plasti-Systemes, Inc. ("Plasti-Systemes") of
Ville D'Anjou Quebec began providing consulting services respecting the design,
construction, and installation of the "front-end" of the TCS-1 System. The
Plasti-Systemes Agreement provides for Plasti-Systemes to design (including
rendering of all necessary engineering drawings), construct, and install the
"front-end" of the TCS-1 System. The Front End System will consist of a series
of mechanisms
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which will automatically, at the rate of three tires per minute: (i) clean and
debead the tires; (ii) separate the sidewalls from the treads; (iii) cut both
sidewalls and treads into sections ready for processing; and (iv) transport the
beads and tire sections into separate areas for disposal or processing.
The Plasti-Systemes Agreement, which was made retroactively effective as of
October 16, 1996, covers mechanical work and equipment. Plasti-Systemes agreed
to accept payment of 26% of its total price for the foregoing 255,010
unregistered shares of the common stock of the Company. The stock portion of
such price was issued to Plasti-Systemes on January 17, 1997. Prior to such
date, that part of the design and engineering work on the front-end system,
which was allocated to the stock portion of the purchase price, had been
completed. The terms of the Plasti-Systemes Agreement are substantially as set
forth in detail in the Company's annual report on Form 10-KSB for the year ended
June 30, 1996. For further details, reference is made to the discussion
contained in Item I of the 1996 10-K under "Proposed Product - Proposed
Agreement with Plasti-Systemes, Inc."
Potential Markets
General
The Company believes that the potential market for its TCS-1 System can be
expected to directly reflect the level of demand for economical, high quality
rubber crumb derived from the recycling of scrap tires.
The following discussion of the potential markets for rubber crumb assumes
that the TCS-1 System will be capable of economically producing high quality
recycled rubber crumb, in a variety of sizes, capable of being used in a wide
range of products. While this accurately reflects management's present
expectations, it should be noted that the TCS-1 System is still in the research
and development stage. Further, because development of the TCS-1 System is at an
early stage, the Company cannot give any assurance with respect to if, or when,
it will in fact be able to complete the design and construction of the TCS-1
System in accordance with its plans and specifications or that, if completed,
the TCS-1 System will perform as expected. Therefore, even if the demand for
rubber crumb should increase in accordance with the Company's expectations,
there can be no assurance that a concomitant development of demand for the TCS-1
System will develop.
Effect of Environmental Concerns
on Development of New Markets for Scrap Tires
Until approximately 1990, low tipping fees made landfills the most popular
option for the disposal of scrap tires. In fact, according to the Scrap Tire
Management Council (the "STMC"), until that time, management and market
development efforts for scrap tires were non-existent or minimal. This was
reflected in the fact that in 1990, only 25 million (approximately 11%) of the
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scrap tires generated annually in the United States were marketed for any
purpose whatsoever. The remaining 89% were dumped or stockpiled. However, within
the past few years, changes in the market for scrap tires has been swift and
dynamic, resulting in significant market application alternatives to the
landfilling and stockpiling of scrap tires.
The STMC reported in its "Scrap Tire Use Disposal Study - 1996 Update"
(which was published in April of 1997 and is referred to herein as the "STMC
Study"), that significant progress has been achieved with respect to development
of scrap tire management alternatives to landfilling and stockpiling. In 1996,
market applications were found for 76% of all scrap tires (or 202 million
tires). This means, however, that even as of 1996, 64 million additional tires
(or 24% of the annually generated scrap tires that year) were still being
landfilled or stockpiled in the United States alone.
Notwithstanding the foregoing progress, in most developed countries, the
traditional dumping of tires in landfills has been completely banned or the
number of tires legally permitted to be dumped has been substantially reduced.
Unfortunately, such measures often have the effect of simply exacerbating the
problem of illegal tire dumping and above ground stockpiling. Increasingly in
the United States, individual states sponsor scrap tire management programs. By
1994, 48 states had legislated laws governing and regulating proper handling,
recovery, reuse, and disposal of discarded scrap tires. To date, over 34 of such
states have provided at least some of the funding needed to build and support
the tire recycling infrastructure which is or will be required to assure that
the state's annual generation of scrap tires, as well as its already stockpiled
tires, will be recovered, reused, and recycled. In Canada, most provinces have
similar regulations. As a result of this proliferation of state regulations and
the influence of the environmental movement, national attention has increasingly
focused on the need to develop alternative methods of scrap tire disposal.
Market for Rubber Crumb
Rubber is a valuable raw material and Company believes that recycling this
valuable resource from scrap tires is an ideal way to recover that value.
Recycled scrap tire rubber is already used in a great variety of products,
promoting longevity by adding it to asphalt pavement, adding bulk and providing
drainage as a soil additive, providing durability as a carpet underpadding,
increasing resiliency in running track surfaces and gymnasium floors, and
absorbing shock and lessening the potential for injuries as a ground cover for
playgrounds and other recreational areas.
Recycling tires into reusable rubber crumb (or "ground rubber") was, as of
1996, the third largest use of scrap tires. "Rubber Crumb" is the end product of
the tire disintegration processes discussed in, "Products and Services" below.
The ideal rubber crumb is a powder, which can be produced in various particulate
sizes, ranging from relatively coarse to very fine, and which is not
significantly contaminated by fiber and metal particles. As noted above, the
STMC Study reported that the largest use presently being made of scrap tires is
burning them as tire derived
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fuel, with export (for refitting and reuse as tires) taking second place.
However, as noted above, the use of scrap tires for ground rubber experienced an
enormous surge during the last two years, increasing two hundred and
seventy-seven percent (277%) from 4,500,000 tires in 1994 to 12,500,000 tires in
1996. Historically, most rubber crumb available and sold in the market was
derived not from recycled scrap tires, but from tire "buffings", a by-product
from the retreading industry created when used tires are prepared to accept new
treads. This situation has recently improved significantly, however, with tire
buffings now representing 52% and scrap tires representing 48% of source
material for rubber crumb. According to the STMC, the demand for rubber crumb
for various uses could experience further substantial increases over the next
two to five years, with expected overall growth in sales of rubber crumb from
25% to 33%. The Company believes that because the supply of buffings is limited,
the main source of an increased supply of rubber crumb must come from scrap
tires.
At present, there are at least seven general categories of markets for
rubber crumb of various sizes and grades. These consist of the following:
* Rubber Modified Asphalt ("RMA", 168 million pounds in 1996): Rubber
crumb can be blended with asphalt to modify the properties of asphalt
used in highway construction. Rubber crumb can be used either as part
of the asphalt rubber binder, seal coat, cape seal spray, or joint and
crack sealant (generally referred to as "asphalt-rubber") or as an
aggregate substitution (rubber modified asphalt concrete or "RUMAC").
At present, the cost of using asphalt-rubber and RUMAC is somewhat
higher than conventional materials. However, the service life of such
products has proved in some cases to be two to three times that of
conventional asphalt pavements. While the use of ground rubber in
asphalt pavement has a large potential market, certain technical
issues must be addressed before the potential can be reached. The
ability to recycle asphalt pavement containing ground rubber and the
development of standards, particularly for materials testing and the
environment are the key issues to be addressed. In general,
asphalt-rubber, or the "wet process", has proven to be the most
successful product, representing approximately 95% of the RMA market
in 1996, according to the STMC. States using RMA to a significant
degree include Arizona, California and Florida, with lesser activity
in Kansas and Texas.
* Bound Rubber Products (134 million pounds in 1996): Ground or powdered
scrap tire rubber is formed into a set shape, usually held together by
an adhesive material such as urethane or epoxy. Examples of such
applications are injection molded products and extruded goods such as
railroad crossing pads; dock bumpers, patio floor blocks, flooring
material, roof walkway pads, and carpet underlay.
* New Tire Manufacturing (48 million pounds in 1996): Fine rubber crumb
or powder reclaimed from scrap tires can be used as a low volume
filler material in
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both the tread and the sidewalls of new tires. The percentage of
recycled rubber that can be used in new tires is somewhat in excess of
1.5%.
* Athletic and Recreational Applications (24 million pounds in 1996):
Coarse rubber crumb can be used in several applications, such as in
running track material, grass surfaced playing areas, or as a
substitute for playground surfaces. The use of rubber crumb for these
purposes will generally make playing surfaces and running tracks more
resilient and less rigid, but capable of maintaining traction and
shape.
* Molded and Extruded Plastics and Rubber (18 million pounds in 1996):
Finely ground scrap tire rubber can be placed into production molds to
form products for the automotive industry, such as sound insulation,
step pads, truck and trailer liners, matting and drip irrigation
pipes. Management believes that there are significant potential
markets for these applications which may result from continuing
research and development of products using a surface modified rubber.
There has also been increasing interest on the part of automotive
manufacturers in the purchase of products which contain recycled
rubber.
* Friction Material (8 million pounds in 1996): Coarse rubber crumb is
used in friction brake materials for brake pads and brake shoes.
Possibilities for Market Expansion and Added Value
Through Availability of More, and Higher Quality, Product
Notwithstanding the recent growth in the use of scrap tires for ground
rubber, this application represented only 6% of the market for scrap tires in
1996. The Company attributes this limited market penetration principally to the
lack of available high quality product. The TCS-1 System, however, has been
specifically designed to address this problem through the economical production
of high quality crumb rubber than is, to the best of management's knowledge,
currently being produced from scrap tires. The Company believes that increases
in the amount and quality of available crumb, at economically reasonable prices,
creatively marketed, will inspire new uses for rubber crumb and expand the range
and variety of products composed, in whole or in part, of such product.
Moreover, the Company believes that as the demand for rubber crumb recycled from
scrap tires increases, this market value will increase in proportion to the
quantity of product sold and will that the product will be come inherently more
valuable.
The Company believes that growth in the market for rubber crumb will
directly reflect a number of factors, including but not limited to: (i) the
amount of rubber crumb available; (ii) the cost of available rubber crumb; (iii)
the quality and characteristics of available crumb; and (iv) the availability of
suitable substitutes for rubber crumb.
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There can be no assurance at this time, however, that the availability of
rubber crumb of the quality which the Company expects that the TCS-1 will be
able to produce, will necessarily lead to a significant expansion of the market
for such product, or if it does, that the Company will necessarily benefit from
such expansion.
Prospect of "Devulcanization"
One of the principal difficulties in producing a marketable rubber crumb
from scrap tires is the inherent nature of the recycled rubber itself. Rubber
used in the manufacture of tires is vulcanized, a process by which sulfur is
combined with the rubber in order to impart strength and dimensional stability
to the rubber. Because of such vulcanization, the ability to chemically bond
recycled rubber with other polymers (rubber or plastic) materials is greatly
diminished. While to date, to the best of management's knowledge, no technology
for the economical devulcanization of rubber exists, there is at present a great
deal of research and development activity in this area. if and when an
economical devulcanization process is achieved, a new market for recycled rubber
could be opened.
Proposed Services
The Company requires all of its TCS-1 System purchasers to agree to enter
into a Maintenance and Technical and Market Support Agreement (the "Proposed
Maintenance Agreements"). In connection therewith the Company intends to provide
timely, high quality technical support to insure that the TCS-1 System will
perform in conformance with its specifications. Until the test phase of the
first production sized model of the TCS-1 System is completed, the Company will
be unable to finalize the definitive parameters of the services which it intends
to offer under the Proposed Maintenance Agreements. Currently proposed plans
call for the Company, or the Company's designated service provider, to provide,
or be responsible for, all technical and other labor necessary for the
maintenance of the TCS-1 System at a performance level capable of disintegrating
the equivalent of one million automobile tires per year on a twenty-four hour
per day, three hundred sixty-five day per year basis, in accordance with an
operations and performance specifications manual to be furnished to the
customer.
The Proposed Maintenance Agreements are expected to require the Company to
provide (i) regularly scheduled on-site preventive maintenance including but not
be limited to inspection and assessment of wear factors affecting all
constituent components of the System and determination and effectuation of
replacement and/or recalibration requirements and (ii) unscheduled remedial
maintenance, on an as needed basis. Other responsibilities which the Company, or
its authorized service provider, are intended to assume under the Proposed
Maintenance Agreements will include: (i) providing and maintaining computerized
equipment to monitor and document the performance by the operator of the TCS-1
System of all routine maintenance procedures; (ii) reviewing the data retrieved
thereby on a monthly, or more frequent, basis; (iii) immediately advising the
operator of any improper performance of any of such
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Procedures; (iv) providing remedial instructions to the Operator's personnel
with respect to the proper performance of certain routine maintenance procedures
to be performed by the TCS-1 System Operator, and; (v) upon request of the
Operator, re-training its personnel. The Proposed Maintenance Agreements are
intended also to provide that the Company, or its authorized service provider,
will provide an initial training period for the operator's personnel as well as
continuing training, seminars and updates, on an as needed basis.
The Proposed Maintenance Agreements are also intended to provide for
additional technical and market support including Pre-Operational Support by way
of, among other things: (i) assistance to the Operator with respect to
procedures and requirements related to obtaining all licenses, permits, and
other requirements for the establishment and operation of a TCS-1 System Plant,
including the development, documentation, and furnishing of all required
technical, environmental, operational, and other information and data; (ii)
instructions and assistance with respect to all applicable federal, state, and
local regulations and requirements respecting the preparation of the site and
the installation and operation of a TCS-1 System at the site.
In addition, the Proposed Maintenance Agreements will require that the
Company, or its authorized service provider establish and maintain laboratory
facilities at which they shall:
(a) test and monitor the quality and properties of the rubber crumb
produced by the TCS-1 System, including but not limited to: (i) total
production rates (ii) the comparative percentages of various crumb
rubber mesh sizes produced, and (iii) wear factors existing or
developing in the disintegration mechanisms, so as to generate a
continual data base for the anticipation and determination of the
maintenance, remediation, and recalibration requirements of the
disintegration mechanisms and all other constituent components of the
System under actual operating conditions;
(b) test and monitor, on a continuing basis, oil samples from the TCS-1
System so as to ascertain and monitor the wear factors on the bearings
and on other components of the System.
(c) record and maintain all test data and records for the TCS-1 System in
a monthly log to be furnished to the operator at regular intervals on
a monthly basis, or on request by the operator, and be available to
the Operator at all times to discuss the meaning and significance of
all test results and any remedial or other actions which such data
indicate is necessary or advisable;
(d) creating and developing new products and uses for rubber crumb
produced by the TCS-1 System.
It is intended that the Company, or its authorized service provider will
also be responsible for certain accounting and record keeping services,
including providing accounting software to
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monitor the operations and output of the TCS-1 System. It is intended that the
Proposed Maintenance Agreements will also impose obligations upon the Company,
or its authorized service providers to stock replacement parts for the TCS-1
System in order to minimize any interruptions in the continual operation of the
System.
The monthly maintenance fee for all services to be provided by the Company,
or its authorized service provider under the Proposed Maintenance Agreements is
presently expected to be $9,500 per month.
Negotiations With Proposed Service Provider
The Company is presently negotiating with Louis Sanzaro ("Sanzaro"), a
director of the Company and the controlling person of the two entities
(Ocean/Ventures III, Inc. and Oceans Tire Recycling & Processing Co., Inc.)
which have ordered nine of the ten TCS-1 Systems presently on order, to organize
and operate a maintenance company capable of serving as the Company's authorized
service provider and meeting all of the above described responsibilities. Mr.
Sanzaro has worked closely with the Company on the development of the TCS-1
System and the proposed maintenance and technical support program. Mr. Sanzaro
is a highly respected, knowledgeable, and experienced operator of recycling
organizations in New Jersey and the Company believes that he is eminently
qualified to organize and head its maintenance and technical support effort.
While the parties have not yet entered into an agreement respecting the terms
under which Mr. Sanzaro or an organization under his control will direct the
Company's maintenance services, they are currently in negotiations respecting
such arrangements. Currently, however, the Company expects that the service
provider to be organized and operated by Mr. Sanzaro will be paid a flat fee of
$4,000 per month to cover all of the services described in Item I, above. The
service provider is also expected to furnish, at no additional cost, all
equipment necessary to effect the provision of such services.
Tirex Canada
The governments of Canada and, in particular, the province of Quebec, have
officially acknowledged the pivotal role played by business investment in
research and development in ensuring sustained economic growth and long-term
prosperity. In order to encourage such activities, these governments support
research and development programs by granting individuals and businesses tax
incentives that encourage technological development in Quebec. As a result,
Quebec offers the most generous tax incentives for research and development
programs of which the Company is aware. In May of 1995, in an effort to take
advantage of such financial incentives, the Company formed a Canadian
corporation, 3143619 Canada Inc. (referred to herein as "Tirex Canada") in the
Province of Quebec, Canada, for the purpose of completing all research and
development work on the first production model of the TCS-1 System and,
thereafter, to serve as the Company's manufacturing arm. For a discussion of the
initial capitalization of Tirex Canada, the distribution of its shares among the
Company and officers and directors of the
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Company who are Canadian residents, the terms of the shareholders agreement
pursuant to which such shares are held, including but not limited to the rights
of the Company to regain 100% record ownership of Tirex Canada, reference is
made to the discussion under the caption "Existing and Proposed Canadian
Financing, Manufacturing, and Research and Development Operations" in Item 1 of
the Company's annual report on Form 10-K for the fiscal year ended June 30,
1996.
The Tirex Canada License
Tirex Canada holds an exclusive, ten year license to design, develop, and
manufacture the TCS-1 System in North America. The terms of the said license
require that Tirex Canada may manufacture TCS-1 Systems only upon and pursuant
to specific purchase orders and requires that Tirex Canada sell all TCS-1
Systems which it manufactures exclusively to the Company.
Canadian Financial Assistance - Grants and Commitments
Transfer of the Company's research and development, and its proposed
manufacturing, activities to Tirex Canada has made the Company eligible for
various Canadian and Quebec government programs which provide grants and tax
incentives for eligible investment, research and development, and
employee-training activities. Canadian and Quebec tax incentives take the form
of deductions and tax credits with respect to eligible research and development
expenditures. Certain of the tax credits are refundable when they exceed the tax
payable. Thus such credits function effectively as monetary grants. To qualify
for such tax credits, research and development activities must comprise
investigation or systematic technological or scientific research conducted
through pure or applied research, undertaken to advance science and develop new
processes, materials, products or devices or to enhance even slightly existing
processes, materials products or devices.
Refundable tax credits are calculated as a percentage of eligible research
and development expenses. They are called "refundable" because to the extent
that the amount of the tax credit exceeds the taxes payable, they are paid over
or "refunded" to the taxpayer. During the last fiscal year, virtually all of the
activities connected with the development and construction of the first
production model of the TCS-1 System qualified as eligible expenses. Moreover,
some approved, anticipated tax credits for contemplated research and development
expenditures can serve as "receivables" for the collateralization of debt. In
this regard, the Company received the following grants and commitments since
moving its operations to Quebec in the summer of 1995:
(a) Prior to the period covered by this report, on March 22nd, 1996, the
Ministry of Industry, Trade, and Commerce of Quebec (the "Quebec
MITC") accepted a feasibility study, conducted by Techtran: Technology
Transfer Institute, a technology-based consulting and project
financing organization specializing in the development, financing, and
project implementation of new technologies. To qualify for financial
aid under this program, studies must be carried out by
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independent Quebec consulting firms, be related to eligible projects
to be established in Quebec, and be done in respect of admissible
projects. To be deemed "admissible", projects must address one of the
industrial sectors under the responsibility of the Quebec Ministry of
Industry, Commerce, Science and Technology (the "Quebec MICST") while
being consistent with the government industrial development policy.
The development of the TCS-1 System was confirmed as an "admissible
project" in this regard when the Techtran Feasibility Study was
accepted by the Quebec MITC. In connection therewith, the Company
received a total of $36,800 Canadian dollars, from the Quebec MITC in
refundable tax credits, representing reimbursement of 40% of Company's
costs for the said study.
(b) On May 6, 1996, the Company received a commitment for a contribution
of up to $500,000 Canadian dollars (approximately $360,000 United
States dollars at current exchange rates) under the Industrial
Recovery Program for Southwest Montreal for the development of the
TCS-1 System. Such commitment comprises repayable loans in an
aggregate amount not to exceed the greater of (i) approximately US
$370,370 or (ii) twenty percent of the total costs actually paid by
the Company in connection with the development of the TCS-1 System. To
date, the Company has received a total of $450,000 Canadian dollars
(approximately $326,000 United States dollars at current exchange
rates) under such loan commitment. The balance will be available to
the Company upon completion of the project.
(c) On October 16, 1996, the Company obtained an "Agreement for Financial
Assistance For Technology Development" (the "Recyc-Quebec Agreement")
from La Societe Quebecoise de Recuperation et de Recyclagez
("Recyc-Quebec"). Pursuant thereto, Recyc-Quebec, a provincial
government organization, has agreed to provide the Company with
financial assistance consisting of the grant of an amount equal to
fifty percent of the total eligible expenses of the development of the
first full scale, production model of the TCS-1 System (the
"Project"), up to an amount of seventy five thousand Canadian dollars
(Cdn $75,000) (approximately fifty-four thousand United States dollars
[US $54,000] at current exchange rates). To date the Company has
received 50,000 Canadian dollars (approximately thirty-eight thousand,
four hundred United States dollars [US $38,400] at current exchange
rates) under this agreement. Such payment was based upon
Recyc-Quebec's receipt and acceptance of the Company's proofs of
payment of eligible expenses in the approximate amount of Cdn $ 76,800
(approximately US $56,064). The Company will be able to obtain the
balance of 25,000 Canadian dollars (approximately nineteen thousand,
two hundred United States dollars [$19,200] at current exchange rates)
after it has paid 100% of all eligible expenses related to the Project
and a final report respecting the achievements of the Project has been
delivered to and accepted by Recyc-Quebec.
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Sales and Marketing
Distribution
The Company's objective is to market and distribute its products worldwide,
through national and international distributors and sales representatives.
However, to a large extent the Company has to date concentrated, and is
continuing to concentrate, its efforts on completing the design, development,
and construction of the first production model of the TCS-1 System and raising
adequate financing to support such efforts. It has, therefore, not yet commenced
a full scale marketing campaign and does not intend to do so until the
production model is complete and adequate funding is available to cover the
costs thereof. During the last two fiscal years and the subsequent period, the
Company has however taken initial steps to prepare a foundation for a world-wide
marketing program. In connection therewith, the Company has taken the following
steps during the last fiscal year:
(a) Appointed Vijay Kachru as Vice President of Market Development to
oversee market and product development activities;
(b) Entered into negotiations with Alan Crossley, a director of the
Company, with respect to his serving as Sales and Marketing director
for Europe;
(c) Obtained the agreement of Louis Sanzaro, a director of the Company and
the principal of Ocean Ventures III, Inc. and Oceans Tire Recycling &
Processing Co., Inc. to accept appointment as the Company's exclusive
sales distributor in the United States and Puerto Rico (see the
discussions, below, in this Item 1. under the caption, "Sales"; See
also Item 12 of this Report, "Certain Relationships and Related
Transactions").
The Company can make no assurances with respect to the success of its
distribution strategy. Furthermore, the Company has limited resources to achieve
the distribution of its products and no assurances can be given that the Company
will not require additional financing, which may not be available, to achieve
such objective.
Market Research and Development Studies
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In January of 1997, the Company retained Gapco Inc., a market research firm
located in Madrid, Spain, headed by Alan Crossley.(4) The study indicated that
the tire recycling Industry in Spain is in its infancy but is under pressure to
desist from the current practice of landfilling with unshredded tires, and
concludes that there is therefore a possible opportunity at this time for the
introduction of alternative scrap tire disposal methods.
Similar studies are being conducted in the rest of Europe, India and
Pakistan. The company believes that both India and Pakistan are potential
importers of ground rubber, or rubber crumb. This is based on the fact that
these countries are expanding their tire and auto manufacturing capacities and
are already experiencing supply shortages in rubber and carbon black. Based on
the initial research the company believes that the recycling of tires would
eventually gravitate toward production of products that can be assimilated in
industries which manufacture any products which use rubber and plastic in their
manufacture.
Dependence on Major Customer
To date the Company has received orders for ten TCS-1 Systems, eight of
which were ordered by Ocean/Ventures III, Inc.("O/V III") of Toms River, New
Jersey ("O/V III") and one of which was ordered by Oceans Tire Recycling &
Processing Co., Inc. ("OTRP"). Both O/V III and OTRP are under the control of
Louis Sanzaro. The loss of either of these two customers would have a major
adverse effect on the Company. However, the Company also believes that while Mr.
Sanzaro's companies comprise the initial TCS-1 System purchasers, future sales
efforts will be widespread and, as the Company matures and its business
develops, it will not be dependent upon the business of one or more major
customers.
Sales
The O/V III Agreements
On May 29, 1997, the Company entered into an Equipment Lease and Purchase
Agreement (the "O/V III L&P Agreement") with Ocean/Ventures III, Inc.("O/V III")
of Toms River, New Jersey ("O/V III"). This agreement modified the terms of, and
replaced, a prior agreement between the parties dated June 6, 1995 (the "Prior
O/V III Agreement").(5) O/V III is under common ownership and control with the
solid waste recycling firm, Ocean County
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(4) Mr. Crossley, a director of the Company, was appointed as Sales and
Marketing Director for Europe in July of 1997 after the completion of such study
(5) Reference is made to the detailed discussion of the terms of the Prior
O/V III Agreement included in Item I of the Company's annual report of Form
10-KSB for the fiscal year ended June 30, 1996, in the subtopic "Sales and
Marketing" under the caption, "The O/V III Agreements".
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Recycling Center, Inc. Under the terms of the L&P Agreement, O/V III Agreement,
O/V III will purchase and lease the various components which comprise the
constituent parts of the TCS-1 System. The Agreement provides for lease and
purchase arrangements for eight Systems at an aggregate lease and purchase price
of three million dollars ($3,000,000) each.
Pursuant to the terms of the O/V III Agreement, certain non-proprietary
equipment (the "Non-Proprietary Equipment") will be purchased by O/V III for a
total purchase price of $2,250,000. Such equipment includes, but may not be
limited to: (i) all bailing systems contained in the TCS-1 System, including all
associated ancillary equipment and conveyance and exit belts, chutes and/or
other components combined or integrated therewith, and (i) freezing chambers and
cryogenic systems.
The other constituent components of the TCS-1 System comprise equipment
which is proprietary to the Company (the "Proprietary Equipment"). Such
Proprietary Equipment is, under the terms of the O/V III L&P Agreement, subject
to a five year operating lease, with monthly lease payments of $12,500 each. The
Proprietary Equipment consists of (i) the disintegration system including but
not limited to all grinders contained therein, and (i) the separation systems,
including but not limited to: (a) a magnetic separator; (b) a fiber/crumb
separator; (c) fiber collector; (d) crumb rubber sizing system; and (e) all
integrated conveyance and exit belts, chutes, and other components.
The O/V III L&P Agreement calls for the delivery of the first System by
October 1998, with seven additional Systems scheduled for delivery every three
months thereafter, through July 2000. The Agreement requires a downpayment of
$25,000 for each System to be paid not less than fourteen months prior to the
anticipated delivery date. In an effort to assist the Company at this early
stage of its development, to date, O/V III has prepaid $25,000 down payments on
five Systems. Other payment terms for each of the eight systems subject to the
O/V III L&P Agreement, call for a $50,000 payment six months prior to the
anticipated delivery, an additional $100,000 to be paid three months prior to
the anticipated delivery date, and $1,825,000 on O/V III's acceptance of the
System.
Pursuant to the terms of the L&P Agreement, O/V III also entered into
certain ancillary agreements with the Company, consisting of the following:
(a) a royalty agreement (the "Royalty Agreement") pursuant to which O/V
III will pay the Company a royalty of three percent (3%) of the gross
proceeds from all sales of rubber crumb fiber and steel from scrap
tires disintegrated through the utilization of the TCS-1 System;
(b) a rubber crumb purchase option agreement (the "Rubber Crumb
Agreement") pursuant to which O/V III has granted to the Company and
option to purchase up to 40% of the rubber crumb, yielded by the
disintegration of scrap tires in the TCS-1 System, at negotiated
prices. The Company is currently exploring the feasibility of
vertically integrating its operations so as to include the rubber
crumb
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brokerage business and/or the value-added rubber crumb product
development business. It obtained the rubber crumb purchase option in
connection with the foregoing.
The parties also agreed that they would enter into a maintenance and
technical support agreement (the "Maintenance and Technical Support Agreement")
pursuant to which the Company or its designated service provider ("Service
Provider") will provide or be responsible for all technical and other labor
necessary for the maintenance of the TCS-1 System at a performance level capable
of disintegrating the equivalent of one million automobile tires per year on a
twenty-four hour per day, three hundred sixty-five day per year basis. Services
to be provided shall include but not be limited to the following: (i) regularly
scheduled on-site preventive maintenance, which shall include but not be limited
to inspection and assessment of wear factors affecting all constituent
components of the System and determination and effectuation of replacement
and/or recalibration requirements, and (ii) unscheduled remedial maintenance, on
an as needed basis. Both scheduled and unscheduled service maintenance will
include adjustments and replacement of parts, as deemed necessary by the Service
Provider. The Company is presently in negotiations with Louis Sanzaro, a
principal of O/V III, with respect to the possibility of Mr. Sanzaro's
establishing an equipment maintenance company to serve as the Company's Service
Provider for all Systems sold by the Company, including but not limiting to the
eight Systems to be purchased by O/V III.
Agreements with Oceans Tire Recycling & Processing Co., Inc.
On May 29, 1997, the Company entered into an Equipment Lease and Purchase
Agreement (the "OTRP L&P Agreement") with Oceans Tire Recycling & Processing
Co., Inc. ("OTRP"), a New Jersey corporation under common control with O/V III.
Pursuant to the OTRP L&P Agreement, OTRP will purchase the first production
model TCS-1 System. Under the terms of the Agreement, the anticipated delivery
date for this System was September 15, 1997. The parties have agreed however to
waive delivery until November 1997. OTRP will accept delivery at the Company's
facility in Montreal(6) to allow initial test phase operations to be conducted
under supervision of both the Company and OTRP. This will also create an
opportunity for OTRP's personnel to be trained by the Company's technical staff
in the operation of the TCS-1 System.
The terms of the OTRP L&P Agreement, pursuant to which the constituent
components of the TCS-1 System will be leased and or purchased, are
substantially identical to those of the O/V III L&P Agreement, as described
above. The only significant differences are in the purchase price and payment
terms. The purchase price for the Non-Proprietary Equipment is $1,225,000 and
the terms of the 60-month operating lease call for monthly lease payments of
$8,770 each.
- ----------
(6) The Company intends to purchase or lease a facility adequate for
installation and testing of the System in the immediate future. Reference is
made to Item 2. "Properties" of this Report.
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Accordingly, the aggregate lease/purchase price under the OTRP L&P Agreement is
$1,751,200. OTRP has obtained "pre-commencement" sale and lease-back financing
from an outside source for the Non-Proprietary Equipment being purchased under
the Agreement. Pursuant thereto, OTRP has been making lease payments since April
of 1997. The terms of OTRP's lease financing arrangements provide for the lessor
to deliver the purchase price payments directly to the Company, to be used to
fund the construction of the first TCS-1 production model. To date,
approximately $605,000 of such financing has been paid to the Company and used
for such purpose.
Pursuant to the terms of the OTRP L&P Agreement, upon execution thereof,
the parties also entered, or agreed to enter, into the same types of ancillary
agreements as are described above with respect to the O/V III L&P Agreement,
i.e., a maintenance and technical support agreement, a royalty agreement, and a
rubber crumb purchase option agreement. The terms of all of such ancillary
agreements are identical to those described above in connection with the O/V III
Agreements.
The Recycletron Inc. Agreements
On July 8, 1997, the Company entered into an Equipment Lease and Purchase
Agreement (the "Recycletron L&P Agreement") with Recycletron Inc.
("Recycletron") of Montreal, Quebec. Pursuant to the Recycletron L&P Agreement,
Recycletron will purchase one TCS-1 System, with delivery scheduled for the end
of the second quarter of 1998. The terms of the Recycletron L&P Agreement,
pursuant to which the constituent components of the TCS-1 System will be leased
and or purchased, are substantially identical to those of the O/V III L&P
Agreement, as described above. The only significant differences are in the
purchase price and payment terms. The purchase price for the Non-Proprietary
Equipment is $2,000,000 and the terms of the 60-month operating lease call for
monthly lease payments of $12,500 each. Accordingly, the aggregate
lease/purchase price under the Recycletron L&P Agreement is $2,750,000. Upon
execution of the Agreement, Recycletron paid a $25,000 down payment. Other
payment terms require additional payments of $100,000 six months prior to the
anticipated delivery date, $125,000 prior to the anticipated delivery date, and
$1,750,000 upon Recycletron's acceptance of the System.
Pursuant to the terms of the Recycletron L&P Agreement, upon execution
thereof, the parties also entered, or agreed to enter, into the same types of
ancillary agreements as are described above with respect to the O/V III L&P
Agreement, i.e., a maintenance and technical support agreement, a royalty
agreement, and a rubber crumb purchase option agreement. The terms of all of
such ancillary agreements are identical to those described above in connection
with the O/V III Agreements.
Backlog
As of September 18, 1997, the Company's backlog amounted to $28,501,200.
Backlog includes firm orders under executed Equipment Lease and Purchase
Agreements. The amount
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shown includes the aggregate of: (i) the full purchase price for those parts of
the TCS-1 System which will be sold by the Company, and (ii) total lease
payments under the five-year operating lease which forms part of every Equipment
Lease and Purchase Agreement. The $28,501,200 backlog presently booked includes:
(i) one TCS-1 System ordered by OTRP for an aggregate lease/purchase price of
$1,751,200, for which the Company has already received prepayment of $605,000
toward the purchase price; (ii) eight systems ordered by O/V III for an
aggregate lease/purchase price of $3,000,000 each, for which the Company has
already received over $130,000 by way of prepayments of the $25,000 downpayments
(due for each system fourteen months before the scheduled delivery date of such
System) on five of the eight Systems ordered by O/V III; and (iii) one TCS-1
System ordered by Recycletron for an aggregate lease/purchase price of
$2,750,000, for which the Company has received a $25,000 down payment. The
foregoing ten TCS-1 Systems are scheduled for delivery between November 1997 and
July 2000, with two of such Systems (the OTRP and Recycletron Systems) scheduled
for delivery during the current fiscal year. The balance of the ten Systems
currently on order are scheduled for delivery between November 1998 and July
2000.
The Company has not included in its backlog any revenues which may result
from the Royalty Agreements which all TCS-1 System purchasers must enter into
with the Company. These Royalty Agreements entitle the Company to receive a
royalty in the amount of 3% of the gross revenues from sales of rubber crumb
produced by the TCS-1 System. The Company has also not included an additional
$5.7 million dollars in revenues which it expects to receive under the Proposed
Maintenance Agreements to be signed in connection with the ten Systems already
on order (see "Proposed Services", above in this Item I).
Although the stated backlog may be used as a guideline in determining the
value of orders which are presently scheduled for delivery during the period
indicated, it is subject to change by reason of several factors including
possible cancellation of orders, change in the terms of the contracts, and other
factors beyond the Company's control and should not be relied upon as being
necessarily indicative of the Company's revenues or of the profits which the
Company might realize when the results of such contracts are reported.
Research and Development Activities
The Company's technical expertise has been an important factor in its
development and is expected to serve as a basis for future growth. Since its
inception, the Company has devoted substantial resources to the design and
development of the TCS-1 System as well as to raising the financing necessary
for such activities. The Company expended approximately $600,000 on research and
development activities during the fiscal year ended June 30, 1997, (virtually )
all of which funds were applied to the design, development, and construction of
the first TCS-1 production model.
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Research and Development activities during the fiscal year ended June 30,
1997, focused on completion of the engineering design of the TCS-1 System and
redesign of the front end system to increase automation and optimize
performance.
All of such activities were carried out by the Company's engineering and
technical staff, consisting of Louis V. Muro, Vice President in Charge of
Engineering, and John Carr, Program Director, who devoted 100% of their time to
such projects. Such activities were conducted in conjunction with the Company's
outside Consultant, Bentley Environmental Engineering Inc., and the Company's
outside subcontractors, Plasti-Systemes, Fedico, Inc., and Lefebvre Freres,
Limitee.
Although the basic design and development of the TCS-1 is expected to be
brought to completion by the end of 1997, the Company intends to continue to
seek to refine and enhance its tire disintegration technology and to enhance it
to comply with emerging regulatory or industry standards or the requirements of
a particular customer. The Company also intends to endeavor to develop new
products and uses for the rubber crumb produced by the operation of the TCS-1
System.
Seasonality
The Company does not believe that its future operating results will be
subject to quarterly variations.
Employees
During the fiscal year ended June 30, 1997, the Company had seven employees
including its officers: Terence C. Byrne, Louis V. Muro, John Threshie, and
Vijay Kachru, its in-house Corporate and Securities Counsel, its Technical
Program Director, and one secretary-receptionist. All of the foregoing persons
devote their full time to the business and affairs of the Company. The Company
also utilizes the services of several part-time consultants to assist them with
market research and development and other matters. The Company intends to hire
additional personnel, as needed.
Patents
On December 18, 1996, the Company filed patent applications in the United
States and Canada based on provisional priority under preliminary patent
applications filed on December 19, 1995. Prior to such filings, the Company
relied on trade secrets, proprietary know-how and technological innovation to
develop its technology and the designs and specifications for the TCS-1 System.
The Company has entered into confidentiality and invention assignment agreements
with certain employees and consultants which limit access to, and disclosure or
use of, the Tirex
34
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technology. There can be no assurance, however, that the steps taken by the
Company to deter misappropriation or third party development of its technology
and/or processes will be adequate, that others will not independently develop
similar technology and/or processes or that secrecy will not be breached. In
addition, although the Company believes that its technology has been
independently developed and does not infringe on the proprietary rights of
others, there can be no assurance that the Company's technology does not and
will not so infringe or that third parties will not assert infringement claims
against the Company in the future. The Company believes that the steps it has
taken to date will provide some degree of protection and that the issuance of a
patent pursuant to its application will materially improve this protection.
However, no assurance can be given that this will be the case or that the
Company will in fact be granted a patent. No assurance can be given, in the
absence of a final court determination, that any particular patent is valid and
enforceable or that any patent may not be the subject of patent infringement
claims. The Company has no present knowledge of any information which would
adversely affect the issuance of a patent pursuant to its current application
or, should a patent be granted, the validity thereof.
On or about September 13, 1996, the Company received a letter from
attorneys for a New York based recycling company respecting its filing for
worldwide patent protection for a tire recycling process utilizing a natural air
freezing system and claiming that, upon issuance of its Canadian patent, the
Company's recycling process would be the subject of a patent infringement claim.
The Company responded to such letter on September 20, 1996 stating its position
that any such claim would be completely without merit. The Company has received
no further communications respecting this matter. Since that time, a member of
the Company's engineering staff and the Company's patent agent have examined the
patent which was involved in this matter and have concluded that the
specifications thereof are different from those of the patent for which the
Company has applied and that no meritorious patent infringement claim could
arise in connection therewith.
Competition
The Company knows of no devices, apparatus or equipment, utilizing
technology which is identical or comparable to the TCS-1 System, which are
presently being sold or used anywhere in the world, nor is it aware of any
patents relating to the Technology. However, the Technology and the TCS-1
System, if and when developed, may reasonably be expected to compete with
related or similar processes, machines, apparata or devices for tire
disintegration, cryogenic or otherwise. Moreover prospective competitors which
may enter the field may be considerably larger than the Company in total assets
and resources. This could enable them to bring their own technologies to more
advanced stages of development with more speed and efficiency than Company will
be able to apply to the TCS-1 System. Additionally, manufacturers of presently
available equipment may be in a position to operate research and development
departments dedicated continually to improving conventional systems and to
developing new and improved systems. There can be no assurance that the
Company's Technology or the TCS-1 System, if
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developed, can successfully compete with existing systems or with any improved
or new systems which may be developed in the future.
Government Regulation
While the Company's equipment manufacturing operations may not be directly
subject to extraordinary government regulations, the operations of the
purchasers and operators of such equipment may be subject to extensive and
rigorous government regulation designed to protect the environment. The
Company's proposed rubber crumb re-grinding, and on-site tire shredding,
operations will, however be directly subject to these types of government
regulation. As a result, the business of the Company will be directly or
indirectly subject to, and may be affected by, government regulations.
Management does not expect that the operation of the TCS-1 Systems, the
re-grinding operations, or the on-site tire shredding will result in the
emission of air pollutants, the disposal of combustion residues, or the storage
of hazardous substances (as is the case with other tire recycling processes such
as pyrolysis). However, establishing and operation any of the foregoing types of
plants for tire recycling will require numerous permits and compliance with
environmental and other government regulations, both in the United States and
Canada and in most other foreign countries. Moreover, the Company is currently
making preparations to enter into a five-year tire shredding project in Quebec
(see "Proposed Tire Shredding Operations"). These operations, as well as the
businesses of TCS-1 System operators, may involve, to varying degrees and for
varying periods of time, the storage or "stockpiling" of scrap tires which, with
their size, volume and composition, can pose a particularly serious
environmental problem. Among the numerous problems relating to stockpiling scrap
tires, is the fact that when stockpiled above ground, tires create serious fire,
public health, and environmental hazards ranging from fires, which generate
large and dense clouds of black smoke and are extremely difficult to extinguish,
to the creation of vast breeding grounds for mosquitoes and vermin. As a result,
many states have either passed or have pending legislation regarding discarded
tires including legislation limiting the storage of used tires to specifically
designated areas. For reasons including, but not limited to the problems
described above, the Company and the purchasers of its TCS-1 Systems will be
subject to various local, state, and federal laws and regulations including,
without limitation, regulations promulgated by federal and state environmental,
health, and labor agencies.
Compliance with applicable environmental and other laws and regulations
governing the business of the Company may impose a financial burden upon the
Company that could adversely affect its business, financial condition,
prospects, and results of operations. Likewise, the burden of compliance with
laws and regulations governing the installation and/or operation of TCS-1
Systems could discourage potential customers from purchasing a TCS-1 System
which would adversely affect the Company's business, prospects, results, and
financial condition. Actions by federal, state, and local governments concerning
environmental or other matters could result in regulations that could increase
the cost of producing the recyclable rubber, steel, and fiber which are the
by-products from the operation of the TCS-1 System and make such by-products
less profitable or even impossible to sell at an economically feasible price
level.
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The process of obtaining required regulatory approvals may be lengthy and
expensive for both the Company and for its TCS-1 System customers. Moreover,
regulatory approvals, if granted, may include significant limitations on either
the Company's or its customer's operations. The EPA and comparable state and
local regulatory agencies actively enforce environmental regulations and conduct
periodic inspections to determine compliance with government regulations.
Failure to comply with applicable regulatory requirements can result in, among
other things, fines, suspensions of approvals, seizure or recall of products,
operating restrictions, and criminal prosecutions. Furthermore, changes in
existing regulations or adoption of new regulations could impose costly new
procedures for compliance, or prevent the Company or its TCS-1 customers from
obtaining, or affect the timing of, regulatory approvals.
The Company believes that existing government regulations, while extensive,
will not result in the disability of either the Company or its TCS-1 System
customers to operate profitably and in compliance with such regulations. In this
regard, it has retained environmental attorneys in Montreal to advise it with
respect to compliance with local environmental regulations applicable to its
proposed tire shredding operations. It has also engaged a consultant to advise
purchasers of its TCS-1 Systems with respect to compliance with local
environmental regulations applicable to the installation and operation of the
TCS-1 System. To date, the Company has not had to make significant capital
expenditures relating to environmental compliance because it has not yet
commenced operations. However, the inception of equipment manufacturing and,
possibly, tire shredding operations together with continually changing
compliance standards and technology, may affect the Company's future capital
expenditure requirements relating to environmental compliance. Moreover, since
all government regulations are subject to change and to interpretation by local
administrations, the effect of government regulation could conceivably prevent,
or delay for a considerable period of time, the development of the Company's
business as planned and/or impose costly requirements on the Company or on its
TCS-1 System customers, which could cause or result in competitive advantages to
the Company's competitors or make the Company's or its TCS-1 customers'
businesses less profitable, or unprofitable, to operate.
Proposed Tire Shredding Operations
The Company has taken preliminary steps to enter a new related business
segment. Plans for these proposed operations include on-site scrap tire
shredding operations in Quebec under a five-year, government sponsored stockpile
abatement program (the "Quebec Program") which will fund the clean-up of scrap
tire stockpiles at the rate of Cdn $1.00 (approximately $0.72 U.S., at current
exchange rates) for every tire recycled and removed. In connection therewith,
the Company is presently engaged in negotiations with CG TIRE, Inc. ("CGT"), a
wholly owned subsidiary of Continental General Tire Inc. ("General Tire")(7) and
Recyc-Quebec, the Canadian
- ----------
(7) General Tire is the fourth largest tire manufacturer in the world. It
has denominated CG TIRE, Inc. as "The Continental General Tire Recycling
Effort")
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government agency involved in designing and managing the Quebec Used Tire
Program. According to Recyc-Quebec, there could be more than 30 millions tires
accumulated in about 40 stockpiles in the province of Quebec. As it is always
the case for stockpile estimates in North America however, these numbers are
only approximate.
In order to qualify to participate in the Quebec Program and receive the
Cdn $1.00 per tire payment, recycling operations must take place in Quebec and
must be effected by a recycling company located in Quebec. The Company is
located in Quebec and it has been advised by Recyc-Quebec that the on-site
shredding operations which the Company proposes to conduct will qualify as a
"recycling activity" for purposes of the Quebec Program. The Company is seeking
a long-term commitment from the Quebec government for a total of Cdn $20,000,000
(approximately $14,400,000 U.S., at current exchange rates) to be allocated to
tipping fees of Cdn $1.00 per tire for the Company. In connection therewith,
meetings have been held and discussions have occurred by and among the Company,
CGT, Mr. Bernard Landry (the Vice-Premier of Quebec), and Mr. Albert Leblanc
(the President of Recyc-Quebec). While the Company is reasonably optimistic
about the outcome of such meetings and discussions, it is unable to give any
assurance that it will in fact be successful in obtaining the firm commitment
from the government which it will require in order to commence operations in
this area. Moreover, even if the Company is able to move forward with this
project, there can be no assurance at this time that it will be profitable.
The Company is currently negotiating the terms of an agreement with CGT
which, while not finalized, presently contemplates that: (i) CGT would be
obligated to accept, for a tipping fee of Cdn $0.25 (approximately $0.18 U.S.)
per tire to be paid to CGT, up to 4 million tires per year in 2 inch chips; (ii)
The Company would be responsible for delivery of the tires to CGT in North
Carolina, in accordance with an agreed upon schedule and other terms. Current
plans contemplate that the Company would be responsible for acquiring the tires
from various Quebec stockpile owners, reducing the whole tires into 2" X 2"
chips with mobile shredders, and removing the tire chips from the sites by means
of truck transportation to a train off-loading facility in Quebec for transport
by train to CGT's facility near Charlotte, North Carolina.
On August 12, 1997, the Company entered into an agreement with Mr. Richard
Grenier (the "Grenier Agreement") for the purchase of approximately 4.5 million
scrap tires presently owned by Mr. Grenier and stockpiled on his property in
St-Jean-Chrystostome, Quebec, for an aggregate purchase price of Cdn $175,000
(approximately $126,000 U.S., or $0.028 per tire, at current exchange rates).
Payment terms required a nonrefundable downpayment of Cdn $15,000 (approximately
$10,800 U.S. at current exchange rates) upon execution, with the balance payable
at the closing of the Grenier Agreement, which must take place on or before
October 31, 1997. The Grenier Agreement also provides that the Company will have
access to the property on which the tires are stockpiled and will be permitted
to conduct the shredding of the tires thereat. The Company will acquire only the
tire inventory and not the land on which it is stored nor any piece of equipment
situated thereon. The Company is currently in negotiations, and has received a
letter of intent from, the owner of another Quebec stockpile (the "Ganby
Stockpile") of approximately 500 000 tires, to acquire such tires free of
charge. In addition the Company is
38
<PAGE>
engaged in negotiations with the owner of the largest scrap tire stockpile in
Quebec (the "Franklin Stockpile"), located in Franklin, just a few miles north
of the NY State border, to secure supply for up to 25 million additional tires.
The Company is unable to state at this time whether it will be able to close on
the Grenier Agreement within the required time period or what the eventual
outcome of its negotiations respecting the Ganby and Franklin Stockpiles will
be.
The company has retained Avery de Billy, a Montreal law firm specializing
in environmental law, to advise it with respect to any environmental liabilities
which the Company may incur in connection with these proposed operations and to
assist the Company with meeting all regulatory requirements and standards and
obtaining all permits and legal certificates required in connection therewith.
Proposed Financing Activities
The Company is currently conducting negotiations with a brokerage firm (the
"Proposed Placement Agent") respecting a private placement (the "Proposed
Private Placement") of the securities of the Company pursuant to the exemption
from the registration requirements of the Securities Act of 1933, as Amended
(the "Securities Act"), available under Rule 506 of Regulation D thereof. The
terms presently being negotiated contemplate an offering of Units consisting of
10% convertible, subordinated debentures and common stock or common stock
purchase warrants, for the aggregate amount of $1,400,000. No agreement has yet
been reached with the Proposed Placement Agent and the terms of the Proposed
Private Placement have not yet been finalized. There can be no assurance at this
time that the Proposed Private Placement will be attempted or, if attempted,
that the Company will be successful in raising adequate, if any, funds
therefrom.
The Company has entered into a letter of intent with a brokerage firm (the
"Proposed Underwriter") for such firm to underwrite a public offering of the
common stock of the Company, in an amount of not less than $8,000,000, at or
around the end of March 1998. There can be no assurance at this time that such
Proposed Public Offering will actually take place.
ITEM 2. PROPERTIES
The Company's corporate headquarters are located at 740 St. Maurice, Suite
201, Montreal, Quebec, H3C 1L5. The Company occupies a 1988 square foot suite in
a modern office building located in the commercial and business district of
South West Montreal. All of such facility is devoted to executive offices,
reception, and conference areas including six executive offices. The Company
occupies these premises under a three-year lease, dated June 23, 1997, (expires
on June 30,2000) with Les Immeubles 740 Saint-Maurice Inc. The lease provides
for monthly rental payments of 2,825 Canadian Dollars (approximately 2,034
United States Dollars at current exchange rates). Rental payments are inclusive
of all taxes, utilities, and any other
39
<PAGE>
applicable fees or charges. The lease is renewable for an additional three years
at market rates then prevailing.
The Company intends during the present fiscal year to rent or purchase a
manufacturing and storage facility of approximately 100,000 square feet to be
used for assembling and warehousing the TCS-1 Systems, as they are manufactured
by the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is the defendant in an action, commenced on June 18, 1997, in
the United States District Court for the District of New Jersey, entitled Great
American Commercial Funding Corp. vs. Tirex America Inc. The action arises out
of a certain "placement fee agreement", executed by the Company in February of
1986, under which the Company, among other things, undertook to pay the
plaintiff a "placement fee" in the amount of $250,000 and to grant to the
plaintiff an option to acquire 400,000 shares of the company's common stock, at
a price of $0.01 per share, in the event, and only in the event, that plaintiff
succeeded in obtaining financing acceptable to the Company. Although the amount
and terms of the "financing" were not mentioned in the documents, it was clearly
understood by the parties that the Company was then seeking to obtain, and that
the agreement contemplated, financing in an amount (assumed necessarily to be in
the multi-million dollar range), adequate to fund the design and development of
the TCS-1 System and to enable the Company to initiate manufacturing such
Systems on a commercial basis. Under the Agreement: (i) the plaintiff did not
undertake to do anything other than "attempt" to secure financing acceptable to
the Company and (ii) the Company had absolute discretion whether or not to
accept any and all "financing" proposals.
Several months elapsed after the Company signed the Agreement without
plaintiff ever introducing the Company to any third party which was ready,
willing, and able to produce the kind and type of financing which the plaintiff
knew the defendant was seeking and needed; However, plaintiff did recommend a
firm in long island which was engaged in the business of equipment lease
financing. The Company then introduced one of its customers to the such lease
financing firm. The customer ultimately entered into a lease financing
arrangement with such firm, pursuant to which the Company was able to obtain
some limited amounts of pre-delivery funds, but only because the customer agreed
to do so, and the customer's principals fully collateralized any and all advance
payments/loans made by or through the lease financing firm. Because the advances
made to the Company pursuant to that lease-financing arrangement clearly did not
in any way constitute the type of financing contemplated by the parties or the
Agreement, the Company believes it has no financial obligation to the plaintiff
pursuant to said "placement fee agreement".
The Company has filed an Answer denying any liability to the plaintiff in
light, among other things, of the foregoing facts, and asserting, among other
things, that: (i) the agreement was induced by plaintiff's material
misrepresentations; (ii) enforcement thereof would be clearly
40
<PAGE>
unconscionable in the circumstances; (iii) plaintiff never introduced the
Company to any third party which was ready, willing, and able to produce the
type of financing which the plaintiff knew the Company was seeking and needed;
and (iv) the so-called "placement fee agreement" was merely an offer for a
unilateral contract which was terminated or revoked, and notice of such
revocation was timely communicated to plaintiff before it rendered any
substantial performance in reliance upon the offer. The Company and its
litigation counsel, Sheldon A. Weiss, believe that the plaintiffs complaint is
without merit and that the Company ultimately will prevail in this litigation.
The Company is unaware of any other pending or threatened legal proceedings
to which Company is a party or of which any of its assets is the subject. No
director, officer, or affiliate of the Company, or any associate of any of them,
is a party to or has a material interest in any proceeding adverse to the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fiscal year ended June 30, 1997, the matter of changing the name
of the Company from Tirex America Inc. to The Tirex Corporation was submitted to
a vote of the shareholders of the Company. Such vote was taken in accordance
with Delaware General Corporation Law, Section 228(a), on February 21, 1997,
pursuant to which the holders of record, in person or by proxy, of approximately
52% of the issued and outstanding shares of common stock of the Company, by
their consent in writing, authorized, approved, and adopted a resolution
respecting the amendment of the Company's certificate of incorporation. Pursuant
thereto, effective July 11, 1997, the certificate of incorporation of the
Company was amended so as to change the name of the Company from "Tirex America
Inc." to "The Tirex Corporation".
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Company's Common Stock, is traded on a limited basis in the
over-the-counter market. The following table sets forth representative high and
low bid prices by calendar quarters as reported by the Electronic Bulletin Board
of the National Association of Securities Dealers during the last two fiscal
years and the subsequent interim period through September 12, 1997. Bid
quotations represent prices between dealers, and do not include resale mark-ups,
mark-downs or other fees or commissions, and do not necessarily represent actual
transactions.
41
<PAGE>
Bid Prices
Period Common Stock
------ ------------
Low High
Fiscal Year Ended June 30, 1995
September 30, 1995 1/8 3/4
December 31, 1995 1/8 3/8
March 31, 1996 1/8 0.28
June 30, 1996 0.10 9/16
Fiscal Year Ended June 30, 1996
September 30, 1996 3/16 0.45
December 31, 1996 0.13 0.44
March 31, 1997 0.23 0.58
June 30, 1997 0.18 0.44
Fiscal Year 1997
September 12, 1997 0.13 0.46
Shareholders
As of September 23, 1997, the number of holders of record of the common
stock, $.001 par value, of the Company was 311.
Dividends
The Company has paid no cash dividends and has no present plan to pay cash
dividends, intending instead to reinvest its earnings, if any. Payment of future
cash dividends will be determined from time to time by its board of directors,
based upon its future earnings (if any), financial condition, capital
requirements and other factors, the company is not presently subject to any
contractual or similar restriction on its present or future ability to pay such
dividends.
42
<PAGE>
Sales of Unregistered Securities
The following sets forth information respecting the dates, purchasers, and
consideration involved in sales of its Common Stock by the Company without
registration under the Securities Act of 1933, as amended (the "Securities Act")
during the fiscal year ended June 30, 1997, and not previously reported in a
quarterly report on Form 10-Q.(8)
Sales to Executive Officers in Respect of Services Rendered
As discussed extensively, below, in the footnotes to the Summary
Compensation Table, which appears in Item 10 of this Report, "Executive
Compensation - Current Remuneration" and in Item 12 of this Report, "Certain
Relationships and Related Transactions - Issuance of Stock in Lieu of Salaries
and Consulting Fees", during the fiscal year ended June 30, 1997, the Company
had available financial resources to meet only part of its salary obligations to
its executive officers and its corporate and securities counsel, and to
reimburse such persons for out-of-pocket disbursements made by them for the
account, or on behalf, of the Company. As a result, such persons accepted
unregistered shares of the Company's Common Stock, valued, for this purpose
only, at fifty percent of the average of the bid and ask prices for of stock as
traded in the over-the-counter market and reported in the electronic bulletin
board of the NASD, as follows:
On April 28, 1997, in consideration of unpaid executive services rendered
during the fiscal quarter ended March 31, 1997, the Company authorized the
issuance of an aggregate of 453,532 shares to three of its executive officers
and its in-house corporate counsel at a per share price of $.214, representing
50% of the average of the bid and ask price for the Common Stock of
approximately $.428 per share during the said fiscal quarter. On that same date,
the Company authorized the issuance of an aggregate of 132,299 shares to another
executive officer in consideration of unpaid executive services rendered during
the seven month-month period ended March 31, 1997, at fifty percent of the
average of the bid and ask prices for of stock as traded in the over-the-counter
market and reported in the electronic bulletin board of the NASD, during the
three fiscal quarters when such unpaid services were rendered, as follows:
- --------
(8) For information respecting sales of unregistered shares of its Common
Stock made by the Company during the first three quarters of fiscal 1997,
reference is made to the disclosure thereof contained in Part II, Item 2.
"Changes in Securities" contained in the Company's quarterly reports on Forms
10-QSB for the quarters ended September 30, 1996, December 31, 1996, and March
31, 1997.
43
<PAGE>
Period for
Which Shares Price Per No. Of
are Issued Share Shares
---------- ----- ------
Sept 1, 1996
through
Sept 30, 1996 US $0.169 32,396
Quarter ended
Dec 31, 1996 US $0.1433 68,520
Quarter ended
March 31, 1997 US $0.214 31,383
Issuance of Stock Pursuant to Consulting Agreements
1. On April 28, 1997, in consideration of business and financial consulting
services rendered by a nonaffiliated financial consultant (the "Financial
Consultant"), the Company authorized the issuance of 79,462 shares of its Common
Stock to the said nonaffiliated consultant for an aggregate purchase price of
$20,000 (Canadian) (approximately, US $14,780 at exchange rates in effect as at
such date). In accordance with the terms of the Consulting Agreement applicable
thereto, this represented a per share price equal to the average of the high and
low prices of the Company's common stock as traded in the over-the-counter
market and quoted in the NASD Electronic Bulletin Board, during the ten (10)
days of trading immediately preceding April 3, 1996, when the average per share
high-ask price and the average per share low-bid price of the common stock of
the Company were approximately US $0.204 and US $0.168, respectively, yielding
an average of such prices during such period of approximately US $0.186.
2. On April 28, 1997, in consideration of financial public relations
consulting services rendered by a nonaffiliated public relations consultant (the
"Public Relations Consultant"), the Company authorized the issuance of 99,502
shares of its Common Stock to the said nonaffiliated Public Relations Consultant
for an aggregate purchase price of $20,000. In accordance with the terms of the
Public Relations Consulting Agreement applicable thereto, this represented a per
share price equal to 50% of the average of the high and low prices of the
Company's common stock as traded in the over-the-counter market and quoted in
the NASD Electronic Bulletin Board, during the ten (10) days of trading
immediately preceding March 11, 1997, when the average per share high-ask price
and the average per share low-bid price of the common stock of the
44
<PAGE>
Company were approximately US $0.435 and US $0.369, respectively, yielding an
average of such prices during such period of approximately US $0.402, 50% of
which was $0.201.
These sales are claimed to have been exempt from registration under the
Securities Act pursuant to Section 4(2) thereof, as more fully described below.
Basis for Exemption Claimed
With respect to all sales and other issuances of securities as hereinabove
described:
(a) The Company did not engage in general advertising or general
solicitation and paid no commission or similar remuneration, directly
or indirectly, with respect to such transactions.
(b) The persons who acquired these securities are current or former
executive officers and directors of the Company, consultants to the
Company, and providers of professional or other significant services;
Such persons had continuing direct access to all relevant information
concerning the Company and/or have such knowledge and experience in
financial and business mattes that they are capable of evaluating the
merits and risks of such investment and are able to bear the economic
risk thereof.
(c) The persons who acquired these securities advised the Company that the
Shares were purchased for investment and without a view to their
resale or distribution unless subsequently registered and acknowledged
that they were aware of the restrictions on resale of the Shares
absent subsequent registration and that an appropriate legend would be
placed on the certificates evidencing the Shares reciting the absence
of their registration under the Securities Act and referring to the
restrictions on their transferability and resale.
Accordingly, the Company claims the transactions hereinabove described, to
have been exempt from the registration requirements of Section 5 of the
Securities Act by reason of Section 4(2) thereof in that such transactions did
not form part of a single financing plan and did not involve a public offering
of securities.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following is management's discussion and analysis of significant
factors which have affected the Company's financial position and operations
during the fiscal year ended June 30, 1997.
45
<PAGE>
Liquidity and Capital Resources
The activities of the Company since its inception in 1987 have been
financed by sources other than operations. Such financing was principally
provided by the sale of securities in private transactions, as follows:
Proceeds From
Year Ended Sales of
June 30th Securities
--------- ----------
1997 $ 318,685
1996 80,872
1995 22,316
1994 237,430
1993 76,055
1990 80,812
1989 77,000
As at June 30, 1997, the Company had total assets of $1,555,620 reflecting
an increase of $1,357,988 as compared to June 30, 1996 when total assets were
$197,632. The foregoing reflects an increase of $606,227 attributable to accrued
design and development costs of the TCS-1 System, and increases in: (i) cash in
the amount of $154,797; (ii) research and development tax credit receivables in
the amount of $269,918; (iii) loan to directors in the aggregate amount of
$10,881; (iv) deferred start up costs of $74,683; (v) note receivable of 8,571;
(vi) sales tax receivable of $50,284; and (vi) advances to employees of
$185,942. During that same period, total liabilities increased by $1,327,921
from $367,429 at June 30, 1996 to $1,695,350 at June 30, 1997. Such increase was
due primarily to the recording of liabilities associated with the accruing of
various expenses, including: (i) $342,442 in accrued officers' salaries, all of
which will be paid in unregistered stock of the Company and not in cash; (ii)
$415,000 reflecting the Company's receipt of refundable deposits from O/V III,
and recycletron; (iii) increase in debt consisting of loans from the Bank of
Montreal and FORDQ in the respective amounts of $299,096 and $271,383.
Reflecting the foregoing, as at June 30, 1997, the Company had a working capital
deficit (current assets minus current liabilities) of $1,013,559 as compared to
a working capital deficit of $246,031 at June 30, 1996. The major part of such
working capital deficit ($491,840) represents accrued officers' salaries, to be
paid by the Company in stock and not in cash, and deposits of future sales of
$480,000.
The Company currently has limited material assets of $19,954, negative
working capital and a negative net worth of $139,730. The success of its tire
disintegration equipment manufacturing business and its ability to continue as a
going concern will be dependent upon the Company's ability to obtain adequate
financing to complete the design and development of the TCS-1 System and to
commence manufacturing and sales activities related thereto. The Company
46
<PAGE>
believes that it will be able to do so during the fiscal year which will end
June 30, 1998. Currently, the Company is negotiating the terms of a private
placement of the Company's securities in an amount of up to $1,400,000 (the
"Proposed Private Placement"). The Company is also conducting negotiations
respecting the terms of a public offering of the Company's common stock in an
amount of not less than $8,000,000 (the "Proposed Public Offering"). The Company
can give no assurance at this time that either the Proposed Private Placement or
the Proposed Public Offering will be attempted or, if attempted, that either of
such offerings will be successfully completed.
Results of Operations
The Company has never engaged in any significant business activities. There
were no revenues from operations during the fiscal year ended June 30, 1997.
The financial statements which form a part of this Report reflect an
increase in total general and administrative expenses, from $793,948 for fiscal
1996, to $1,358,767 for fiscal 1997. However, the great bulk of such increase
reflects the accrual, as expenditures, of $403,681 in executive officers'
salaries, payment of virtually all of which was actually waived by the executive
officers, who accepted shares of the Company's Common Stock in lieu of such
payment. Management believes that the amounts accrued in respect of the shares
issued to compensate the executive officers' reflect the fair value of the
services rendered and not the value of the stock at the time it was issued. In
respect of the value of the compensation actually received by such officers,
management believes that it is impossible to determine the actual current or
potential value, if any, of the such shares in light of the fact that, as of the
dates when such shares were issued to the executive officers, they had no or
only very minimal actual market value and the actual potential market value of
such shares, if any, was at such dates, and as at the date hereof remains,
highly contingent upon, and subject to, extremely high risks including but not
limited to the following factors: (I) the very early stage of development of the
Company's business; (ii) the Company's lack of sufficient funds to implement its
business plan and the absence of any commitments from potential investors to
provide such funds; (iii) the absence of a reliable, stable, or substantial
trading market for such shares; (iv) the restrictions on transfer arising out of
the absence of registration of such shares; and (v) the uncertainty respecting
the Company's ability to continue as a going concern, (See the discussions
included above, in this report in Item I, "Proposed Business" and Item 5,
"Market for the Company's Common Equity and Related Stockholder Matters". See
also, Item 12 of this Report, "Certain Relationships and Related Transactions -
Issuance of Stock in Lieu of Salaries and Consulting Fees").
From inception (July 15, 1987) through June 30, 1997, the Company has
incurred a cumulative net loss of $3,761,277. Approximately 28% of such
cumulative loss was incurred, prior to the inception of the Company's present
business plan, in connection with the Company's discontinued proposed health
care business and was due primarily to the expensing of costs associated with
the unsuccessful attempt to establish such health care business. The Company
47
<PAGE>
never commenced its proposed health care operations and therefore, generated no
revenues therefrom. The Company is presently in the business of designing and
developing cryogenic tire disintegration equipment (the "TCS-1 System"), which
it intends to begin manufacturing on a commercial basis, during the current
fiscal year. Design and development work on the first production model of the
TCS-1 System has been brought to approximately 90% completion. Unless and until
the Company successfully develops and commences manufacturing and sales
operations respecting such a machine, the Company will continue to generate no
revenues from operations.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company, required to be included in this
Report pursuant to Item 310(a) of Regulation S-B, are set forth below.
48
<PAGE>
TIREX AMERICA, INC. AND SUBSIDIARY
(A Developmental Stage Company)
I N D E X
Page
----
Report of Independent Auditors 50
Consolidated Balance Sheet 51
Consolidated Statements of Operations 52
Consolidated Statements of Stockholders' Equity (Deficit) 53 - 54
Consolidated Statements of Cash Flows 55 - 56
Notes to Consolidated Financial Statements 57 - 63
-49-
<PAGE>
Report of Independent Auditors
Board of Directors
Tirex America, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of Tirex America,
Inc. and subsidiary (a development stage company) as of June 30, 1997, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the years ended June 30, 1997 and 1996, and for the
cumulative period from July 15, 1987, (date of inception) to June 30, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Tirex America, Inc.
and subsidiary (a development stage company) at June 30, 1997, and the results
of their operations, and their cash flows for the years ended June 30, 1997 and
1996, and for the cumulative period from July 15, 1987 (date of inception) to
June 30, 1997, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is still in the development stage and it
cannot be determined at this time that the technology acquired will be developed
to a productive stage. The Company's uncertainty as to its productivity and its
ability to raise sufficient capital raise substantial doubt about the entity's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Nevoso, Pivirotto, Pinkham & Foster
Certified Public Accountants, LLC
October 9, 1997
Fairfield, New Jersey
-50-
<PAGE>
TIREX AMERICA, INC. AND SUBSIDIARY
(A Developmental Stage Company)
Consolidated Balance Sheet
June 30, 1997
Assets
Current assets
Cash and cash equivalents (Note 1) $ 155,037
Note receivable (Note 5) 9,729
Employee advances (Note 5) 185,942
Sales tax receivable 50,284
R&D Investment tax credit receivable (Note 1) 269,918
Loan - director (Note 5) 10,881
-----------
$ 681,791
Equipment, at cost, net of accumulated
depreciation of $5,160 (Note 1) 14,794
Other assets
Equipment development costs (Notes 1 and 9) 783,451
Deferred start-up costs (Note 1) 74,683
Organization costs, net of accumulated
amortization of $641 (Note 1) 901
-----------
859,035
-----------
$ 1,555,620
===========
Liability and Stockholders' Equity (Deficit)
Current liabilities
Notes payable (Note 3) $ 122,551
Accrued expenses (Note 5) 892,254
Loan payable (Note 4) 200,545
Deposit payable (Note 5) 480.000
-----------
$ 1,695,350
Commitments and contingencies --
Stockholders' equity (deficit) (Notes 1,3,4 and 5)
Common stock, $.001 par value, authorized
50,000,000 shares, issued and
outstanding, 37,449,972 shares 37,450
Additional paid-in capital 3,584,097
Deficit accumulated during the development stage (3,761,277)
------------
( 139,730)
-----------
$ 1,555,620
===========
See Notes to Consolidated Financial Statements
-51-
<PAGE>
TIREX AMERICA, INC. AND SUBSIDIARY
(A Developmental Stage Company)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Cumulative
Period from
July 15, 1987
(Date of
Year Ended June 30, Inception) to
1997 1996 June 30, 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ -- $ 10,000 $ 55,976
Cost of sales -- 4,500 14,352
------------ ------------ ------------
Gross profit -- 5,500 41,624
------------ ------------ ------------
General and administrative expenses:
Costs expended in connection with
securing "Certificate of Need" -- -- 309,000
Officers' salary (Notes 5 & 7) 160,025 652,935 1,212,410
Consulting services 896,591 43,021 1,002,886
Other salaries -- -- 42,528
Professional services 82,427 34,533 428,476
Rent (Note 10) 7,946 9,100 159,981
Automobile -- -- 47,801
Travel and entertainment 167,758 22,412 251,871
Telephone 6,582 7,399 37,148
Depreciation and amortization (Note 1) 4,299 3,637 20,600
Utilities -- -- 21,888
Office expenses 13,877 6,487 86,312
Advertising -- 1,680 6,482
Miscellaneous 327 2,189 27,214
Franchise and other tax 1,232 443 23,932
Interest and bank charges (Notes 3 and 4) 8,531 2,088 79,143
Investor relations 2,657 4,754 9,514
Repairs and maintenance -- -- 6,375
Contributions -- -- 1,680
Insurance -- -- 5,018
Abandonment loss -- -- 10,000
Transfer agent 6,515 3,270 21,104
------------ ------------ ------------
Total general and administrative expenses 1,358,767 793,948 3,811,363
------------ ------------ ------------
Operating loss (1,358,767) (788,448) (3,769,739)
------------ ------------ ------------
Other income (expenses)
Income from stock options -- -- 10,855
Loss on disposal of equipment (2,240) -- (2,240)
Gain on foreign exchange (Note 1) 1,027 (1,180) (153)
------------ ------------ ------------
(1,213) (1,180) 8,462
------------ ------------ ------------
Net loss $ (1,359,980) $ (789,628) $ (3,761,277)
============ ============ ============
Net loss per common share $ (.05) $ (.04) $ (.25)
============ ============ ============
Weighted average shares of common
stock outstanding (Note 1) 27,992,502 19,647,590 15,304,512
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
-52-
<PAGE>
TIREX AMERICA, INC. AND SUBSIDIARY
(A Developmental Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During
Common Stock Paid-in Subscriptions Developmental
Shares Amount Capital Receivable Stage Total
---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at July 15, 1987 -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock 500 5,000 -- (1,750) -- 3,250
Net loss for period -- -- -- -- (82,286) (82,286)
---------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1988 500 5,000 -- (1,750) (82,286) (79,036)
5,200 for 1 stock split and change
in par value 2,599,500 (2,400) 2,400 -- -- --
Merger with Concord Enterprises,
Inc 682,228 682 111,869 -- -- 112,551
Net loss for year -- -- -- -- (464,284) (464,284)
Payment received on common
stock subscribed -- -- -- 1,750 -- 1,750
---------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1989 3,282,228 3,282 114,269 -- (546,570) (429,019)
Exercise of 80,792 warrants at
$1 per share 80,792 81 80,711 -- -- 80,792
Stock issued for late pay 20,000 20 -- -- -- 20
Net loss for year -- -- -- -- (359,444) (359,444)
---------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1990 3,383,020 3,383 194,980 -- (906,014) (707,651)
Net loss for year -- -- -- -- (132,782) (132,782)
---------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1991 3,383,020 3,383 194,980 -- (1,038,796) (840,433)
Net loss for year -- -- -- -- (18,560) (18,560)
---------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1992 3,383,020 3,383 194,980 -- (1,057,356) (858,993)
Stock issued for reorganization 18,650,000 18,650 76,155 -- -- 94,805
Stock issued for services 100,000 100 (100) -- -- --
Stock issued in exchange for
warrants 363,656 364 (364) -- -- --
Forgiveness of debt -- -- 728,023 -- -- 728,023
Net loss for year -- -- -- -- (165,296) (165,296)
---------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1993 22,496,676 22,497 998,694 -- (1,222,652) (201,461)
</TABLE>
See Notes to Consolidated Financial Statements
-53-
<PAGE>
TIREX AMERICA, INC. AND SUBSIDIARY
(A Developmental Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During
Common Stock Paid-in Subscriptions Developmental
Shares Amount Capital Receivable Stage Total
---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1993 22,496,676 22,497 998,694 -- (1,222,652) (201,461)
Stock issued 2,000 2 (2) -- -- --
Forgiveness of debt -- -- 149,170 -- -- 149,170
Payments received for stock
previously issued -- -- 237,430 -- -- 237,430
Net loss for year -- -- -- -- (179,296) (179,296)
---------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1994 22,498,676 22,499 1,385,292 -- (1,401,948) 5,843
Revision of common stock (11,900,000) (11,900) 11,900 -- -- --
Stock issued for services 5,592,857 5,592 147,858 -- -- 153,450
Forgiveness of debt 200,000 200 24,300 -- -- 24,500
Issuance of common stock 402,857 401 21,915 -- -- 22,316
Net loss for year -- -- -- -- (209,721) (209,721)
---------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1995 16,794,390 16,792 1,591,265 -- (1,611,669) (3,612)
Stock issued for services 3,975,662 3,976 509,196 -- -- 513,172
Forgiveness of debt 391,857 392 29,008 -- -- 29,400
Issuance of common stock 710,833 710 80,161 -- -- 80,871
Net loss for year -- -- -- -- (789,628) (789,628)
---------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1996 21,872,742 21,870 2,209,630 -- (2,401,297) (169,797)
Stock issued for services 5,067,912 5,069 995,370 -- -- 1,000,439
Forgiveness and assumptiion
of debt 251,382 252 43,965 -- -- 44,217
Issuance of common stock 10,257,936 10,259 335,132 -- -- 345,391
Net loss for year -- -- -- -- (1,359,980) (1,359,980)
---------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1997 37,449,972 $ 37,450 $ 3,584,097 $ -- $(3,761,277) $ (139,730)
========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
-54-
<PAGE>
TIREX AMERICA, INC. AND SUBSIDIARY
(A Developmental Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Cumulative
Period from
July 15, 1987
(Date of
Year Ended June 30, Inception) to
1997 1996 June 30, 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,359,980) $ (789,628) $ (3,761,277)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 4,299 3,637 20,600
Loss on disposal and abandonment of
assets 2,240 -- 15,559
Stock issued in exchange for interest 4,217 -- 4,217
Stock issued in exchange for services 1,000,441 513,172 1,696,463
Change in assets and liabilities:
Increase in employee advances (185,942) -- (185,942)
Increase in sales tax receivable (50,284) -- (50,284)
Increase in R&D investment tax credit
receivable (269,918) -- (269,918)
Increase in other assets -- -- (6,700)
Increase in accrued expenses 656,325 212,171 1,235,243
Increase in due to stockholders -- -- 473,191
------------ ------------ ------------
Net cash used in operating activities (198,602) (60,648) (828,848)
------------ ------------ ------------
Cash flows from investing activities:
Increase in note receivable (8,571) -- (9,729)
Equipment (5,924) (14,030) (53,012)
Equipment assembly costs (606,028) (116,023) (783,252)
Reduction of security deposit -- 1,600 6,700
Organization cost -- -- (1,542)
Deferred start-up costs (74,683) -- (74,683)
------------ ------------ ------------
Net cash used in investing activities (695,206) (128,453) (915,518)
------------ ------------ ------------
Cash flows from financing activities:
Loan granted to director (10,881) -- (10,881)
Proceeds from deposit 415,000 15,000 480,000
Proceeds from note payable 98,551 -- 122,551
Proceeds from loan payable 200,545 35,000 235,545
Proceeds from loan payable- stockholders -- -- 73,013
Proceeds from issuance of stock options -- -- 20,000
------------ ------------ ------------
Sub-total $ 703,215 $ 50,000 $ 920,228
------------ ------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements
-55-
<PAGE>
TIREX AMERICA, INC. AND SUBSIDIARY
(A Developmental Stage Company)
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
Cumulative
Period from
July 15, 1987
(Date of
Year Ended June 30, Inception) to
1997 1996 June 30, 1997
------------ ------------ ------------
<S> <C> <C> <C>
Sub-total from prior page $ 703,215 $ 50,000 $ 920,228
Proceeds from issuance of common stock 10,258 711 35,803
Proceeds from additional paid-in capital 335,132 80,160 943,372
------------ ------------ ------------
Net cash provided by financing activities 1,048,605 130,871 1,899,403
------------ ------------ ------------
Net increase (decrease) in cash 154,797 (58,230) 155,037
Cash and cash equivalents - beginning of year 240 58,470 --
------------ ------------ ------------
Cash and cash equivalents - end of year $155, 037 $ 240 $ 155,037
============ ============ ============
Supplemental Disclosure of Non-Cash Activities:
In 1997 and 1996, the Company recorded an increase in common stock and in additional
paid-in capital of $44,217 and $29,400, respectively, which was in recognition of the
forgiveness and assumption of debt. In 1997 and 1996, stock was issued in exchange for
services performed in the amount of $1,000,441 and $513,172 respectively
In 1997 the Company exchanged a piece of equipment for forgiveness of a debt in the
amount of $2,500
Supplemental Disclosure of Cash Flow
Information:
Interest paid $ -- $ 2,088 $ 70,612
============ ============ ============
Income taxes paid $ -- $ -- $ --
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
-56-
<PAGE>
TIREX AMERICA, INC. AND SUBSIDIARY
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies
Nature of Business
Tirex America, Inc. (the "Company") was incorporated under the laws of
the State of Delaware on August 19, 1987. The Company originally
planned to provide comprehensive health care services to persons with
Acquired Immune Deficiency Syndrome, however due to its inability to
raise sufficient capital it was unable to implement its business plan.
The Company had been inactive since it ceased operations in November
1990.
In the Fall of 1992, a group of shareholders lead by Edward Mihal and
including 16 other shareholders acting in concert with Mr. Mihal along
with Patrick McLaren and George Fattell, individuals without any prior
affiliation with the Company, became interested in the Company as an
entity potentially suitable for merger or similar transaction with an
operating private company seeking to become public in this manner. This
group approached the Company's incumbent management with a proposal
whereby they agreed to assume management control, make all delinquent
filings with the Securities and Exchange Commission, restore service by
transfer agent and pay all other expenses required to enable the
Company to begin trading its stock and completing a merger or similar
transaction.
In furtherance of the foregoing, on November 5, 1992, J. Richard
Goldstein, MD, Peter R. Stratton and Robert Kopsack resigned from their
positions as officers and directors of the Company. From June 1989
until the date of such resignations, Dr. Goldstein was the Company's
President and Chief Executive Officer, Mr. Stratton was Vice-President,
Chief Operating Officer, Secretary and Treasurer, and Mr. Kopsack was
the Company's Vice President. In resigning their positions, Dr.
Goldstein and Messrs. Stratton and Kopsack acknowledged that they
acceded to their respective positions and had received compensation in
consideration of their representations that they would, and their best
efforts to, implement a business plan for the Company which would
encompass, among other things, the establishment and operating of
skilled nursing care facilities for patients with Acquired Immune
Deficiency Syndrome. Compensation received by Dr. Goldstein and Messrs.
Stratton and Kopsack consisted of cash payments, stock issuances, and
the grants of stock options and/or stock purchase warrants. As part of
their resignations, Dr. Goldstein and Messrs. Stratton and Kopsack each
executed releases whereby the Company was released and forever
discharged from all debts, obligations, covenants, agreements,
contracts, claims or demands in law or in equity, including but not
limited to any stock options or stock purchase warrants granted or
promised to them, which against the Company, each ever had, or
thereafter may have for or by reason of any matter, cause or thing up
to and through November 5, 1992. Each of Dr. Goldstein and Messrs.
Stratton and Kopsack also acknowledged the termination and rescission
of their respective employment agreements with the Company to such
persons as the Company should direct for the purpose of satisfying
certain of the Company's obligations to third parties. In consideration
of the resignations and releases executed by Dr. Goldstein and Messrs.
Stratton and Kopsack, Edward Mihal and each of the sixteen shareholders
of the Company acting in concert with Mr. Mihal executed and delivered
reciprocal personal releases to and on behalf of Dr. Goldstein and
Messrs. Stratton and Kopsack. In connection with the foregoing
resignations, Dr. Goldstein and Messrs. Stratton and Kopsack appointed,
as an interim board of directors, Patrick McLaren, George Fattell, and
Edward Mihal (the "Interim Management"). It was the goal of the Interim
Management to find suitable acquisition and/or development by the
Company. On December 29, 1992, Edward Mihal resigned his position as an
officer and a director of the Company and Louis V. Muro was appointed
as an officer and director of the Company to fill the vacancy created
thereby.
-57-
<PAGE>
TIREX AMERICA, INC. AND SUBSIDIARY
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies (continued)
Reorganization
On March 26, 1993, the Company entered into an acquisition agreement
(the "Acquisition Agreement") with Louis V. Muro, Patrick McLaren and
George Fattell, officers and directors of the Company (collectively the
"Sellers"), for the purchase of certain technology owned and developed
by the Sellers (the "Technology") and extensive and detailed plans (the
"Business Plan") for a business which will engage in the exploitation
of the Technology. The Technology will be used to design, develop and
construct a prototype machine and thereafter a production quality
machine for the cryogenic disintegration of used tires. Pursuant to the
Acquisition Agreement, Sellers agreed to assign, transfer and sell to
the Company all of their right, title and interest in the Technology
and Business Plan in exchange for fifteen million nine hundred thousand
(15,900,000) shares of the Company's common stock, $.001 par value per
share (the "Sellers' Stock") of which eleven million nine hundred
thousand (11,900,000) shares were put into escrow. The Business Plan
and Technology were developed by the Sellers prior to their affiliation
or association with the Company. The Sellers were engaged as the
Company's officers and directors for the purpose of implementing the
Business Plan with the Technology or such other technology which they
believed could reasonably satisfy the requirements of the Business
Plan.
Effective with the March 26, 1993, closing date of the Acquisition
Agreement (the "Closing Date"), the Company authorized an increase in
the number of directors of the Company from three to six. Pursuant
thereto, the Company appointed Messrs. Kenneth Forbes, Nicholas
Campagna, and Alfred J. Viscido to fill the vacancies created in the
size of the board. As an inducement to Messrs. Forbes, Campagna and
Viscido to join the board of directors, the Company issued 250,000
shares of its common stock, $.001 par value to each of them. The
Acquisition Agreement also provided for stock issuances in the form of
finders fees. Pursuant thereto, the Company issued 300,000 and
1,700,000 shares of its common stock, $.001 par value, to Joseph
Territo and Edward Mihal, respectively.
Effective March 24, 1994, George Fattell resigned as an officer and
director of the Company. Per the terms of his resignation any future
shares of the Company's common stock issued to Mr. Fattell are to be
equally distributed to Louis V. Muro and Patrick McLaren.
Effective January 18, 1995, Louis V. Muro and Patrick McLaren resign
their positions as officers and directors of the Company. In addition
to their resignations they acknowledged that none of the requisite
performance levels for the release of any of the 11,900,000 escrow
shares had been met and renounced all rights to such shares.
In May of 1995, in order to take advantage of various research and
development incentives, the Company and officers of the Company formed
a Canadian corporation named 3143619 Canada, Inc. (Tirex Canada). All
of the research and development work on the first production model of
the TCS-1 System is being completed by Tirex Canada and after the
completion of the model, they will manufacture the product.
On July 11, 1997 the Company's name was changed to The Tirex
Corporation.
Basis of Consolidation
The consolidated financial statements include the accounts of Tirex
America, Inc. and its subsidiary Tirex Canada. All intercompany
transactions and accounts have been eliminated in consolidation.
-58-
<PAGE>
TIREX AMERICA, INC. AND SUBSIDIARY
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies (continued)
Cash and Cash Equivalents
For purposes of the statement of cash flows all certificates of deposit
with maturities of 90 days or less, were deemed to be cash and cash
equivalents.
Equipment Development Costs
Deferred development costs are stated at cost net of any investment tax
credits when there is reasonable assurance that the credits will be
realized. Amortization will begin once commercial production of the
product has commenced and will be computed based upon the estimated
useful life of related products as determined from management's future
sales estimates and will not exceed five years from the date of the
product's market launching.
Deferred Start-Up Costs
Deferred start-up costs represent pre-operating expenses and will be
amortized on a straight-line basis over a three year period once
commercial operations have commenced.
Equipment
Equipment is recorded at cost less accumulated depreciation.
Depreciation is provided over the estimated useful lives of the assets
by using the straight-line method of depreciation.
Repairs and maintenance costs are expensed as incurred while additions
and betterments are capitalized. The cost and related accumulated
depreciation of assets sold or retired are eliminated from the accounts
and any gain or losses are reflected in earnings.
Estimates
Preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Organization Costs
Organization costs are being amortized on a straight-line basis over a
sixty month period.
Per Share Data
The primary income (loss) per share was computed on the weighted number
of shares of common stock outstanding during the period. Common share
equivalents were not included as their inclusion would have been
anti-dilutive.
Income Taxes
The Company has net operating loss carryovers of approximately $4
million as of June 30, 1997, expiring in the years 2004 through 2011.
However, based upon present Internal Revenue regulations governing the
utilization of net operating loss carryovers where the corporation has
issued substantial additional stock, most of this loss carryover may
not be available to the Company.
-59-
<PAGE>
TIREX AMERICA, INC. AND SUBSIDIARY
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies (continued)
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, Accounting for Income Taxes, effective July 1993. SFAS No.109
requires the establishment of a deferred tax asset for all deductible
temporary differences and operating loss carryforwards. Because of the
uncertainties discussed in Note 2, however, any deferred tax asset
established for utilization of the Company's tax loss carryforwards
would correspondingly require a valuation allowance of the same amount
pursuant to SFAS No. 109. Accordingly, no deferred tax asset is
reflected in these financial statements.
The Company has research and development investment tax credits
receivable from Canada and Quebec amounting to $269,918.
Foreign Exchange Assets and liabilities of the Company which are
denominated in foreign currencies are translated at exchange rates
prevailing at the balance sheet date. Revenues and expenses are
translated at average rates throughout the year.
Note 2 - Going Concern
As shown in the accompanying financial statements, the Company incurred
a net loss of $1,359,980 during the year ended June 30, 1997 and as of
that date, the Company's current liabilities exceeded its current
assets by $1,013,559 and its total liabilities exceeded its total
assets by $139,730.
In March 1993, the Company, which was still in the development stage,
developed a new Business Plan. The Company is in the process of
constructing a production quality machine for the cryogenic
disintegration of used tires. The Company also plans to recycle used
tires using ambient temperature disintegration equipment. At June 30,
1997, the Company is still in the development stage. Fees generated
from tipping and culling were insufficient to fund the current
operations of the Company. All of these factors create an uncertainty
about the Company's ability to continue as a going concern.
The Company is currently in the process of trying to obtain funding
needed through a private placement of its securities in an amount of
not less than $700,000, which will provide working capital while the
Company constructs its cryogenic disintegration machine. The ability of
the Company to continue as going concern is dependent on the success of
the plan. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going
concern.
Note 3 - Notes Payable
The Company has available a line of credit which bears interest at
prime plus 3%. Under this line of credit the Company may borrow a
maximum of 80% of their receivable balance from FORD-Q and the related
Rev Canada receivable. At June 30, 1997, $98,551 was outstanding
against this line of credit. The note is collateralized by the
receivable from FORD-Q. The prime rate of interest at June 30, 1997 was
4.5%. This line was paid in full in July, 1997.
The Company also had a note payable in the amount of $24,000
outstanding as of June 30, 1997. The repayment terms were being
negotiated as of that time.
-60-
<PAGE>
TIREX AMERICA, INC. AND SUBSIDIARY
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Note 4 - Loan Payable
1997 1996
--------- ---------
FORD-Q $ 178,806 $ --
IDEA-SME 14,493 --
IDEA-SME 7,246 --
--------- ---------
$ 200,545 $ --
========= =========
On April 11, 1996 the Company entered into a loan agreement with the
Federal Office of Regional Development - Quebec (FORD-Q) which will be
repayable annually over a period of forty-eight months following the
completion of the project. The loan is being contributed under the
Industrial Recovery Program for South-West Montreal and will be
calculated as the lesser of $362,319 or 20% of the eligible costs
incurred for the construction of a commercial scale prototype of the
cryogenic scrap tire disintegration system. The loan is non-interesting
bearing and unsecured. The Company received $178,806 under this program
in fiscal 1997.
On April 30, 1997 the Company received a refundable contribution
awarded under the terms of the Program for the Development of Quebec's
SME'S (IDEA-SME). The contribution is repayable in amounts equal to 1%
of the annual gross sales in Spain and Portugal occurring after June 1,
1997. $14,493 was received under this program in fiscal 1997.
On March 26, 1997, the Company received a refundable contribution for
the preparation of market development studies for India under the
Quebec SME development assistance program (IDEA-SME). The maximum
contribution is $14,493 based on 50% of the approved eligible costs.
The contribution is repayable in amounts equal to 1% of the annual
gross sales in India occurring after June 1, 1997. As of June 30, 1997,
the Company had received $7,246 under this program.
On June 6, 1997, the Company entered into an agreement under the Quebec
SME development assistance program (IDEA-SME) to receive a refundable
contribution for market development activities for the Iberian
Peninsula. The maximum contribution is $68,841 , based on 50% of
approved eligible costs. The contribution is repayable in amounts equal
to 1.5% of the annual gross sales in Spain and in Portugal occurring
after June 1, 1998 less amounts repaid through the amounts noted in the
April 30, 1997 agreement.
Note 5 - Related Party Transactions
In 1994, a stockholder loaned the Company $5,000. This loan was
converted to common stock and additional paid-in capital during the
year ended June 30, 1997.
On July 22, 1994, 3,000,000 shares of Tirex America, Inc. were released
from escrow and issued to Louis V. Muro and Patrick McLaren (1,500,000
shares each) in accordance with the terms and provisions of the
Acquisition Agreement dated March 26, 1993.
The Company has entered into employment agreements with all of its
executive officers and with its in-house corporate counsel. In addition
to the employment services, the officers agree not to compete with the
Company for the two year period following the termination of
employment. If an officer is terminated other than for cause or for
"good reason", the terminated officer will be paid twice the amount of
their base salary for twelve months.
-61-
<PAGE>
TIREX AMERICA, INC. AND SUBSIDIARY
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Note 5 - Related Party Transactions (continued)
Included in accrued expenses at June 30, 1997 is $366,462 of salary to
officers which the company subsequently issued common stock for. The
Company advanced funds to its officers and directors during the year
ended June 30, 1997 in the amount of $185,942. These will be repaid
during the year ending June 30, 1998.
At June 30, 1997 and 1996, the Company had notes receivable from
various officers in the amount of $9,729 and $1,158, respectively. At
June 30, 1997 the Company had a loan receivable from a director for
$10,881. All of these notes and loans are non-interest bearing and will
be repaid during the year ending June 30, 1998.
During the year ended June 30, 1997, a director of the Company paid a
debt of $39,217 on behalf of the Company in exchange for stock and
additional paid-in-capital.
Deposits payable include an amount of $455,000 which are payable to
companies which are owned by a director of the Company.
Note 6 - Forgiveness of Debt
In 1997 and 1996, the Company recorded increases in common stock and
additional paid-in capital of $5,000 and $29,400, respectively, which
was in recognition of the forgiveness of debt by certain related
parties of the Company.
Note 7 - Common Stock
During the years ended June 30, 1997 and 1996, the Company issued
common stock to individuals for services performed and forgiveness of
debt totaling $1,044,657 and $542,572, respectively. Included in these
amounts are payments to officers of the Company in exchange for salary
in the amount of $786,526 and $502,756, respectively. The dollar
amounts assigned to such transactions have been recorded at the fair
value of the services received, because the fair value of the services
received was more evident than the fair value of the stock surrendered.
Note 8 - Stock Option
On May 19, 1995, the Company sold to a director of the Company an
option to purchase 20,000 shares of Cumulative Convertible Preferred
Stock at an exercise price of $10 per share, exercisable during the two
year period beginning May 19, 1995, and ending May 18, 1999. The
director paid $20,000 for the option. The terms of the Preferred Stock
purchasable under the option call for cumulative cash dividends at a
rate of $1.20 per share and conversion into shares of common stock. The
conversion to common stock ratio varies depending on when the
conversion is made. At June 30, 1997, the option has not been
exercised.
Note 9 - Government Assistance
The Company has entered into an agreement with Recyc-Quebec for
financial assistance covering 50% of certain defined costs incurred in
developing the cryogenic scrap tire disintegration system to a maximum
of $54,348. $36,500 has been received during the year and this amount
has reduced the equipment development costs on the balance sheet.
-62-
<PAGE>
TIREX AMERICA, INC. AND SUBSIDIARY
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Note 10 - Commitments
The Company has entered into a property lease agreement, with a term
from July 1, 1997 to June 30, 2000. The Company has an option to renew
this lease for an additional three years. Minimum rentals in each of
the next three years is as follows:
1998 $ 18,967
1999 18,967
2000 18,967
--------
$ 56,901
========
Note 11 - Contingency
The Company is a defendant in an action which commenced on June 18,
1997 entitled Great American Commercial Funding Corp. vs. Tirex
America, Inc. The Company agreed to pay the plaintiff a placement fee
of $250,000 and to grant them an option to acquire 400,000 shares of
the company's common stock at a price of $.01 per share in the event
that the plaintiff succeeded in obtaining financing acceptable to the
Company. The amount and terms of the financing are not mentioned in the
documents. The plaintiff recommended an equipment lease financing
company who in turned introduced the Company to one of their customers.
The customer ultimately entered into a lease financing arrangement with
Tirex America, Inc. Because the advances made to the Company pursuant
to that lease financing arrangement did not constitute the type of
financing originally contemplated, the Company believes it has no
financial obligation to the plaintiff. The Company and its litigation
counsel believe that the plaintiffs complaint is without merit and that
the Company will prevail in this litigation.
Note 12 - Subsequent Event
Subsequent to the year end, the Company received an additional $99,888
under the FORD-Q Industrial Recovery Program and $41,304 under the
Program for the Development of Quebec SME'S.
-63-
<PAGE>
ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There was no resignation or dismissal of the Company's principal
independent accountant during the two most recent fiscal years and the interim
period subsequent thereto.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICER, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors and Executive Officers
The following sets forth the names and ages of all directors and executive
officers of the Company and the date when each director was appointed, and all
positions and offices in the Company held by each:. Each director will hold
office until the next annual meeting of shareholders and until his or her
successor has been elected and qualified:
Date
Offices Appointed
Name Age Held Director
---- --- ---- --------
Terence C. Byrne 39 President, Jan. 18, 1995
Treasurer,
and Director
Louis V. Muro 63 Vice President Jan. 1, 1996
of Engineering
and Director
John G. Hartley 50 Director Feb 21, 1995
John L. Threshie, Jr. 43 Secretary, June 1, 1995
Vice President
of Operations
and Director
Louis Sanzaro 47 Director January 17, 1997
Alan Crossley 49 Director January 17, 1997
Vijay Kachru 46 Vice President of Sept 1, 1996
Market Development
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Family Relationships
No family relationship has ever existed between any director, executive
officer of Company or any person contemplated to become such.
Business Experience
The following summarizes the occupation and business experience during the
past five years for each director and executive officer, of the Company:
TERENCE C. BYRNE. Mr. Byrne has served as president, treasurer, and a
director of Company since January 18, 1995. He holds a Bachelor's degree in
Economics from Villanova University in Philadelphia. Mr. Byrne has been the
controlling shareholder and an officer and director of Bartholemew & Byrne,
Inc., a consulting firm specializing in corporate finance and general business
consulting, since its founding in January 1993. From September 1992 through
August 1993, he directed European marketing and business development for Pacer
Systems Corporation, a public company engaged in the business of systems
engineering for high tech industries. From July 1989 to August 1992, Mr. Byrne
served as president of Digital Optronics Corporation, a public company which,
until August 1992, was engaged in the business of manufacturing digital optronic
measuring devices, (principally) for the defense industry. From November 1988
(prior to being acquired by Digital Optronics) until March 1992, Mr. Byrne also
served as president and a director of Byrne Industries, Inc.("BII"), a
wholly-owned subsidiary of Digital Optronics, Inc. BII was, until the drastic
down-turn in the defense industry in March of 1991, in the business of
manufacturing electronic defense equipment as a sub-contractor to major
multi-billion dollar defense industry companies, such as Lockheed Aviation.
LOUIS V. MURO. Mr. Muro acted as an engineering consultant to the Company
from January 18, 1995 until January 1, 1996 when he was appointed as a director
and as vice president in charge of engineering. Mr. Muro served as a director of
the Company from December 29, 1992 until January 18, 1995. He also served as the
Company's secretary from December 29, 1992 until March 1994 when he was
appointed president of the Company, a position he held until January 18, 1995.
Mr. Muro received a B.S. degree in Chemical Engineering from Newark College of
Engineering in 1954, since which time he has continually been employed as a
chemical engineer. From 1974 to 1993 Mr. Muro has been the sole proprietor of
Ace Refiners Corp. of New Jersey, a precious metals refinery. From 1971 to 1974,
he worked as an independent consultant and from 1964 until 1971, he was director
of research and development for Vulcan Materials Corporation in Pittsburgh, Pa.,
a public company engaged in the business of recovering useable tin and clean
steel from scrap tin plate. From 1960 to 1964, Mr. Muro was the sole proprietor
of Space Metals Refining Co. in Woodbridge, NJ, a company involved in the
purification of scrap germanium to transistor grade metal. From 1959 to 1960 he
was employed by Chemical Construction Co., of New Brunswick, NJ, where he
developed a process for the waste-free production of urea from ammonia, carbon
dioxide and water. From 1954 to 1959, Mr.
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Muro worked in the research and development department at U.S. Metals Refining
Co. in Carteret, NJ where he was involved with the refinement of precious
metals.
JOHN G. HARTLEY. Mr. Hartley holds a Bachelor of Science Degree in
Economics from Manchester University in England. He has acted as a director of
Pacer Systems Inc. since 1985. Pacer Systems is a publicly held company with
offices in Boston, Mass. and is engaged in the business of Systems Engineering
for high tech industries. Since 1993, Mr. Hartley has also served as a
consultant to Moore Rowland International, an investment banking firm
headquartered in Monaco.
JOHN L. THRESHIE, JR. Mr. Threshie holds a Bachelor of Science Degree in
Business from the University of North Carolina. He was self employed as a
management consultant, doing business as Primerica Financial Services, from 1991
through 1994. From 1988 to 1990, Mr. Threshie was an advertising Account
Supervisor for Ammirati & Puris Inc., an advertising firm in New York, where Mr.
Threshie supervised all advertising for BMW of North America.
LOUIS SANZARO. Mr. Sanzaro, who is 47 years old, holds a degree in
marketing from Marquette University. In 1997, he was named "Recycler of the
Year" for the State of New Jersey and was also awarded the distinction of being
named "Recycling Processor of the Decade" by Ocean County, New Jersey. He is the
President and a member of the Board of Directors of the nation-wide,
Construction Material Recycling Association. Since 1986, Mr. Sanzaro has served
as President and CEO of Ocean County Recycling Center, Inc. ("Ocean County
Recycling"), in Tom's River, New Jersey. Ocean County Recycling is in the
business of remanufacturing construction and demolition debris for reuse as a
substitute for virgin materials in the construction and road building
industries. In addition, since 1989, Mr. Sanzaro has served as Vice President
and COO of Ocean Utility Contracting Co., Inc., a New Jersey the Company engaged
in the installation of sewer and water main pipelines and the construction of
new roadway infrastructure. From 1973 until 1990, Mr. Sanzaro was the President
and CEO of J and L Excavating and Contracting Co., Inc., a company engaged in
the construction of residential, commercial, industrial, and government
building. Mr. Sanzaro was a member of the Board of Directors of the New Jersey
state-wide Utility Transportation.
ALAN CROSSLEY. Mr. Crossley, who is 49 years old, holds a degree in
Economics from Cambridge University in England and an MBA degree from INSEAD in
France. In addition to serving as a Director of Registrant, Mr. Crossley is
participating in developing, and will have charge of implementing, the Company's
projected marketing operations in Europe and Asia. Since 1986, Mr. Crossley has
served as president of FAISLESA, Arganda del Rey in Madrid, Spain. FAISLESA, a
company which Mr. Crossley established in 1986 as a venture capital project, is
a manufacturer and applicator of thermal insulants and water-proofing products
for the construction industry. It runs a network of regional distributors
throughout Spain and has its own application crews in the Madrid Area. Mr.
Crossley has full executive responsibility in all areas of manufacturing,
marketing, research, and administration of FAISLESA. Mr. Crossley's previous
business experience includes his work as: a Eurocurrency trader in the
International Division of S.G. Warburg and Co. Ltd., Merchant Bankers in London
(1968-1970);
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a management consultant for McKinsey and the Company, Inc. in Brazil, France,
Germany, Holland, Italy, Spain, Switzerland, the UK and the United States
(1971-1977); Managing Director of Satlan, S.A., a Madrid firm involved in
International trading of petroleum products and various commodities (1977-1980)
and; President of Gapco, S.A., a Madrid commercial and financial consulting firm
(1980-1994).
VIJAY KACHRU. Ms. Kachru, who is 46 years old holds, a Bachelor's degree in
English literature and has attended business management, marketing, and
behavioral sciences courses at McGill University in Montreal. She was appointed
Vice President in charge of Market Development for the Company on September 1,
1996. From 1992 until she joined the Company, Ms. Kachru worked as an
independent consultant in the area of market research and market development.
Pfizer Canada, CP Rail marketing division and Techtran Technology Transfer
Company were among her clients during this period. From 1989 until 1992, Ms.
Kachru was a training specialist for CP Rail System where she designed and
implemented a drug and alcohol abuse control program throughout North America.
From 1981 to 1989, Ms. Kachru worked as a consultant with, among others,
Proudfoot Consulting Firm on projects with Bell Canada, Alberta Great Telephone,
Firestone Bridgestone, East Midland Electric Board in England, Columbus
McKennin, and International Paper.
Compliance With Section 16(a) of the Exchange Act.
None of the Company's securities have been registered pursuant to Section
12 of the Exchange Act of 1934, as amended (the "Exchange Act"). Therefore,
Section 16(a) of the Exchange Act is not applicable.
ITEM 10. EXECUTIVE COMPENSATION
Current Remuneration
The Company has no stock option or stock appreciation rights, long term or
other incentive compensation plans, deferred compensation plans, stock bonus
plans, pension plans, or any other type of compensation plan in place for its
executive officers, directors, or other employees; none of its executive
officers or directors have any received compensation of any such types from the
Company pursuant to plans or otherwise. The following table sets forth
information concerning the annual compensation received or accrued for services
provided in all capacities to the Company for the fiscal years ended June 30,
1995, 1996, and 1997 by the Company's chief executive and the persons who are,
or were during such periods, the Company's most highly compensated executive
officers and whose compensation may be deemed for these purposes to have
exceeded $100,000.
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SUMMARY COMPENSATION TABLE
================================================================================
Annual Compensation
=====================================
Other
Annual
Compen-
Salary Bonus sation
Name and Principal ($) ($) ($)
Position Year
(a) (b) (c) (d) (e)
- --------------------------------------------------------------------------------
Terence C. Byrne 1997 $62,457 (1) (10)(12) (1)(10)(11)
President and Treasurer
------------------------------------------------
1996 $17,424 (2) (10)(12) (2)(10)(11)
------------------------------------------------
1995 -0- (3) (10)(12) (3)(10)(11)
- --------------------------------------------------------------------------------
Louis V. Muro 1997 $51,510 (4) (10)(12) (4)(10)(11)
Vice President of Engineering
------------------------------------------------
1996 7,592 (5) (10)(12) (5)(10)(11)
------------------------------------------------
1995 -0- (6) (10)(12) (6)(10)(11)
- --------------------------------------------------------------------------------
Frances Katz Levine 1997 $17,437 (7) (10)(12) (7)(10)(11)
Secretary ------------------------------------------------
(Resigned Dec. 22, 1997) 1996 -0- (8) (10)(12) (8)(10(11)
------------------------------------------------
1995 -0- (9) (10)(12) (9)(10)(11)
================================================================================
Notes To Summary Compensation Table:
(1) For the year ended June 30, 1997, Mr. Byrne received cash salary payments
directly from the Tirex Corporation, or indirectly, through Tirex Canada Inc.,
in the aggregate amount of $62,457 (this does not include cash disbursements
made to Mr. Byrne during fiscal 1997 by way of reimbursements for expenses paid
by him for or on behalf of the Company). Mr. Byrne waived cash payment of the
balance of $187,543 in salary payments due to him under the terms of his
employment agreement with the Company (the "Byrne Executive Agreement") for
fiscal 1997. The terms and conditions of the Byrne Executive Agreement, which
calls for an annual salary in the amount of $250,000, are discussed in more
detail, below, in this Item 10, under the caption, "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements -
Executive Agreements". In lieu of cash payment of salary, Mr. Byrne agreed to
accept shares of the Company's stock, valued at one-half the average market
price of such stock during the periods in which such salary was earned. The
number of Compensation Shares issued to Mr. Byrne for services rendered pursuant
to his Executive Agreement during fiscal 1997 aggregated to 1,130,217 shares.
For a discussion in detail of all issuances of Compensation Shares made
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to Mr. Byrne during fiscal 1997, including the dates, amounts, and share prices
thereof, reference is made to Item 12 of this report, "Certain Relationships and
Related Transactions - Issuance of Stock in Lieu of Salaries and Consulting Fees
and Stock Restriction Agreements". Subsequent to the period covered by this
report, Mr. Byrne has continued to waive payment of substantial portions of his
contractual salary and he has agreed to continue to waive all or part of such
salary until the Company's financial position improves significantly.
(2) For the year ended June 30, 1996, Mr. Byrne received cash salary payments
directly from Tirex America Inc., or indirectly, through Tirex Canada Inc., in
the aggregate amount of $17,424 (this does not include cash disbursements made
to Mr. Byrne during fiscal 1996 by way of reimbursements for expenses paid by
him for or on behalf of the Company). Mr. Byrne waived cash payment of the
balance of $ 232,576 in salary payments due to him under the terms of Byrne
Executive Agreement for the year ended June 30, 1996. In lieu of cash payment of
salary, Mr. Byrne agreed to accept shares of the Company's stock, valued at
one-half the average market price of such stock during all or part of the period
in which such salary was earned. The number of Compensation Shares issued to Mr.
Byrne for services rendered pursuant to his Executive Agreement during fiscal
1996 aggregated to 1,676,075. For a discussion in detail of all issuances of
Compensation Shares made to Mr. Byrne during fiscal 1996, including the dates,
amounts, and share prices thereof, reference is made to Item 12 of this report,
"Certain Relationships and Related Transactions - Issuance of Stock in Lieu of
Salaries and Consulting Fees and Stock Restriction Agreements".
(3) For the approximately five and one-half month period which commenced on
January 18, and ended on June 30, 1995, Mr. Byrne waived cash payment of
$104,166 in total salary payments due to him under Byrne Executive Agreement.
This does not include cash disbursements made to Mr. Byrne during the quarter
ended June 30, 1995 by way of reimbursements for expenses paid by him for or on
behalf of the Company. In lieu of cash salary payment of the foregoing amount,
Mr. Byrne agreed to accept shares of the Company's stock, valued at one-half the
average market price of such stock during all or part of the period in which
such salary was earned ("Compensation Shares"). The number of Compensation
Shares issued to Mr. Byrne for services rendered pursuant to his Executive
Agreement during fiscal 1995 aggregated to 1,478,174. For a discussion in detail
of all issuances of Compensation Shares made to Mr. Byrne during fiscal 1995,
including the dates, amounts, and share prices thereof, reference is made to
Item 12 of the Company's annual report on Form 10-KSB for the fiscal year ended
June 30, 1995, "Certain Relationships and Related Transactions - Issuance of
Stock in Lieu of Salaries and Consulting Fees".
(4) For the fiscal year ended June 30, 1997, Mr. Muro received cash salary
payments directly from Tirex America Inc., or indirectly, through Tirex Canada
Inc., in the aggregate amount of $51,510. (This does not include cash
disbursements made to Mr. Muro during fiscal 1997 by way of reimbursements for
expenses paid by him for or on behalf of the Company.) Mr. Muro waived cash
payment of the aggregate balance of $98,490 in salary payments due to him under
the terms of his employment agreement with the Company (the "Muro Executive
Agreement") during the year ended June 30, 1997. In lieu thereof, Mr. Muro
agreed to accept shares of the Company's
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stock, valued at one-half the average market price of such stock during the
periods in which such salary was earned. The number of Compensation Shares
issued to Mr. Muro for services rendered pursuant to his Executive Agreement
during fiscal 1997 aggregated to $595,540. For a discussion in detail of all
issuances of Compensation Shares made to Mr. Muro during fiscal 1997, including
the dates, amounts, and share prices thereof, reference is made to Item 12 of
this report, "Certain Relationships and Related Transactions - Issuance of Stock
in Lieu of Salaries and Consulting Fees". Subsequent to the period covered by
this report, Mr. Muro has continued to waive payment of substantial portions of
his contractual salary and he has agreed to continue to waive all or part of
such salary until the Company's financial position improves significantly.
(5) From January 18, 1995 through December 31, 1995, Mr. Muro served as an
Engineering Consultant to the Company pursuant to the terms of his consulting
agreement (the "Muro Consulting Agreement") which provided for aggregate
consulting fees in the amount of $150,000. Effective January 1, 1996, Mr. Muro
served as the Company's vice president of Engineering pursuant to the Muro
Executive Agreement, which provides for salary payments to Mr. Muro in the
annual amount of $150,000 annually). For the six-month period which commenced on
July 1, 1995 and ended on December 31, 1995, Mr. Muro waived payment in cash of
all consulting fees due to him. For the balance of the fiscal year ended June
30, 1996, Mr. Muro received cash salary payments directly from Tirex America
Inc., or indirectly, through Tirex Canada Inc., in the aggregate amount of
$7,592. (This does not include cash disbursements made to Mr. Muro during fiscal
1996 by way of reimbursements for expenses paid by him for or on behalf of the
Company.) Mr. Muro waived cash payment of the aggregate balance of $142,408 in
consulting fees and salary payments due to him under the terms of the Muro
Consulting Agreement and the Muro Executive Agreement during the year ended June
30, 1996. In lieu thereof, Mr. Muro agreed to accept shares of the Company's
stock, valued at one-half the average market price of such stock during all or
part of the period in which such consulting fees and salary were earned. The
number of Compensation Shares issued to Mr. Muro for services rendered pursuant
to his Consulting and Executive Agreements during fiscal 1996 aggregated to
1,074,367. For a discussion in detail of all issuances of Compensation Shares
made to Mr. Muro during fiscal 1996, including the dates, amounts, and share
prices thereof, reference is made to Item 12 of this report, "Certain
Relationships and Related Transactions - Issuance of Stock in Lieu of Salaries
and Consulting Fees".
(6) Mr. Muro waived cash payment of $75,000 in consulting fees due to him
pursuant to the Muro Consulting Agreement for the approximately 24 week period
which commenced on January 18, 1995 and ended on June 30, 1995 (this does not
include cash disbursements made to Mr. Muro during this period by way of
reimbursements of expenses). In lieu of such unpaid consulting fees, Mr. Muro
agreed to accept shares of the Company's stock, valued at one-half the average
market price of such stock during all or part of the period in which such fees
were earned. The number of Compensation Shares issued to Mr. Muro for services
rendered pursuant to his Consulting Agreement during fiscal 1995 aggregated to
464,000. For a discussion in detail of all issuances of Compensation Shares made
to Mr. Muro during fiscal 1995, including the dates, amounts, and share prices
thereof, reference is made to Item 12 of the Company's
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annual report on Form 10-KSB for the fiscal year ended June 30, 1995, "Certain
Relationships and Related Transactions - Issuance of Stock in Lieu of Salaries
and Consulting Fees".
(7) During fiscal 1997, Ms. Levine was employed by the Company as its Secretary
and General Counsel from July 1, 1996 through December 21, 1996 under the terms
of an employment agreement dated January 18, 1995 (the "First Levine Employment
Agreement"). On December 22, 1996, resigned her positions as Secretary and as a
Director of the Company. Her resignation was not caused by any disagreement with
the Company on any matter relating to the Company's operations, policies, or
practices. Following her resignation from the foregoing positions, Ms. Levine
has continued to be employed by the Company as its in-house Corporate and
Securities Counsel pursuant to the terms of her employment agreement, dated
December 22, 1996 (the "Second Levine Employment Agreement"). The terms and
conditions of both the First and the Second Levine Employment Agreements, call
for an annual salary in the amount of $150,000, and are discussed in more
detail, below, in this Item 10, under the caption, "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements - Executive
Agreements". For the year ended June 30, 1997, for services rendered through
December 21, 1996, as an executive officer of the Company, and thereafter, as
corporate counsel to the Company, Ms. Levine received cash salary payments
directly from The Tirex Corporation, or indirectly, through Tirex Canada Inc. in
the aggregate amount of $17,437.45 (this does not include cash disbursements
made to Ms. Levine during fiscal 1997 by way of reimbursements for expenses paid
by her for or on behalf of the Company). Ms. Levine waived cash payment of an
aggregate of $136,702.55 in salary payments due to her under the terms of both
the First and the Second Levine Employment Agreements for fiscal 1997. In lieu
of cash salary payments, Ms. Levine agreed to accept shares of the Company's
stock, valued at one-half the average market price of such stock during all or
part of the period in which such salary was earned. The number of Compensation
Shares issued to Ms. Levine for services rendered under both the First and
Second Levine Employment Agreements during fiscal 1997 aggregated to 824,868
shares. For a discussion in detail of all issuances of Compensation Shares made
to Ms. Levine during fiscal 1997, including the dates, amounts, and share prices
thereof, reference is made to Item 12 of this report, "Certain Relationships and
Related Transactions - Issuance of Stock in Lieu of Salaries and Consulting Fees
and Stock Restriction Agreements". Subsequent to the period covered by this
report, Ms. Levine has continued to waive payment of substantial portions of her
contractual salary and she has agreed to continue to waive all or part of such
salary until the Company's financial position improves significantly.
(8) For the year ended June 30, 1996, Ms. Levine received no cash salary
payments directly from Tirex America Inc., or indirectly, through Tirex Canada
Inc. (this does not include cash disbursements made to Ms. Levine during fiscal
1996 by way of reimbursements for expenses paid by her for or on behalf of the
Company). Ms. Levine waived cash payment of the $150,000, in salary payments due
to her under the terms of the First Levine Employment Agreement for the year
ended June 30, 1996, and in lieu thereof, Ms. Levine agreed to accept shares of
the Company's stock, valued at one-half the average market price of such stock
during all or part of the period in which such salary was earned. The number of
Compensation Shares issued to Ms. Levine for services rendered pursuant to her
Executive Agreement during fiscal 1996
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aggregated to 942,459. For a discussion in detail of all issuances of
Compensation Shares made to Ms. Levine during fiscal 1996, including the dates,
amounts, and share prices thereof, reference is made to Item 12 of this report,
"Certain Relationships and Related Transactions - Issuance of Stock in Lieu of
Salaries and Consulting Fees and Stock Restriction Agreements".
(9) For the approximately five and one-half month period which commenced on
January 18, and ended on June 30, 1995, Ms. Levine waived cash payment of
$68,750 in total salary payments due to her under the Levine Executive
Agreement. This does not include cash disbursements made to Ms. Levine during
this period by way of reimbursements for expenses paid by her for or on behalf
of the Company. In lieu of cash salary payments in the foregoing amount, Ms.
Levine agreed to accept shares of the Company's stock, valued at one-half the
average market price of such stock during all or part of the period in which
such salary was earned ("Compensation Shares"). The number of Compensation
Shares issued to Ms. Levine for services rendered pursuant to her Executive
Agreement during fiscal 1995 aggregated to 886,904. For a discussion in detail
of all issuances of Compensation Shares made to Ms. Levine during fiscal 1995,
including the dates, amounts, and share prices thereof, reference is made to
Item 12 of the Company's annual report on Form 10-KSB for the fiscal year ended
June 30, 1997, "Certain Relationships and Related Transactions - Issuance of
Stock in Lieu of Salaries and Consulting Fees".
(10) Management believes that it is impossible to determine the actual current
or potential value, if any, of the such shares in light of the fact that, as of
the dates when such shares were issued to the executive officers, they had no or
only very minimal actual market value and the actual potential market value of
such shares, if any, was at such dates, and as at the date hereof remains,
highly contingent upon, and subject to, extremely high risks including but not
limited to the following factors: (I) the very early stage of development of the
Company's business; (ii) the Company's lack of sufficient funds to implement its
business plan and the absence of any commitments from potential investors to
provide such funds; (iii) the absence of a reliable, stable, or substantial
trading market for such shares; (iv) the restrictions on transfer arising out of
the absence of registration of such shares and certain stock restriction
agreements which each of such persons has entered into; and (v) the uncertainty
respecting the Company's ability to continue as a going concern, (See the
discussions included above, in this report in Item I, "Proposed Business" and
Item 5, "Market for the Company's Common Equity and Related Stockholder
Matters").
(11) All Compensation Shares issued to the executive officers named in this
Summary Compensation Table in lieu of cash compensation were issued pursuant to
certain special compensation agreements and stock restriction agreements between
each of them and the Company. The terms and conditions of such agreements are
discussed in detail below, in this Item 10, "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements - Executive
Agreements and Special Compensation Agreements" and in Item 12 of this report,
"Certain Relationships and Related Transactions - Sales of and Restrictions on
Shares Held by Executive Officers".
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(12) On May 29, 1997, The Company awarded stock bonuses to Mr. Byrne, Mr. Muro
and Ms. Levine (the "Stock Bonuses"), for the fiscal years ended June 30, 1995
and 1996, in recognition of: (i) their success in bringing the Company from a
virtual start-up position in January 1995 to its present stage of development,
and (ii) that such persons have not been adequately compensated for their
contributions because, among other things, they have accepted, for all of the
services rendered by them to the Company, compensation consisting principally of
shares of the Company's common stock, the value of which has been and continues
to be completely dependent upon the success of the Company and therefore has
always placed and continues to place the recipients thereof at risk. The
awarding of the Stock Bonuses was approved by the full board of directors and
was effected pursuant to the terms of the Company's employment agreements with
each of such persons. Such Agreements provide that Mr. Byrne, Mr. Muro, and Ms.
Levine are each eligible to receive a discretionary bonus for each year (or
portion thereof) during the term of such Agreement and any extensions thereof,
with the actual amount of any such bonus to be determined in the sole discretion
of the Board of Directors based upon its evaluation of the Executive's
performance during such year. The Stock Bonuses consisted of options to purchase
the following numbers of shares, at a per share exercise price of $.001 per
share, in the following amounts: Mr. Byrne - 1,413,382 shares; Mr. Muro -
1,115,093 shares; Ms. Levine - 811,684 shares. Because these shares were issued
under the terms of the above described employment agreements, they are also
subject to the terms of the respective stock restriction agreements which each
of such persons has entered into. The terms and conditions of such agreements
are discussed in detail below, in this Item 10, "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements - Executive
Agreements and Special Compensation Agreements" and in Item 12 of this report,
"Certain Relationships and Related Transactions - Sales of and Restrictions on
Shares Held by Executive Officers".
Compensation of Directors
The directors of the Company are not compensated for their services as
such, except as follows: Except for Mr. Muro, all of the Company's present
directors, as well as Ms. Levine, who was a director until her resignation on
December 22, 1996, received unregistered shares of the Company's common stock
("Directors Shares"). Messrs. Byrne, Hartley, and Threshie and Ms. Levine
received Directors Shares in consideration of their agreement to join the
Company's board of directors and, in the case of Mr. Threshie, in consideration
of services rendered as well as his agreement to serve as Vice President in
Charge of Operations without compensation. Messrs. Crossley and Sanzaro received
Directors Shares as compensation for services, under the terms of certain
Directors Compensation Agreements, dated July 7, 1997. Directors Shares have
been issued, or transferred to the recipients thereof, as follows: 2,500,000
shares transferred by two members of the Company's former management to Terence
C. Byrne on January 18, 1995; 500,000 shares transferred by two members of the
Company's former management to Frances Katz Levine on January 18, 1995; 100,000
shares issued by the Company to John G. Hartley on February 16, 1995; 250,000
shares issued by the Company to John L. Threshie, Jr. on June 1, 1995; 100,000
shares issued to each of Alan Crossley and Louis Sanzaro on or about July 7,
1997. At the time the Directors Shares were transferred or issued to the
respective directors, such
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shares had no or only very minimal market value and the potential market value
of such shares, if any, was, and remains, highly contingent upon, and subject
to, extremely high risks including but not limited to the following factors: (I)
the very early stage of development of the Company's business; (ii) the
Company's lack of sufficient funds to implement its business plan and the
absence of any commitments from potential investors to provide such funds; (iii)
the absence of a reliable, stable, or substantial trading market for such
shares; and (iv) the restrictions on transfer arising out of the absence of
registration of such shares (See the discussions included above, in this report
in Item I, "Proposed Business" and Item 5, "Market for the Company's Common
Equity and Related Stockholder Matters").
Employment Contracts and Termination of Employment
and Change-in-Control Arrangements
Executive Agreements
And Special Compensation Agreements
1. Terms of the Executive Agreements
The Company has entered into employment agreements with all of its
executive officers and with its in-house corporate counsel, Frances Katz Levine
(the "Executive Agreements"). The respective commencement and termination dates
of the Executive Agreements, as amended are as follows: Mr Byrne, January 18,
1995 - December 31, 2003; Mr. Muro, January 1, 1996 December 31, 2000; Mr.
Threshie, January 1, 1996 - December 31, 1998, Ms. Kachru - August 31, 1999, and
Ms. Levine, December 22, 1996 - December 21, 2000.(9) The Agreements provide for
annual salaries, of $250,000 to Mr. Byrne $150,000 to each of Mr. Muro and Ms.
Levine, $50,000 to Mr. Threshie, and $90,000 Canadian (approximately $65,000
U.S. at current exchange rates) to Ms. Kachru. Such agreements also provide for
the payment of bonuses at the sole discretion of the board of directors based
upon an evaluation of the executive's performance, with
- --------
(9) Ms. Levine was employed by the Company as its Secretary and General
Counsel from July 1, 1996 through December 21, 1996 under the terms of an
employment agreement dated January 18, 1995 (the "First Levine Employment
Agreement"). On December 22, 1996, resigned her positions as Secretary and as a
Director of the Company. Her resignation was not caused by any disagreement with
the Company on any matter relating to the Company's operations, policies, or
practices. Following her resignation from the foregoing positions, Ms. Levine
has continued to be employed by the Company as its in-house Corporate and
Securities Counsel pursuant to the terms of her employment agreement, dated
December 22, 1996 (the "Second Levine Employment Agreement"). The Principal
terms and conditions of the First and the Second Levine Employment Agreements,
other than the commencement and termination dates and the positions and exact
nature of duties and responsibilities, are essentially identical except also for
terms which were added in order to insure that benefits and rights earned under
the First Employment Agreement would not be lost to Ms. Levine perforce of the
foregoing changes.
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payment of any such bonuses to be reviewed annually by a Compensation Committee,
with the exception that Ms. Kachru's agreement requires semi-annual review for
eligibility for bonuses and raises. As of the date hereof, the board of
directors has not established a Compensation Committee and it has no plans to do
so until such time as the financial position and prospects of the Company
improve significantly. The Executive Agreements also provide for the
participation by each of the foregoing persons in any pension plan,
profit-sharing plan, life insurance, hospitalization or surgical program, or
insurance program hereafter adopted by the Company (there are no such programs
in effect at the present time), reimbursement of business related expenses, the
non-disclosure of information which the Company deems to be confidential to it,
non-competition by the executive with the Company for the two-year period
following termination of employment with the Company and for various other terms
and conditions of employment.
The Executive Agreements with Mr. Byrne, Mr. Muro, and Ms. Levine also
include severance provisions which provide among other things that in the event
that the employment of the executive is terminated by the Company other than for
cause, or by the executive for "good reason", as that term is defined in the
Executive Agreements, or pursuant to a change in control of the Company, the
terminated executive will be paid, as severance compensation, twice the amount
of his or her base salary for a period of twelve months.
Because of the early stage of development of the Company, its lack of
operations and insignificant cash flow, since January 18, 1995, the Company has
not had the resources to meet fully its financial obligations under the
Executive Agreement. As a result, the major portion of the compensation which
has been available to the Company's executive officers has consisted of
unregistered shares of the Company's common stock ("Compensation Shares"), which
such individuals accepted, in lieu of cash compensation, for a substantial
portion of salary and/or consulting fees due to them (see Item 12, of this
report, "Certain Relationships and Related Transactions - Issuance of Stock in
Lieu of Salaries and Consulting Fees"). As at the various dates when
Compensation Shares were issued to the executive officers, such shares had
either no, or only very minimal, actual market value and the actual potential
market value of such shares, if any, was, and remains, highly contingent upon,
and subject to, extremely high risks including but not limited to the following
factors: (I) the very early stage of development of the Company's business; (ii)
the Company's lack of sufficient funds to implement its business plan and the
absence of any commitments from potential investors to provide such funds; (iii)
the absence of a reliable, stable, or substantial trading market for such
shares; and (iv) the restrictions on transfer arising out of the absence of
registration of such shares (See the discussions included above, in this report
in Item I, "Proposed Business" and Item 5, "Market for the Company's Common
Equity and Related Stockholder Matters").
All of the Executive Agreements, as amended, provide that, as compensation,
and in lieu of payment in cash of salary, due thereunder, the Company may issue
and the respective executive officers will accept unregistered shares of the
Company's common stock, valued at fifty percent (50%) of the average of the bid
and ask prices of such stock, as traded in the over-the-counter market and
quoted in the NASDAQ Electronic Bulletin Board, during part or all of the
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period in which the salary was earned under the Executive Agreement. All of the
Compensation Shares issued to Mr. Byrne, Mr. Muro, and Ms. Levine are also
subject to the terms and conditions of certain stock restriction agreements
between each of them and the Company. Such stock restriction agreements, as
amended on May 30, 1996 and May 1, 1997 (the "Amended Stock Restriction
Agreements"), provide that shares subject to such agreements may be sold in
accordance with the Rules and Regulations of the Securities Act of 1933, as
amended, but limit the right to have any of the Compensation Shares included in
a registration statement on Form S-8 until after they have been issued and
outstanding for not less than eighteen months.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners.
The following table sets forth information as of September 23, 1996, with
respect to the persons known to the Company to be the beneficial owners of more
than 5% of the common stock, $.001 par value of the Company and of more than 5%
of the Class A Common Stock of the Company's subsidiary, Tirex Canada. Neither
the Company nor Tirex Canada have any shares of any other class issued or
outstanding.
PRINCIPAL SHAREHOLDERS TABLE
- --------------------------------------------------------------------------------
Title Name and Amount and
of Address of Nature of Percent of
Class Beneficial Beneficial Class (1)
Owner Owner
- --------------------------------------------------------------------------------
Common Terence C. Byrne 11,619,430 (2) 33.4%
The Tirex 489 Grosvner Street
Corporation Westmount, Quebec
H3Y 2S5
Class A
Common 34 (3) 34%
Tirex
Canada
Common CG TIRE, INC. 4,308,2920 (4) * (4)
The Tirex The Continental General
Corporation Tire Recycling Effort
1800 Continental Blvd.
Charlotte, NC 28273
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PRINCIPAL SHAREHOLDERS TABLE CONTINUED
- --------------------------------------------------------------------------------
Title Name and Amount and
of Address of Nature of Percent of
Class Beneficial Beneficial Class (1)
Owner Owner
- --------------------------------------------------------------------------------
Common Frances Katz Levine (8) 4,016,762 9.8%
The Tirex 621 Clove Road
Corporation Staten Island, NY 10310
Common Louis V. Muro (8) 6,681,191 16.4%
The Tirex 435 Roy Avenue
Corporation Dorval, Quebec H953E2
Canada
Class A
Common 17 (3) 17%
Tirex
Canada
Common The NAIS Corporation 5,231,092 13.5%
The Tirex 94 Washington Avenue
Corporation Lawrence, NY 11559
* Percentages less than 1% not shown
Notes
The footnotes to this table appear after the "Security Ownership of
Management Table" which is set forth below.
Security Ownership of Management
The following table sets forth information as of October 10, 1996, with
respect to the beneficial ownership of the common stock, $.001 par value, of the
Company and the Class A common stock of the Company's subsidiary, Tirex Canada
by each of the executive officers and directors of the Company and by all
executive officers and directors as a group:
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MANAGEMENT SHAREHOLDINGS TABLE
- --------------------------------------------------------------------------------
Title Name and Amount and
of Address of Nature of Percent of
Class Beneficial Beneficial Class (1)
Owner Owner
- --------------------------------------------------------------------------------
Common Terence C. Byrne 13,619,430 (2) 30%
The Tirex 489 Grosvner Street
Corporation Westmount, Quebec
H3Y 2S5
Class A
Common 34 (3) 34%
Tirex
Canada
Common Alan Crossley 214,658 (5) *
The Tirex Gran Via de Hortaleza
Corporation 82A, 1B
Madrid, Spain 28043
Common John G. Hartley 20,000 (6) *
The Tirex 7/9 Boulevard D'Italie
Corporation Monte Carlo MC 98000
Monaco
Common Vijay Kachru 167,821 *
The Tirex 1598 Pine Ave. West
Corporation Montreal, Quebec H3B 1B4
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MANAGEMENT SHAREHOLDINGS TABLE CONTINUED
- --------------------------------------------------------------------------------
Title Name and Amount and
of Address of Nature of Percent of
Class Beneficial Beneficial Class (1)
Owner Owner
- --------------------------------------------------------------------------------
Common Louis V. Muro 6,681,191 (8) 16.4%
The Tirex 435 Roy Avenue
Corporation Dorval, Quebec H953E2
Canada
Class A
Common 17 (3) 17%
Tirex
Canada
Common Louis V. Sanzaro 302,581 (7) *
The Tirex 1900 Vermont Avenue
Corporation Toms River, NJ 08755
Common John L. Threshie, Jr. 471,310 1.77%
The Tirex 200 Lansdowne,
Corporation Westmount, Quebec
Canada, H3Z 3E1
Common All directors and 17,476,991 (2) 55.62%
The Tirex officers as a group
Corporation (7 persons)
Class A All directors and 34 (3) 34%
Common officers as a group
Tirex (7 Persons)
Canada
* Percentages less than 1% not shown
(Notes to Tables appear on Following Page)
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Notes:
(1) The percentages listed in the tables are calculated on the basis of
38,774,625 shares of the common stock, $.001 par value, of the Company ("Common
Stock") outstanding as at September 23, 1997, with the following exceptions: (a)
The percentage deemed to be beneficially owned by CG TIRE, Inc. is calculated on
the basis of 38,774,625 shares of Common Stock currently issued and outstanding
plus 4,308,292 shares of common stock which, as at the date hereof, CG Tire has
the right to acquire within 60 days pursuant to its option (see footnote (4),
below; (b) The percentage deemed to be beneficially owned by Mr. Byrne is
calculated on the basis of 38,774,625 shares of Common Stock currently issued
and outstanding plus 2,000,000 shares of common stock which, as at the date
hereof, Mr. Byrne has the right to acquire within 60 days pursuant to his option
(see footnote (2), below; and (c) The percentages deemed to be beneficially
owned by Mr. Muro and Ms. Levine are calculated on the basis of 38,774,625
shares of Common Stock currently issued and outstanding plus 1,000,000 shares of
common stock which, as at the date hereof, each of them has the right to acquire
within 60 days pursuant to its option (see footnotes (2), below.
(2) Includes: (i) 5,507,414 shares held of record by Mr. Byrne as of
September 23, 1997; (ii) 434,328 shares held of record by Mr. Byrne's wife,
Darla Sapone Byrne, over which shares Mr. Byrne has voting power pursuant to an
irrevocable proxy granted to him on September 27, 1996; (iii) 446,596 shares
held of record by John W. Surgent, over which shares Mr. Byrne has voting power
pursuant to an irrevocable proxy granted to him on June 13, 1996; (iv)
5,231,0921, shares held of record by The NAIS Corporation over which shares Mr.
Byrne has voting power pursuant to an irrevocable proxy granted to him in June
of 1997; and (v) 2,000,000 shares which Mr. Byrne has the right to acquire
within sixty days pursuant to an option granted to him on September 3, during
the period subsequent to that covered by this Report. The option exercise price
is equal to the average of the high ask and the low bid price of this
Corporation's common stock, as traded in the over-the-counter market and quoted
in the NASDAQ electronic bulletin board as at the close of business on the date
of the grant of the said option, which was $0.39.
(3) Messrs. Byrne and Muro hold all shares of Tirex Canada Class A Common
Stock pursuant to the terms of a Shareholders agreement among them and the
Company (the "Tirex Canada Shareholders Agreement"), pursuant to which they will
be obligated to transfer all such shares to the Company, for no consideration,
at such time as such transfer will not be in violation of any Canadian
government regulations governing tax and other financial incentives which may be
available to Tirex Canada. The terms of the Tirex Canada Shareholders Agreement
are discussed in more detail, below, in Item 12 of this Report, "Certain
Relationships and Related Transactions", under the caption "Transfer of 17% of
Tirex Canada Shares From Mr. Forbes to Mr. Byrne."
(4) Includes 4,308,292 shares which CG TIRE, Inc. (CGT) has the right to
acquire within sixty days pursuant to an option to purchase at a per share price
equal to fifty percent (50%) of the average of the final bid and ask prices of
the common stock of Tirex, as quoted in the NASDAQ electronic Bulletin Board
during the ten business days preceding the date of a notice
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of exercise given by the CG TIRE, all, or any part of, the number of shares of
the common stock of Tirex which would constitute ten percent, upon their
issuance (10%) of the common stock of Tirex, issued and outstanding at the date
of exercise (the "Option"), on a fully diluted basis. CGT is a wholly-owned
subsidiary of Continental General Tire Inc. ("General Tire"), one of the largest
tire manufacturers in the world. CGT is called by General Tire, "The Continental
General Tire Recycling Effort. The Option, which has a three-year term, was
granted to CGT on April 24, 1997, in consideration of CGT's agreement to: (1)
explore with the Company the possibility of the Company's: (a) furnishing
General Tire with all or part of its 80-mesh rubber crumb requirements and (b)
establishing local tire recycling centers for the purpose of accepting for
disintegration scrap tires from General Tire's network of independent dealers;
and (ii) advise the Company with respect to General Tire's specifications for
its rubber crumb requirements, any further development of such specifications in
the future, the suitability of the TCS-1 System for meeting such specifications,
and the further development of the Company's technology in coordination with
Continental Tire's product development requirements. Since such time, CGT has
worked closely on a number of projects designed to accomplish the foregoing (see
the discussion, above, under the caption "Proposed Tire Shredding Operations").
CGT has not, as of the date hereof, exercised any part of the Option. However,
On August 13, 1997, CGT gave notice ot the Company that it wished to exercise
the Option, in part, for the number of shares of the common stock of the Company
which constituted two and one-half percent (2.5%) of the common stock of the
Company, issued and outstanding as at that date (the "August 13th Portion"). The
Company was, at that time, engaged in (still ongoing) negotiations respecting a
private placement of its securities to be effected under Rule 506 of Regulation
D. In connection therewith, the Company wished to establish a six-month period,
during which no sales of unregistered securities were effected except for sales
made pursuant to employee compensation plans. The Company wished to do so in
order to establish a "safe harbor" under Rule 502 of Regulation D. This was
required in order to insure that past sales of unregistered securities made by
the Company would not be "integrated" with the contemplated private placement
and therefore make the Rule 506 exemption from the registration requirements of
the Securities Act unavailable to the Company. As a result of the foregoing, at
the time of CG TIRE's August 13, 1997 notice that it wished to exercise part of
the Option, the Company requested that CG TIRE postpone such exercise so as not
to cause the Company to effect any sales which would nullify the said "safe
harbor". CGT agreed, and in consideration for CG TIRE's waiving its right to
exercise on August 13, 1997, the Company agreed to amend the Option so as to
insure that when CGT does exercise the Option for the August 13th Portion, the
option exercise price for the shares included in such Portion will be the price
that would have been in effect as of August 13, 1997. Under the terms of the
Option, CGT has the right to have the shares underlying the Option registered at
any time during the exercise period. Subsequent to August 13, 1997, CGT demanded
that such registration be effected and the Company intends to comply with such
demand by filing with the Securities and Exchange Commission a registration
statement on Form SB-2, including all of the shares underlying the Option, as
promptly as practicable following the date hereof.
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(5) Includes 214,658 shares held of record by Sinermad Comercio E Invest,
Lda. of Madeira, Portugal ("SCIL"). Mr. Crossley is a controlling person of SCIL
and, as such, has sole or shared voting and investment power over such shares.
(6) Mr. Hartley holds an option (the "Hartley Option") to purchase twenty
thousand (or, under certain circumstances, more) shares of the Company's Class A
Cumulative Convertible Preferred Stock (the "Preferred Stock"), which shares
will be convertible into up to two million shares of the Company's common stock.
Mr. Hartley has not exercised such option nor has he indicated to the Company
that he intends to do so in the foreseeable future. The figures shown in the
Table, above, do not give effect to the exercise of the Hartley Option and do
not include any of the shares of common stock which would be issuable upon
conversion of the Preferred Stock. For a discussion in more detail of the terms
of the Hartley Option and Mr. Hartley's purchase thereof, reference is made to
Item 12 of this Report, "Certain Relationships and Related Transactions" under
the caption, "Extension of Exercise Period of Option Held by John G. Hartley".
(7) Includes 302,581 shares held of record by Mr. Sanzaro's spouse, Sharon
Sanzaro, over which shares Mr. Sanzaro disclaims any beneficial ownership.
(8) Includes 1,000,000 shares which each of Mr. Muro and Ms. Levine has the
right to acquire within sixty days pursuant to options granted to them on
September 3, 1997 during the period subsequent to that covered by this Report.
The said options were granted to Mr. Muro and Ms. Levine under the terms of
their respective employment agreements with the Company for the fiscal year
ended June 30, 1997. The per share exercise price under the options is equal to
the average of the high ask and the low bid price of this Corporation's common
stock, as traded in the over-the-counter market and quoted in the NASDAQ
electronic bulletin board as at the close of business on the date of the grant
of the said option, which was $0.39.
Changes in Control
The Company is not aware of any arrangements which may at a subsequent date
result in a change in control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a description of any transactions during the last two
years, or presently proposed transactions, to which the Company was or is to be
a party, in which the amount involved in such transaction (or series of
transactions) was $60,000 or more and which any of the following persons had or
is to have a direct or indirect material interest: (i) any director or executive
officer of the Company; (ii) any person who owns or has the right to acquire 5%
or
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more of the issued and outstanding common stock of the Company; and (iii) any
member of the immediate family of any such persons.
Agreements with Customers Controlled by Louis Sanzaro
On May 29, 1997, the Company entered into an Equipment Lease and Purchase
Agreement (the "O/V III L&P Agreement") with Ocean/Ventures III, Inc.("O/V III")
of Toms River, New Jersey ("O/V III") for the purchase and lease of the various
components which will comprise eight TCS-1 Systems. Also on that same date, the
Company entered into an Equipment Lease and Purchase Agreement (the "Oceans Tire
L&P Agreement") with Oceans Tire Recycling & Processing Co., Inc. ("Oceans
Tire") for the purchase and lease of the various components which will comprise
the first production model of the TCS-1 System. Louis Sanzaro, a member of the
Company's Board of Directors is a controlling person of both O/V III and Oceans
Tire. The O/V III L&P Agreement modified the terms of, and replaced, a prior
agreement between the parties dated June 6, 1995 (the "Prior O/V III
Agreement"). Mr. Sanzaro was appointed a director of the Company in January
1997. For details of the terms and provisions of the O/V III L&P Agreement and
the Oceans Tire L&P Agreement, as well as certain ancillary agreements executed
or agreed to in connection therewith, reference is made to the discussions
contained under the captions, "The O/V III Agreements" and "Agreements with
Oceans Tire Recycling & Processing Co., Inc" in the Subtopic "Sales" of Item I
of this Report.
Agreement to appoint Louis Sanzaro As
Exclusive Sales Representative in North America
Louis Sanzaro and the Company have agreed, in principal that Mr. Sanzaro
will be appointed as the Company's exclusive sales distributor in the United
States and Puerto Rico. The terms of the under which Mr. Sanzaro will serve as
such have not yet been finalized, but the Company intends that such terms will
be as beneficial, or better, to the Company than could be obtained in an arms
length transaction with a person with Mr. Sanzaro's qualifications.
Negotiations With Louis Sanzaro to Organize and Operate Service Provider For
Company
As Discussed in detail in the Subtopic, "Proposed Services" which is
included in Item I of this Report, the Company is presently negotiating with
Louis Sanzaro ("Sanzaro"), to organize and operate a maintenance company capable
of serving as the Company's authorized service provider and meeting all of the
services described which the Company will be obligated to provide under its
Proposed Maintenance Agreements (See the Subtopic, "Proposed Services" which is
included in Item I of this Report). Mr. Sanzaro has worked closely with the
Company on the development of the TCS-1 System and the proposed maintenance and
technical support program. Mr. Sanzaro is a highly respected, knowledgeable, and
experienced operator of recycling organizations in New Jersey and the Company
believes that he is eminently qualified
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to organize and head its maintenance and technical support effort. The parties
have not yet entered into an agreement respecting the terms under which Mr.
Sanzaro, or an organization under his control, will direct the Company's
maintenance services. Currently, however, the Company expects that the service
provider to be organized and operated by Mr. Sanzaro will be paid a flat fee of
$4,000 per month to cover all of the services described in Item I, above. The
service provider is also expected to furnish, at no additional cost, all
equipment necessary to effect the provision of such services.
Extension of Exercise Period of Option Held by John G. Hartley
On May 19, 1995, the Company sold to John G. Hartley, a director of the
Company, an option to purchase twenty thousand (20,000) shares of the Cumulative
Convertible Preferred Stock of the Company ("Preferred Stock") at an exercise
price of $10 per share, during a two-year exercise period which commenced on May
19, 1995 and will terminate on May 18, 1997. Mr. Hartley paid the Company twenty
thousand dollars ($20,000) for the said Option. Notwithstanding the foregoing,
since the Preferred Stock is convertible into Common Stock at a decreasing
ratio, should the total number of shares of the Preferred Stock which can be
purchased pursuant to the Option, be convertible into fewer than two million
(2,000,000) shares of the Company's Common Stock, the number of shares of
Preferred Stock purchasable under the Option, at the exercise price of ten
dollars per preferred share, will be increased to such number as is convertible
to 2,000,000 shares of Common Stock. The terms of the Preferred Stock
purchasable under the Option provide, among other things, for cumulative annual
cash dividends at the rate of $1.20 per share and conversion into shares of the
Company's Common Stock at the following ratios:
(a) From May 19, 1995 through November 19, 1995, one share of Preferred
Stock and each $10 of accumulated and unpaid dividends thereon, for 91
shares of Common Stock;
(b) From November 19, 1995 through February 18, 1996, one share of
Preferred Stock and each $10 of accumulated and unpaid dividends
thereon, for 50 shares of Common Stock;
(c) From February 19, 1996 through May 18, 1996, one share of Preferred
Stock and each $10 of accumulated and unpaid dividends thereon, for 33
shares of Common Stock;
(d) From May 19, 1996 through May 18, 1997, one share of Preferred Stock
and each $10 of accumulated and unpaid dividends thereon, for the
number of shares of the Company's Common Stock purchasable for ten
dollars at a per share price equal to 30% of the then current Market
Price of such Common Stock.
To date, Mr. Hartley has not exercised any part of the Option and the
Company has not issued any shares of the Preferred Stock. On May 29, 1997, the
Company acknowledged that
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(i) delivery of the first TCS-1 System and the commencement of business
operations by the Company had taken substantially more time than was estimated
by the Company in the Spring of 1995 when Mr. Hartley purchased the Option. In
recognition of this and other factors, the Board of Directors agreed to extend
the Option exercise period until May 18, 1999, convertible under the terms set
forth in subparagraph (d) above, with such conversion period extended to May 18,
1999.
Transfer of 17% of Tirex Canada Shares From Mr. Forbes to Mr. Byrne.
As discussed above, in Item I of this Report, under the caption "Tirex
Canada", in May of 1995, in an effort to take advantage of such certain
financial incentives, the Company formed a Canadian corporation, 3143619 Canada
Inc. (referred to herein as "Tirex Canada") in the Province of Quebec, Canada,
for the purpose of completing all research and development work on the first
production model of the TCS-1 System and thereafter serving as the Company's
manufacturing arm. For a discussion of the initial capitalization of Tirex
Canada, the original distribution of its shares among the Company and officers
and directors of the Company who are Canadian residents, the terms of the
shareholders agreement pursuant to which such shares are held, including but not
limited to the rights of the Company to regain 100% record, as well as
beneficial, ownership of Tirex Canada, reference is made to the discussion under
the caption "Existing and Proposed Canadian Financing, Manufacturing, and
Research and Development Operations" in Item 1 of the Company's annual report on
Form 10-K for the fiscal year ended June 30, 1996.
On July 3, 1995, there were, and as at the date hereof there are, a total
of one hundred shares of Tirex Canada stock issued and outstanding. In order to
position the Company to be eligible for Canadian government sponsored financial
incentives, on July 3, 1995, the Company transferred 51 of the 100 Tirex Canada
shares to Kenneth J. Forbes. Mr. Forbes, a shareholder and a former director of
the Company, is an officer and director of Tirex Canada. He agreed to hold such
shares pursuant to the terms and provisions of a Shareholders Agreement (the
"Tirex Canada Shareholders Agreement") which provided, among other things, for:
(I) Mr. Forbes to retain complete voting control over all shares held by him so
as to assure "control" by Canadian Residents; (ii) Tirex Canada's right to
redeem the shares held by the record holder in amounts equal to any number of
shares of Tirex Canada which may be sold to private investors who are also
Canadian the Company's (this will prevent Company's ownership interest in Tirex
Canada from being diluted to less than 49%; (iii) Company's right to direct the
transfer of all or any part of such shares to other individuals who are officers
and directors of the Company, so long as such other individuals are also
Canadian Residents who will hold such shares in accordance with the terms of the
Tirex Shareholders Agreement; (iv) the ability of the Company to eventually
regain 100% ownership of Tirex Canada at such time as such ownership will not
contravene any Canadian regulations respecting financial aid and assistance to
Tirex Canada or tax benefits to private Canadian investors, and (v) the escrow
of all shares subject to the Tirex Canada Shareholders Agreement.
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On February 8, 1996, in accordance with the terms of the Tirex Canada
Shareholders Agreement, at the request of the Company, Mr. Forbes transferred a
total of 34 of the 51 Canadian Shares held of record by him to Louis V. Muro and
Terence C. Byrne, in equal parts. Pursuant to an Amendment to the Tirex Canada
Shareholders Agreement, Messrs. Muro and Byrne, who are officers and directors
of both the Company and Tirex Canada, joined as parties to such Agreement and
agreed to hold such shares pursuant to the terms and provisions thereof. On
August 21, 1997, in accordance with the terms of the Tirex Canada Shareholders
Agreement, at the request of the Company, Mr. Forbes transferred the remaining
17 shares held by him to Terence C. Byrne, the Company's president and Chief
Executive Officer.
New Employment Agreement With Ms. Levine
From January 18, 1995 through and including December 21, 1996, Frances Katz
Levine was employed by the Company as its Secretary and General Counsel under
the terms of an employment agreement dated January 18, 1995 (the "First Levine
Employment Agreement"). On December 22, 1996, Ms. Levine resigned her positions
as Secretary, General Counsel, and as a Director of the Company. Her resignation
was not caused by any disagreement with the Company on any matter relating to
the Company's operations, policies, or practices. Following her resignation from
the foregoing positions, Ms. Levine has continued to be employed by the Company
as its in-house Corporate and United States Securities Counsel pursuant to the
terms of her employment agreement, dated December 22, 1996 (the "Second Levine
Employment Agreement"). The Principal terms and conditions of the First and the
Second Levine Employment Agreements, other than the commencement and termination
dates and the positions and exact nature of duties and responsibilities, are
essentially identical, except also for terms which were added in order to insure
that benefits and rights earned under the First Employment Agreement would not
be lost to Ms. Levine perforce of the foregoing changes. On May 1, 1997, the
Second Levine Employment Agreement was amended to explicitly state the original
intent of the parties that Ms. Levine would remain eligible to receive a
discretionary bonus for each year (or portion thereof) during which Ms. Levine
had served as Secretary and General Counsel under the First Levine Employment
Agreement. For a discussion in more detail of the terms and conditions of both
the First and the Second Levine Employment Agreements, reference is made to the
information contained above in Item 10 of this report, "Executive Compensation -
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements."
Extension of Employment Agreements With Mr. Byrne and Mr. Muro
The Company is a party to employment agreements with Terence C. Byrne, its
President and CEO and with Louis V. Muro, its Vice President in Charge of
Engineering. On May 1, 1997, the parties amended these employment agreements so
as to extend the term of Mr. Byrne's agreement until December 31, 2003 and Mr.
Muro's agreement until December 31, 2000. No other changes were made pursuant to
these amendments. For a discussion in more detail of the terms and conditions of
the Company's employment agreements with Mr. Byrne and Mr. Muro,
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reference is made to the information contained above in Item 10 of this report,
"Executive Compensation - Employment Contracts and Termination of Employment and
Change-in-Control Arrangements."
Executive Agreement With John L. Threshie, Jr.
On February 20, 1997, the Company entered into an employment agreement with
John L. Threshie, Jr., pursuant to which Mr. Threshie is employed as the
Company's Vice President of Operations. The agreement was made effective as of
January 1, 1996, the date when Mr. Threshie began serving in such capacity.
Since December 22, 1996, pursuant to the terms of the agreement, he has also
served as Secretary of the Company. The agreement is for a three-year term
ending December 31, 1998 and calls for compensation at the annual rate of
$50,000. For a discussion in more detail of the Executive Agreements, reference
is made to the information contained above in Item 10 of this report, "Executive
Compensation - Employment Contracts and Termination of Employment and
Change-in-Control Arrangements".
Executive Agreement With V.J. Kashru
On April 29, 1997, the Company entered into an employment agreement with
Vijay Kachru, pursuant to which Ms. Kachru is employed an Director of Market
Development. The Agreement was made effective as of September 1, 1996, the date
when Ms. Kachru began serving in such capacity. The Agreement is for a
three-year term ending August 31, 1999 and calls for compensation during the
term of the agreement, in the following amounts: (i) through and until March 31,
1998, ninety thousand Canadian dollars (CAN $90,000) per year; (ii) Commencing
as of February 1, 1998, ninety thousand United States dollars (US $90,000) per
year. For a discussion in more detail of the Executive Agreements, reference is
made to the information contained above in Item 10 of this report, "Executive
Compensation - Employment Contracts and Termination of Employment and
Change-in-Control Arrangements".
Issuance of Stock to Mr. Muro as Compensation for Past Services
Mr. Muro served as Secretary of the Company from December 29, 1992 until
March 1994 and as the Company's president from March 1994 until January 18,
1995. Mr. Muro received no compensation for any of the foregoing services, but
served on the basis of an understanding that he would be fairly and equitably
compensated. On January 17, 1997, the Board of Directors authorized the issuance
of a total of 1,113,636 shares of the Common Stock of the Company pursuant to
Mr. Muro's agreement to accept as compensation in for all services rendered
prior to January 18, 1995 at the same rate as he has been entitled to receive
for his services since such date. Based upon the foregoing, Mr. Muro was
entitled to payment of three hundred and six thousand, two hundred fifty dollars
($306,250) in respect of his pre-1995 services. The number of shares so issued
was calculated on the basis of one hundred and fifty percent (150%) of the
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average of the bid and ask prices of the Company's common stock, as traded in
the over-the-counter market and reported in the electronic bulletin board of the
NASD, during the calendar years of 1993 and 1994. The Company's stock was traded
only sporadically during such time. Therefore, calculations were based upon the
fifteen months during 1993 and 1994 when actual trading took place and for which
it was possible to obtain information. The average of the high and low closing
prices of the common stock of this corporation, as traded in the
over-the-counter market during such fifteen month period, which the Company was
able to obtain, was approximately $.18333 per share.
Amendment to NAIS Corp Consulting Agreement
On May 3, 1997, the Company entered into a Financial Consulting Agreement
(the "NAIS Consulting Agreement") with The NAIS Corp.("NAIS"), pursuant to which
NAIS was retained for a period of three years for compensation consisting of
5,231,092 (the "NAIS Shares") at a price of $.001 per share (the "NAIS Shares")
is a corporation under the control of Mr. Jack Ehrenhause. For a discussion in
more detail of the terms and conditions of the NAIS Consulting Agreement,
reference is made to the Company's Current Report on For 8-K, dated as of June
24, 1997, and filed with the Commission on July 14, 1997 and the exhibits
thereto. On July 1, 1997, the parties agreed to amend the NAIS Consulting
Agreement to more clearly state their mutual intentions respecting the services
to be performed by NAIS, which at all times had been limited to providing advice
and opinions to the Corporation with respect to evaluating the managerial,
professional, and financial requirements of the Company and advising and
assisting the Company with respect to its budgetary and business plan
requirements, marketing, stockholder relations, public relations, financial
arrangements, mergers, acquisitions, consolidations, joint ventures, and similar
corporate transactions. The parties entered into the said amendment because they
were concerned that certain activities stated in the NAIS Consulting Agreement
as duties of NAIS were: (i) not expressive of the actual intentions of the
parties and (ii) capable of being misconstrued as direct involvement in the
effectuation of a private placement or public offering of the securities of the
Company so as to be deemed to affect the underwriting compensation payable in
connection therewith. No other changes were made to the terms and conditions of
the NAIS Consulting Agreement. NAIS has the right to have the NAIS Shares
registered and has demanded that such registration be effected. The Company
intends to comply with such demand by filing with the Securities and Exchange
Commission a registration statement on Form SB-2, including all of the NAIS
Shares, as promptly as practicable following the date hereof.
Amendment of Stock Option held by CG TIRE, Inc.
On April 24, 1997, the Company granted to CG TIRE, Inc. (CGT) an option to
purchase at a per share price equal to fifty percent (50%) of the average of the
final bid and ask prices of the common stock of Tirex, as quoted in the NASDAQ
electronic Bulletin Board during the ten business days preceding the date of a
notice of exercise given by the CG TIRE, all, or any part of, the number of
shares of the common stock of Tirex which would constitute, upon their
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issuance, ten percent (10%) of the common stock of Tirex, issued and
outstanding, on a fully diluted basis (the "CGT Option"). As of August 13, 1997,
the Company agreed to amend the CGT Option with respect to the purchase price
for a certain portion of the CGT Option which CGT had wished to, but pursuant to
the request of the Company, did not, exercise as at that date. For a discussion
in detail of the terms of the CGT Option and the consideration received by the
Company therefor, see footnote (4) to the Principal Shareholders Table,
included, above in Item 11. of this Report, "Security Ownership of Certain
Beneficial Owners and Management".
Amendment of Stock Restriction Agreements.
All shares issued or transferred, either as Directors Shares or
Compensation Shares to Mr. Byrne, Mr. Muro, and Ms. Levine so issued or
transferred subject to the terms of certain stock restriction agreements (the
"Stock Restriction Agreements") between the Company and each of such persons.
Such Agreements were amended on May 30, 1996 and on May 1, 1997. Prior to the
amendments described below, the Stock Restriction Agreements subjected all of
the Directors and Compensation Shares to restrictions on transfer for a period
of three years, except for a limited number of shares which were allowed to be
sold pursuant to Rule 144 after two years, and to forfeiture in the event that
employment with the Company was terminated prior to the expiration of the
three-year terms of the respective Executive Agreements.
Amendments to Stock Restriction Agreements.
On May 30, 1996, an the Company and each of the executive officers entered
into amendments to their respective Stock Restriction Agreements (hereinafter,
the "Amended Stock Restriction Agreements"), which acknowledged the amendments
made concomitantly therewith to the Executive Agreements respecting the issuance
of Compensation Shares in lieu of cash compensation under the Executive
Agreements and the possibility of the registration of all or part of such shares
pursuant to a registration statement on Form S-8. On May 1, 1997, the Amended
Stock Restriction Agreements were further amended so as to reflect certain
changes in Rule 144 of the Securities Act of 1933, as amended (the "Securities
Act"), and to shorten the period required before Compensation Shares of the
Company's common stock, are permitted to be included in a registration statement
on Form S-8. The Amended Stock Restriction Agreements provide, among other
things, that: (i) all Compensation Shares will be issued and held pursuant to
the terms of one single stock restriction agreement rather than one stock
restriction agreement for each stock issuance, as had been the case prior to
such amendment; (ii) under certain circumstances, and within the limitations of
Rule 144, the Directors Shares and the Compensation Shares held by affiliates
are eligible for sale by the holders thereof one year after they were acquired
from the Company and (ii) to the extent that they are eligible, commencing
eighteen months after their issuance, such shares can registered for sale to the
public pursuant to a registration statement on Form S-8 which includes a Reoffer
Prospectus; (iii) there had been a mutual error on the part of the Company and
each of the executive officers respecting the effect of the forfeiture clauses
contained in the Stock Restriction Agreements on the commencement of
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the executive officers' beneficial ownership of the stock subject thereto
insofar as such provisions would operate to delay the commencement of the two
year holding period for purposes of Rule 144 until after the expiration of the
three-year term of the Executive Agreements. The parties agreed further that
such delay in the commencement of the Rule 144 holding period had at no time
been the intent of any of them and that inclusion of such provision had
therefore been an error ab initio (from the beginning). Because such forfeiture
provision had been included in the Stock Restriction Agreements pursuant to an
error on the part of all of the parties with respect to their meaning and
effect, the parties agreed that such forfeiture provisions should be deemed to
have been ab initio void and of no effect, that the Stock Restriction Agreements
should be deemed never to have included such forfeiture provisions. More
specifically, with respect to the foregoing effects of the amendments to the
Stock Restriction Agreements:
The effect of the foregoing amendments was twofold, in that: (i)
(1) Rule 144 Sales. Rule 144 provides, among other things, that if certain
information concerning the operating and financial affairs of the
Company is publicly available, persons holding restricted securities
for a period of one year may sell, in each subsequent three month
period, up to that number of such shares equal to the greater of (I)
one percent of the Company's outstanding common stock or (in the event
that the Company's common stock shall be listed on a national exchange
or included in the National Association of Securities Dealers
Automated Quotation System ["NASDAQ"]), (ii) the average weekly
reported volume of common stock trading during the four calendar weeks
preceding the filing of a notice of proposed sale. All executive
officers, directors, and holders of ten percent or more of the issued
and outstanding common stock of the Company may be deemed to be
"affiliates" of the Company for purposes of Rule 144. If a period of
at least two years has elapsed since stock was acquired from the
Company or from an affiliate of the Company, then persons, who have
not been affiliates of the Company for a period of at least three
months, may sell such stock without any limitations or restrictions.
(2) Offers and Sales Pursuant to Registration on Form S-8. Form S-8
provides special and simplified registration procedures for employee
benefit plans and/or the employer's securities that can be purchased
pursuant to the plan. A Form S-8 registration statement becomes
automatically effective upon filing with the Securities and Exchange
Commission. Form S-8 can be utilized by a reporting company (a company
which files annual, quarterly, and certain other reports pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934) to be offered to, or which have been acquired by, its
employees pursuant to any written option, purchase savings, bonus,
appreciation, profit sharing, thrift, incentive, pension, or similar
plan, or a written compensation contract. For purposes of registration
under Form S-8, "written compensation contracts" include individually
negotiated contractual agreements and the term, "employee" includes,
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(in addition to employees), officers, directors, consultants, and
advisors, provided they render services not connected with offers or
sales of securities in a capital raising transaction. For purposes of
eligibility for registration under a Form S-8:
(a) The employment agreements which the Company has entered into with
each of its executive officers, as well as the directors
compensation agreements with Messrs. Sanzaro and Crossley and the
employment agreement with Ms. Levine are individually negotiated
written compensation contracts constituting Employee Benefit
Plans, as defined in Rule 405 of the Securities Act of 1933;
(b) All of the Compensation Shares are considered to be "restricted
securities" insofar as they were issued under an employee benefit
plan pursuant to a Securities Act exemption prior to their
inclusion in a registration statement on Form S-8;
(c) Reoffers and resales of restricted securities may only be made
pursuant to a registration statement on Form S-8 by means of a
separate "reoffer prospectus", which is prepared in accordance
with the requirements of Part I of Form S-3 and included in, and
filed with, such registration statement. Restricted securities
may be included in a reoffer prospectus only if they have been
acquired by the selling shareholder prior to the filing of the
registration statement;
(d) If, at the time of filing a registration statement on Form S-8,
the company whose securities are being registered, does not
satisfy the requirements for use of Form S-3, then the number of
shares to be reoffered or resold by means of the reoffer
prospectus included in such registration statement by each
selling shareholder may not exceed, during any three month
period, the greater of (i) one percent of the outstanding class
of such securities (or, if such registrant's securities are
listed on a national exchange or included in NASDAQ,) (ii) the
average weekly reported volume of common stock trading during the
four calendar weeks preceding the filing of the Form S-8
registration statement. The Company has not, does not currently,
and will not for at least the twelve-month period following May
27, 1996, satisfy the registrant requirements for use of Form
S-3. The foregoing amount limitations on the number of shares
which may be reoffered and resold by each selling shareholder are
therefore applicable to all reoffer prospectuses forming part of
any S-8 registration statement heretofore filed by the Company or
hereafter filed by the Company for at least the twelve months
following the filing date of this report.
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3. Resales of Stock by Executive Officers
Pursuant to Rule 144 and Form S-8 Registration.
Although the number of shares which may be sold by any individual executive
officer of the Company pursuant to either Rule 144 or a Form S-8 reoffer
prospectus, is limited as described above, it should be noted that such volume
limitations are exclusive of each other. (Rule 144(e) provides that securities
sold pursuant to an effective registration statement (such as a Form S-8) need
not be included in determining the amount of securities sold in reliance upon
Rule 144. In the most practical and simple terms, this means that, as at such
time that the Rule 144 one-year holding period is satisfied for common stock
held by such persons, each of the persons discussed above would be entitled to
sell, under Rule 144, a number of shares equal to one percent of the total
issued and outstanding common stock of the Company every three months. In
addition, each such person could also sell an equal amount of shares pursuant to
an S-8 registration every three months. Such sales could have a depressive
effect on the price of the shares of the Company's common stock in the public
market. Such sales could also adversely affect the Company's ability to raise
capital at that time through the sale of its equity securities as well as its
ability to make acquisitions using its shares of Common Stock.
4. Possible Conflicts of Interest
Messrs. Byrne and Muro hold the bulk of the Company's shares which could be
eligible for an S-8 registration or sale under Rule 144. These same individuals
comprise two of the three members of the executive committee of the Company's
board of directors which has the power to authorize the issuance, as well as the
S-8 registration of, Compensation Shares (and any other securities of the
Company, such as stock bonus shares). As clearly demonstrated, the Company's
executive officers have, since January of 1995 (except Mr. Muro who has done so
since 1993), unstintingly devoted their full-time efforts to the goal of
establishing and developing the Company's business. For most of such periods,
none of them have received more than minimal cash compensation plus unregistered
shares of the Company's common stock which at the time of issuance had no or
only minimal value. Moreover, the stock which they received in compensation for
their services cannot and will not ever have any significant value other than
that which will arise directly out of the success of the efforts of such
individuals in attaining the aforesaid goals. All members of the Company's board
of directors believe that the Company's executive officers have at all times
acted, and will continue to act, in complete accord with their fiduciary duties
to the Company's shareholders. It should be noted, however, that such persons
could have possible conflicts of interest in authorizing the issuance and/or
registration of securities of the Company, including but not limited to
Compensation Shares. The market price of the Company's common stock, the
Company's ability to raise capital through the sale of its equity securities,
and the Company's ability to make acquisitions using its shares of common stock
could be adversely affected by such conflicts of interest. Management is
sensitive to this potential problem and therefore intends, at such time as it
has the financial and personnel resources to do so, to establish a special
committee of the board of directors composed of disinterested or outside
directors, or another equivalent body, charged with the exclusive authority
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to determine when and if shares issued by way of compensation to its executive
officers should be the subject of an S-8 registration. The Company also intends
to adopt stock options and stock bonus plans in which its directors, officers,
and employees will be eligible to participate.
Issuance of stock in Lieu of Salaries and
Consulting Fees
During the years ended June 30, 1997 and 1996, the Company's executive
officers and, since December 22, 1996, its in-house corporate and securities
counsel, have waived substantial portions of their salaries and unreimbursed
expenses made by them on behalf, and for the account, of the Company, and have
accepted shares of the Company's common stock in lieu thereof. In connection
therewith:
Year ended June 30, 1996
For the one-month period which commenced on July 1, 1995 and ended on July
31, 1995, Mr. Byrne waived payment of $20,833.34 and Ms. Levine waived payment
of $12,500. In connection therewith, on July 25, 1995, the Company authorized
the issuance 138,888 shares to Mr. Byrne and 83,334 shares to Ms. Levine. The
number of shares issued to Mr. Byrne and Ms. Levine at such time was calculated
on the basis of 50% of the average of the bid and ask price for the Company's
stock (approximately $.30 per share) during the nine-day period preceding July
25, 1995.
For the three and one-half month period which commenced on August 1, 1995
and ended on November 15, 1995, Mr. Byrne waived payment of $66,971 and Ms.
Levine waived payment of $43,750. In connection therewith, on November 15, 1995,
the Company authorized the issuance 446,112 shares to Mr. Byrne and 291,667
shares to Ms. Levine. The number of shares issued to Mr. Byrne and Ms. Levine at
such time was calculated on the basis of 50% of the average of the bid and ask
price for the Company's stock (approximately $.30 per share) during the two-week
period preceding November 15, 1995.
For the three-month period which commenced on July 1, 1995 and ended on
September 30, 1995, Mr. Muro waived payment of $37,500 in unpaid consulting
fees. In connection therewith, on January 1, 1996, the Company authorized the
issuance 250,000 shares to Mr. Muro. The number of shares issued to Mr. Muro at
such time was calculated on the basis of 50% of the average of the bid and ask
price for the Company's stock (approximately $.30 per share) during the
three-month period ended September 30, 1995.
For the one and one-half month period which commenced on November 16, 1995
and ended on December 31, 1995, Mr. Byrne waived payment of $31,250 and Ms.
Levine waived payment of $18,750 In connection therewith, on January 1, 1996,
the Company authorized the issuance 284,091 shares to Mr. Byrne and 170,455
shares to Ms. Levine. The number of shares
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issued to Mr. Byrne and Ms. Levine at such time was calculated on the basis of
50% of the average of the bid and ask price for the Company's stock
(approximately $.22 per share) during the three-month period ended December 31,
1995.
For the three-month period which commenced on October 1, 1995 and ended on
December 31, 1995, Mr. Muro waived payment of $37,500 in unpaid consulting fees.
In connection therewith, on January 1, 1996, the Company authorized the issuance
340,910 shares to Mr. Muro. The number of shares issued to Mr. Muro at such time
was calculated on the basis of 50% of the average of the bid and ask price for
the Company's stock (approximately $.22 per share) during the three-month period
ended December 31, 1995.
For the three-month period which commenced on January 1, 1996 and ended on
March 31, 1996, Mr. Byrne waived payment of $57,864.50, Ms. Levine waived
payment of $37,500, and Mr. Muro waived payment of $35,457. In connection
therewith, on April 1, 1996, the Company authorized the issuance 526,041 shares
to Mr. Byrne, 340,910 shares to Ms. Levine, and 322,337 to Mr. Muro. The number
of shares issued at such time was calculated on the basis of 50% of the average
of the bid and ask price for the Company's stock (approximately $.22 per share)
during the three-month period ended March 31, 1996.
For the two and one-half month period which commenced on January 15, 1996
and ended on March 31, 1996, Mr. Threshie waived payment of $10,416 in unpaid
compensation. In connection therewith, on April 2, 1996, the Company authorized
the issuance 94,691 shares to Mr. Threshie. The number of shares issued to Mr.
Threshie at such time was calculated on the basis of 50% of the average of the
bid and ask price for the Company's stock (approximately $.22 per share) during
the three-month period ended March 31, 1996.
For the three-month period which commenced on April 1, 1996 and ended on
June 30, 1996, Mr. Byrne waived payment of $55,711, Ms. Levine waived payment of
$37,500, Mr. Muro waived payment of $31,952, and Mr. Threshie waived payment of
$11,898. In connection therewith, in the period subsequent to that covered by
this report, on July 12, 1996, the Company authorized the issuance 280,943
shares to Mr. Byrne, 189,170 shares to Ms. Levine, 161,120 to Mr. Muro, and
61,015 to Mr. Threshie. The number of shares issued at such time was calculated
on the basis of 50% of the average of the bid and ask price for the Company's
stock (approximately $.39 per share) during the three-month period ended June
30, 1996.
Year Ended June 30, 1997
For the fiscal quarter ended September 30, 1996, Mr. Byrne waived payment
of $51,769, Ms. Levine waived payment of $31,062, Mr. Muro waived payment of
$29,324, and Mr. Threshie waived payment of $9,945. In connection therewith, on
September 30, 1996, the Company authorized the issuance 329,738 shares to Mr.
Byrne, 197,847 shares to Ms. Levine, 186,777 to Mr. Muro, and 62,392 to Mr.
Threshie. The number of shares issued at such time was calculated on the basis
of 50% of the average of the bid and ask price for the Company's stock
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(approximately $.314 per share) during the three-month period ended September
30, 1996. On April 28, 1997, The Company authorized the issuance to Ms. Kachru
of 32,396 shares in lieu of $5,475 in salary waived by her for services
performed during the month of September 1996. The number of shares issued to Ms.
Kachru was calculated on the basis of the price of the Company's common stock
during the quarter ended September 30, 1996.
For the fiscal quarter ended December 31, 1996, Mr. Byrne waived payment of
$40,966, Ms. Levine waived payment of $33,446, Mr. Muro waived payment of
$23,910, Mr. Threshie waived payment of $12,074, and Ms. Kachru waived payment
of $9,819. In connection therewith, on January 17, 1997, the Company authorized
the issuance 285,876 shares to Mr. Byrne, 233,402 shares to Ms. Levine, 166,853
to Mr. Muro, and 84,260 to Mr. Threshie. On April 28, 1997, The Company
authorized the issuance to Ms. Kachru of 68,520 shares in lieu of salary waived
by her for services performed during this quarter.The number of shares issued at
such time was calculated on the basis of 50% of the average of the bid and ask
price for the Company's stock (approximately $.314 per share) during the
three-month period ended December 31, 1996.
For the fiscal quarter ended March 31, 1997, Mr. Byrne waived payment of
$41,836, Ms. Levine waived payment of $30,554, Mr. Muro waived payment of
$22,732, Mr. Threshie waived payment of $1,934, and Ms. Kachru waived payment of
$6,715. In connection therewith, on April 28, 1997, the Company authorized the
issuance 195,495 shares to Mr. Byrne, 142,776 shares to Ms. Levine, 106,224 to
Mr. Muro, 9,037 to Mr. Threshie, and 31,383 to Ms. Kachru. The number of shares
issued at such time was calculated on the basis of 50% of the average of the bid
and ask price for the Company's stock (approximately $.314 per share) during the
three-month period ended March 31, 1997.
For the fiscal quarter ended June 30, 1997, Mr. Byrne waived payment of
$52,972, Ms. Levine waived payment of $41,640, Mr. Muro waived payment of
$22,524, Mr. Threshie waived payment of $3,140, and Ms. Kachru waived payment of
$5,905. In connection therewith, on April 28, 1997, the Company authorized the
issuance 319,108 shares to Mr. Byrne, 250,843 shares to Ms. Levine, 135,686 to
Mr. Muro, 18,915 to Mr. Threshie, and 35,572 to Ms. Kachru. The number of shares
issued at such time was calculated on the basis of 50% of the average of the bid
and ask price for the Company's stock (approximately $.314 per share) during the
three-month period ended June 30, 1997.
Subsequent Period
During the approximately three and one-half months since the end of fiscal
1997, the Company's executive officers and in-house corporate and securities
counsel, have continued to waive substantial portions of their salaries and
unreimbursed expenses made by them on behalf, and for the account, of the
Company. To date not shares have been issued in connection therewith.
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Registration of Compensation Shares
The Company has filed with the Securities and Exchange Commission registration
statements on Forms S-8 respecting the shares of its Common Stock issued to its
executive officers and in-house corporate and securities counsel, as follows:
(a) On July 22, 1996, the Company registered 220,000 shares for each of
Mr. Byrne and Ms. Levine;
(b) On March 21, 1997, the Company registered 166,174 shares for each of
Mr. Byrne and Ms. Levine, 150,000 shares for Mr. Muro, and 50,000
shares for Mr. Threshie;
(c) On August 27, 1997, the Company registered 221,572 shares for Mr.
Byrne, 291,667 shares for Ms. Levine, 242,746 shares for Mr. Muro, and
50,000 shares for Mr. Threshie.
Unless circumstances compel otherwise, management intends to file
additional Form S-8 registration statements for reoffers and resales of
additional Compensation Shares now held by, or in future issued to, its
executive officers and other employees. The Company has not, does not currently,
and will not for at least the twelve-month period following May 19, 1997,
satisfy the registrant requirements for use of Form S-3. As a result, the number
of shares of the Company's common stock which may be reoffered or resold by any
individual selling shareholder pursuant to a reoffer prospectus included in any
Form S-8 registration statement filed by the Company, may not exceed, during any
three-month period, the greater of (i) one percent of the Company's outstanding
common stock or, (in the event that the Company's common stock shall be listed
on a national exchange or included in NASDAQ), (ii) the average weekly reported
volume of common stock trading during the four calendar weeks preceding the
filing of such reoffer prospectus.
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ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Financial Statements
The financial statements filed as a part of this report are as follows:
Consolidated Balance Sheet - June 30, 1997
Consolidated Statements of Operations for the years ended
June 30, 1996 and 1997, and cumulative
for the period from inception (July 15, 1987) to
June 30, 1997
Consolidated Statements of Owners' Equity (Deficit) as at
July 15, 1987 and June 30, 1988 - 1997
Consolidated Statements of Cash Flows for the years
ended June 30, 1996 and 1997 and cumulative for the
period from inception (July 15,1987) to June 30, 1997
Financial Statement Schedules
Financial statements schedules have been omitted for the reason that they
are not required or are not applicable, or the required information is shown in
the financial statements or notes thereto.
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Exhibits
The exhibits filed as a part of this Report or incorporated herein by
reference are as follows:
Exhibits
Incorporated
Herein By
Reference,
Exhibit No.
As Filed
With Document
Indicated
---------
1. (a) Underwriting Agreement (2) 1(a)
(b) Selected Dealer Agreement (2) 1(b)
(c) Escrow Agreement (2) 1(c)
2. (a) Agreement and Plan of Merger and
Reorganization, dated May 9, 1989 (1) 2
(b) Certificate of Merger, filed with the
Secretary of State of Delaware on June 8, 1989 (5) 2(b)
(c) Certificate of Merger, filed with the
Secretary of State of New Jersey on June 8, 1989 (5) 2(c)
(d) Acquisition Agreement between the Company
and Robert V. McCausland dated January 15, 1993 (7) 2
(e) Acquisition Agreement among the Company,
Patrick McLaren, Louis V. Muro and George
Fattell, dated March 26, 1993 (8) 2
3. (a) Certificate of Incorporation filed August 19, 1987 (2) 3(a)
(b) Certificate of Amendment filed June 20, 1989 (5) 3(b)
(c) Certificate of Amendment filed March 10, 1993 (8) 3
(d) Certificate of Amendment filed December 5, 1995 (9) 3(e)
(e) By-Laws (2) 3(b)
4. (a) Specimen common stock certificate (3) 4(a)
(b) Specimen redeemable "A" common stock
purchase warrant (1) 4(a)
(c) Specimen redeemable "B" common stock
purchase warrant (1) 4(b)
(d) Specimen redeemable "C" common stock
purchase warrant (1) 4(c)
(e) Underwriter's Warrant (2) 4
(f) Form of Option to John Hartley for the purchase
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of 20,000 shares of Preferred Stock (9) 4(g)
(g) Form of Exchangeable Option, Dated October 5,
1995, to Sharon Sanzaro for the purchase of 560,000
shares of common stock (9) 4(h)
(h) Form of Exchangeable Option, Dated October 5,
1995, to Raymond Pirraglia for the purchase of 140,000
shares of common stock (9) 4(i)
(i) Form of Exchangeable Option, Dated October 5,
1995, to Terry Bentley for the purchase of 100,000
shares of common stock (9) 4(j)
(j) Form of Exchangeable Option, Dated January 1,
1996, to Raymond Pirraglia for the purchase of 43,750
shares of common stock(9) 4(k)
(k) Form of Exchangeable Option, Dated January 1,
1996, to Terry Bentley for the purchase of 31,250
shares of common stock (9) 4(l)
(l) Form of Exchangeable Option, Dated January 1,
1996, to Sharon Sanzaro for the purchase of 175,000
shares of common stock (9) 4(m)
(m) Specimen Preferred Stock Certificate (9) 4(f)
(n) Form of Exchangeable Option, Dated as of March 31,
1996, to Raymond Pirraglia for the purchase of 43,750
shares of common stock (12) 4(n)
(o) Form of Exchangeable Option, Dated as of March 31,
1996, to Terry Bentley for the purchase of 31,250
shares of common stock (12) 4(o)
(p) Form of Exchangeable Option, Dated as of March 31,
1996, to Sharon Sanzaro for the purchase of 175,000
shares of common stock (12) 4(p)
(q) Form of Exchangeable Option, Dated July 1,
1996, to Raymond Pirraglia for the purchase of 43,750
shares of common stock (12) 4(q)
(r) Form of Exchangeable Option, Dated July 1,
1996, to Terry Bentley for the purchase of 31,250
shares of common stock (12) 4(r)
(s) Form of Exchangeable Option, Dated July 1,
1996, to Sharon Sanzaro for the purchase of 175,000
shares of common stock (12) 4(s)
(t) Form of Option, Dated April 24, 1997 to CG TIRE, INC.
for the purchase of up to 10% of the common stock of Registrant
99
<PAGE>
10.(a) Consulting Agreement among Concord and
Stamford Financial Consulting, dated August 31, 1987 (2) 10
(b) Letter between Concord and Stamford
Financial Consulting, dated January 1987 (2) 10(e)
(c) Employment Agreement between the Company
and J. R. Goldstein (1) 28(h)
(d) Employment agreement between the Company
and Peter Stratton (1) 28(i)
(e) Employment agreement between the Company
and Robert Kopsack (1) 28(j)
(f) Certificate of need approval letter
from the NJ Department of Health,
dated August 1, 1988 (3) 10(e)
(g) Architectural approval letter from
the NJ Department of Health, dated
August 4, 1988 (3) 10(f)
(h) Letter of understanding from the
NJ Department of Human Services,
dated July 12, 1988 (3) 10(g)
(i) Occupancy Contract, dated July 18, 1988
between the NJ City Health Care Corp. and
the Company for use of sixteenth floor,
Jersey City Medical Center (1) 10(f)
(j) Reimbursement letter, dated July 27, 1988
from CIGNA Healthplan of Northern New
Jersey, Inc. (1) 28(g)
(k) Letter of Support, dated August
29, 1988 from Northern New Jersey
Health Planning Council (3) 10(k)
(l) Letter of Support, dated August 23,
1988 from Orange General Hospital (3) 10(k)
(m) Letter of Support, dated October 25,
1988 from New Jersey Buddies (3) 10(l)
(n) Letter of Support, dated September 14,
1987 from Hyacinth Foundation (3) 10(m)
(o) Letter of Support, dated August 12,
1988 from The Jersey City Mayor's
AIDS Task Force (3) 10(n)
(p) Letter of Support, dated August 19, 1988
from Regional Health Planning Council (3) 10(o)
(q) Letter of Support, dated December 16,
1987 from the University of Medicine
& Dentistry of New Jersey (3) 10(p)
100
<PAGE>
(r) Letter of Support, dated July 19, 1988
from United Hospitals Medical Center (3) 10(q)
(s) Letter of Support, dated July 19, 1988
from the Public Health Nursing Agency of
Warren County (3) 10(r)
(t) Letter of Support, dated August 2, 1988
from Hackettstown Community Hospital (3) 10(s)
(u) Letter of Support, dated July 25, 1988
from Irvington General Hospital (3) 10(t)
(v) Letter of Support, dated July 25, 1988
from Catholic Community Services (3) 10(u)
(w) Letter of Support, dated July 21, 1988
from the Inter County Council on
Drug and Alcohol Abuse, Inc. (3) 10(v)
(x) Letter of Support, dated July 26, 1988
from the Hospital Center at Orange (3) 10(w)
(y) Letter of Support, dated July 21, 1988
from the Health Force of Essex County (3) 10(x)
(z) Letter of Support, dated July 21, 1988
from Barnert Memorial Hospital Center (3) 10(y)
(aa) Letter of Support, dated July 19, 1988
from Union Hospital (3) 10(z)
(bb) Letter of Support, dated July 19, 1988
from Saint Barnabas Medical Center (3) 10(aa)
(cc) Letter of Support, dated July 21, 1988
from Meadowlands Hospital Medical Center (3) 10(bb)
(dd) Letter of Support, dated August 26, 1988
from Integrity, Inc. (3) 10(cc)
(ee) Letter of Support, dated September 6,
1988 from Morristown Memorial Hospital (3) 10(dd)
(ff) Letter of Support, dated August 4, 1988
from The Mountainside Hospital (3) 10(ee)
(gg) Letter of Support, dated August 12, 1988
from Hunterdon Medical Center (3) 10(ff)
(hh) Letter of Support, dated July 26, 1988
from C.U.R.A., Inc. (3) 10(gg)
(ii) Certificate of need approval letter for
home health care services from the NJ
Department of Health, dated June 28, 1989 (6) 10(ii)
(jj) Demand Note and Letter Agreement, dated
September 19, 1989 between the Company and
Citizens First National Bank of New Jersey (6) 10(jj)
(kk) Promissory Note, dated September 2, 1987
between the Company and Dorothy Goldstein (6) 10(kk)
101
<PAGE>
(ll) Promissory Note, dated September 2, 1987
between the Company and American Bronze Corp. (6) 10(ll)
(mm) Promissory Note, dated November 23, 1988
between the Company and Joseph Ritt (6) 10(mm)
(nn) Promissory Note, dated August 26, 1988
between the Company and Peter D. Stratton (6) 10(nn)
(oo) Promissory Note, dated April 24, 1988
between the Company and Robert E. Kopsack (6) 10(oo)
(pp) Promissory Note, dated December 5, 1988
between the Company and
Goldstein & Stratton Associates (6) 10(pp)
(qq) Promissory Note, dated September 16, 1987
between the Company and J. Richard Goldstein (6) 10(qq)
(rr) Executive Agreement, dated Jan 18, 1995,
between the Company and Terence C. Byrne (9) 10(rr)
(ss) Executive Agreement, dated Jan 18, 1995,
between the Company and Frances Katz Levine (9) 10(ss)
(tt) Stock Restriction Agreements, dated Jan 18, 1995,
June 1, 1995, and July 31, 1995 between the Company
and Terence C. Byrne (9) 10(tt)
(uu) Stock Restriction Agreements, dated Jan 18, 1995,
June 1, 1995, July 31, 1995 between the Company
and Frances Katz Levine (9) 10(uu)
(vv) Consultant Agreement, dated Jan 18, 1995,
between the Company and Louis V. Muro (9) 10(vv)
(ww) Executive Agreement, dated Jan 1, 1996,
between the Company and Louis V. Muro (9) 10(ww)
(xx) Distribution Agreement dated April 4, 1995,
between the Company and Floogle Ltd.,
as amended effective January 12, 1996* (9) 10(xx)
(yy) Sales Representation Agreement, dated July 25, 1995,
between the Company and Contesa Consultores
Tecnicos Especiales, S.A.* (9) 10(yy)
(zz) Marketing Services Agreement, dated July 25, 1995,
between the Company and Contesa Consultores
Tecnicos Especiales, S.A. (9) 10(zz)
(aaa) Superseded "Purchase and Option" Agreement, dated
June 6, 1995, between the Company and
Ocean/Ventures III, Inc.(9) 10(aaa)
102
<PAGE>
(bbb) Revised "Letter" Agreement, dated October 5, 1995, among
Tirex Canada, the Company, and Ocean/Ventures III, Inc. with
Maintenance Agreement, of even date therewith, among Tirex
Canada, the Company, and Ocean/Ventures III,
Inc., as exhibit thereto. (9) 10(bbb)
(ccc) License Agreement, dated October 5, 1995, among
Tirex Canada, the Company and
Ocean/Ventures III, Inc. (9) 10(ccc)
(ddd) Master Lease Agreement, dated October 19, 1995,
between the Company and Ocean/Ventures III, Inc. (9) 10(ddd)
(eee) Lease Agreement, dated October 19, 1995,
among Tirex Canada, the Company, and
Ocean/Ventures III, Inc. re: 1st TCS-1 System (9) 10(eee)
(fff) Sales Representation Agreement, dated November 3, 1995,
between the Company and Sipael S.r.l., via C. Manassei 77,
Roma 00151, Italy
Tecnicos Especiales, S.A (9) 10(fff)
(ggg) License Agreement , dated as of July 3, 1995 between
the Company and Tirex Canada (9) 10(ggg)
(hhh) Shareholders Agreement, dated as of July 3, 1995, as
amended February 8, 1996 among the Company,
Tirex Canada, Kenneth J. Forbes, Terence C. Byrne,
and Louis V. Muro (9) 10(hhh)
(iii) Consulting Agreement, dated as of October 5, 1995, between
the Company and Terry L. Bentley. (10) 4.1
(jjj) Consulting Agreement, dated as of October 5, 1996, between
the Company and Sharon Sanzaro. (10) 4.2
(kkk) Consulting Agreement, dated as of October 5, 1996, between
the Company and Raymond Pirraglia. (10) 4.3
(lll) Special Compensation Agreement, dated April 1, 1996,
between the Company and Terence C. Byrne (11) 4.5
(mmm) Special Compensation Agreement, dated April 1, 1996,
between the Company and Frances Katz Levine (11) 4.6
(nnn) Amendment No. 1 dated May 30, 1996, to Executive
Agreement, dated Jan. 18, 1995, between the Company
and Terence C. Byrne (11) 4.7
(ooo) Amendment No. 1 dated May 30, 1996, to Executive
Agreement, dated Jan. 18, 1995, between the Company
and Frances Katz Levine (11) 4.8
(ppp) Amendment No. 1 dated May 30, 1996, to Stock Restriction
Agreement, dated June 1, 1995, between the Company
and Terence C. Byrne (11) 4.9
103
<PAGE>
(qqq) Amendment No. 1 dated May 30, 1996, to Stock Restriction
Agreement, dated June 1, 1995, between the Company
and Frances Katz Levine (11) 4.9
(rrr) Special Compensation Agreements, dated June 1, 1995,
July 25, 1995, November 15, 1995, and March 18, 1996
between the Company and Terence C. Byrne (12) 10(rrr)
(sss) Special Compensation Agreements, dated June 1, 1995,
July 25, 1995, November 15, 1995, and March 18, 1996
between the Company and Frances Katz Levine (12) 10(sss)
(ttt) Special Compensation Agreements, dated November 15, 1995
and March 18, 1996, and April 1, 1996
between the Company and Louis V. Muro (12) 10(ttt)
(uuu) Letter dated October 14, 1996 from Ocean/Venture III, Inc.
to Tirex America Inc. (12) 10(uuu)
(vvv) English translation of Agreement for Financial Assistance
for Technology Development between La Societe Quebecoise
de Recuperation et de Recyclage and
Tirex Canada Inc. (12) 10(vvv)
(www) Commitment, dated April 11, 1996, from the
Industrial Recover Program for Southwest Montreal,
for a loan of up to $500,000 (Canadian) (12) 10(www)
(xxx) Amendment No. 1 to Stock Restriction Agreement
of January 18, 1995, dated May 30, 1996, between
the Company and Terence C. Byrne. (12) 10(xxx)
(yyy) Amendment No 1. to Stock Restriction Agreement
of January 18, 1995, dated May 30, 1996,
between the Company and Frances Katz Levine. (12) 10(yyy)
(zzz) Financial Consulting Agreement, dated May 3, 1997,
between Registrant and The NAIS Corp. (15) 10
(aaaa)Amendment, dated July 1, 1997, to Financial
Consulting Agreement, dated May 3, 1997, between
Registrant and the NAIS Corp.
(bbbb)Employment Agreement, effective as of January 1, 1996, between
Registrant and John L. Threshie, Jr. (13) 4.4
(cccc)Employment Agreement, dated April 29, 1997,
between Registrant and Vijay Kachru
(dddd)Amendment No.2, dated May 1, 1997, to Stock Restriction
Agreement of April 1, 1996, between Registrant
and Louis V. Muro
(eeee)Amendment No. 2, dated May 1, 1997, to Stock Restriction
Agreement of June 1, 1995 between Registrant
and Terence C. Byrne
(ffff)Amendment No. 2, dated May 1, 1997, to Stock Restriction
104
<PAGE>
Agreement of June 1, 1995 between Registrant
and Frances Katz Levine
(gggg)Employment Agreement, dated December 22, 1997, between
Registrant and Frances Katz Levine
(hhhh)Amendment, dated May 1, 1997, to Employment Agreement
of December 22, 1996, between Registrant and
Frances Katz Levine
(iiii)Amendment, dated May 1, 1997, to Employment Agreement
of January 18, 1995, between Registrant and
Terence C. Byrne
(jjjj)Amendment, dated May 1, 1997 to Employment Agreement
of January 1, 1996, between Registrant and
Louis V. Muro
(kkkk) Equipment Lease & Purchase Agreement, dated May 29, 1997,
between Registrant and Oceans Tire Recycling & Processing
Co., Inc., including Royalty Agreement and Rubber Crumb
Brokerage Agreement, of even date therewith, as Exhibits
thereto
(kkkk) Equipment Lease & Purchase Agreement, dated May 29, 1997,
between Registrant and Ocean Ventures III, Inc.,
including Royalty Agreement and Rubber Crumb Brokerage
Agreement, of even date therewith, as Exhibits thereto
(llll) Equipment Lease & Purchase Agreement, dated May 29, 1997,
between Registrant and Ocean Ventures III, Inc.,
including Royalty Agreement and Rubber Crumb Brokerage
Agreement, of even date therewith, as Exhibits thereto
(mmmm) Equipment Lease & Purchase Agreement, dated July 8, 1997,
between Registrant and Recycletron Inc., including
Royalty Agreement and Rubber Crumb Brokerage Agreement,
of even date therewith, as Exhibits thereto
17. (a) Release and Resignation of J. Richard Goldstein,
dated November 5, 1992 (7) 17(a)
(b) Release and Resignation of Robert Kopsack,
dated November 5, 1992 (7) 17(b)
(c) Release and Resignation of Peter Stratton,
dated November 5, 1992 (7) 17(c)
(d) Release and Resignation of George Fattell,
dated March 24, 1994 (9) 17(d)
(e) Notice and Release of Escrow Agent by Patrick McLaren
and Louis V. Muro, dated January 18, 1995 (9) 17(e)
21. (a) Subsidiaries of the Company
105
<PAGE>
22. Notice to Shareholders, dated July 21, 1997,
Pursuant to Delaware General Corporation
Law Section 228(d), respecting the amendment
of the Certificate of Incorporation, changing
Registrant's name to "The Tirex Corporation" (16) 20
28 (a) Prospectus of the Company, dated November 29, 1988 (4)
(b) Letter, dated June 15, 1989 from the Company to its
stockholders regarding the merger with
Stopwatch, Inc. and the corporate name change (3) 28(b)
99 (a) Feasibility Study by Techtran:
Tehnology Transfer Institute (12)
- ----------
Notes
(1) Filed with the Securities and Exchange Commission on June 21, 1989, as
an exhibit, numbered as indicated above, to the Company's current report on Form
8-K dated June 1, 1989, which exhibits are incorporated herein by reference.
(2) Filed with the Securities and Exchange Commission as an exhibit,
numbered as indicated above, to the registration statement of the Company on
Form S-18, File No. 33-17598-NY, which exhibits are incorporated herein by
reference.
(3) Filed with the Securities and Exchange Commission as an exhibit,
numbered as indicated above, to the Company's annual report on Form 10-K for the
fiscal year ended December 31, 1988, which exhibits are incorporated herein by
reference.
(4) Filed with the Securities and Exchange Commission on December 13, 1988
and incorporated herein by reference.
(5) Filed with the Securities and Exchange Commission on August 10, 1989,
as an exhibit, numbered as indicated above, to post-effective amendment no. 1 to
the registration statement of the Company on Form S-18, File No. 33-17598-NY,
which exhibits are incorporated herein by reference.
(6) Filed with the Securities and Exchange Commission as an exhibit,
numbered as indicated above, to the Company's transition report on Form 10-K for
the transition period December 31, 1988 to June 30, 1989, which exhibits are
incorporated herein by reference.
106
<PAGE>
(7) Filed with the Securities and Exchange Commission on February 1, 1993,
as an exhibit, numbered as indicated above, to the Company's current report on
Form 8-K dated November 5, 1992, which exhibits are incorporated herein by
reference.
(8) Filed with the Securities and Exchange Commission on April 15, 1993, as
an exhibit, numbered as indicated above, to the Company's current report on Form
8-K dated March 10, 1993, which exhibits are incorporated herein by reference.
(9) Filed with the Securities and Exchange Commission as an exhibit,
numbered as indicated above, to the Company's annual report on Form 10-KSB for
the fiscal year ended June 30, 1995, which exhibits are incorporated herein by
reference.
(10) Filed with the Securities and Exchange Commission on June 20, 1996 as
an exhibit, numbered as indicated above, to the registration statement of the
Company on Form S-8, File No. 333-5090, which exhibits are incorporated herein
by reference.
(11) Filed with the Securities and Exchange Commission on June 22, 1996 as
an exhibit, numbered as indicated above, to the registration statement of the
Company on Form S-8, Registration No. 333-5310, which exhibits are incorporated
herein by reference.
(12) Filed with the Securities and Exchange Commission as an exhibit,
numbered as indicated above, to the Company's annual report on Form 10-KSB for
the fiscal year ended June 30, 1996, which exhibits are incorporated herein by
reference.
(13) Filed with the Securities and Exchange Commission on March 21, 1997 as
an exhibit, numbered as indicated above, to the registration statement of the
Company on Form S-8, Registration No. 333-23759, which exhibits are incorporated
herein by reference.
(14) Filed with the Securities and Exchange Commission on August 27, 1997
as an exhibit, numbered as indicated above, to the registration statement of the
Company on Form S-8, Registration No. 333-34369, which exhibits are incorporated
herein by reference.
(15) Filed with the Securities and Exchange Commission on July 14, as an
exhibit, numbered as indicated above, to the Company's current report on Form
8-K dated June 24, 1997, which exhibits are incorporated herein by reference.
(16) Filed with the Securities and Exchange Commission on August 14, 1997,
as an exhibit, numbered as indicated above, to the Company's current report on
Form 8-K dated July 11, 1997, which exhibits are incorporated herein by
reference.
107
<PAGE>
Reports on 8-K
The Company filed the following current report on Form 8-K during the last
quarter of the period covered by this report:
Current Report on Form 8-K, dated, June 24, 1997, filed with the Commission on
July 14, 1997.
108
<PAGE>
SIGNATURES
In accordance with Section 15(d) of the Exchange Act of 1934, the Company
caused this Report to signed on its behalf by the undersigned thereunto duly
authorized.
TIREX AMERICA INC.
By /s/ Terence C. Byrne
-----------------------------------------
Date: October 10, 1997 Terence C. Byrne, President and Treasurer
In accordance with Section 15(d) of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Company in the capacities and on the dates indicated.
SIGNATURES TITLE Date
Principal Executive Officer:
/s/ Terence C. Byrne
- ------------------------------------- President October 10, 1997
Terence C. Byrne
Principal Financial and Accounting Officer:
/s/ Terence C. Byrne
- ------------------------------------- Treasurer October 10, 1997
Terence C. Byrne
A Majority of the Board of Directors:
/s/ Terence C. Byrne
- ------------------------------------- Director October 10, 1997
Terence C. Byrne
/s/ John G. Hartley
- ------------------------------------- Director October 9, 1997
John G. Hartley
/s/ Louis V. Muro
- ------------------------------------- October 10, 1997
Louis V. Muro Director
/s/ John L. Threshie, Jr.
- ------------------------------------- Director October 10, 1997
John L. Threshie, Jr.
109
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
REPORTS FILED PURSUANT TO SECTION 15(D) OF THE
EXCHANGE ACT BY NON-REPORTING ISSUERS
No annual report or proxy materials have been sent to security-holders
during the fiscal year ended June 30, 1997 or the subsequent interim period and,
as at the date hereof, no plans exist for the furnishing of such report or
materials subsequent to the filing of this Report.
110
<PAGE>
INDEX OF EXHIBITS BEING FILED HEREWITH
4 (t) orm of Option, Dated April 24, 1997 to CG TIRE, INC.
for the purchase of up to 10% of the common stock of
Registrant.
10 (aaaa) mendment, dated July 1, 1997, to Financial
Consulting Agreement, dated May 3, 1997, between
Registrant and the NAIS Corp.
(cccc) mployment Agreement, dated April 29, 1997,
between Registrant and Vijay Kachru
(dddd) mendment No.2, dated May 1, 1997, to Stock Restriction
Agreement of April 1, 1996, between Registrant
and Louis V. Muro
(eeee) mendment No. 2, dated May 1, 1997, to Stock Restriction
Agreement of June 1, 1995 between Registrant
and Terence C. Byrne
(ffff) mendment No. 2, dated May 1, 1997, to Stock Restriction
Agreement of June 1, 1995 between Registrant
and Frances Katz Levine
(gggg) mployment Agreement, dated December 22, 1997, between
Registrant and Frances Katz Levine
(hhhh) mendment, dated May 1, 1997, to Employment Agreement
of December 22, 1996, between Registrant and
Frances Katz Levine
(iiii) mendment, dated May 1, 1997, to Employment Agreement
of January 18, 1995, between Registrant and
Terence C. Byrne
(jjjj) mendment, dated May 1, 1997 to Employment Agreement
of January 1, 1996, between Registrant and
Louis V. Muro
(kkkk) quipment Lease & Purchase Agreement, dated May 29, 1997,
between Registrant and Oceans Tire Recycling & Processing
Co., Inc., including Royalty Agreement and Rubber Crumb
Brokerage Agreement, of even date therewith, as Exhibits
thereto
(llll) quipment Lease & Purchase Agreement, dated May 29, 1997,
between Registrant and Ocean Ventures III, Inc.,
including Royalty Agreement and Rubber Crumb Brokerage
Agreement, of even date therewith, as Exhibits thereto
(mmmm) quipment Lease & Purchase Agreement, dated July 8, 1997,
between Registrant and Recycletron Inc., including
Royalty Agreement and Rubber Crumb Brokerage Agreement,
of even date therewith, as Exhibits thereto
21 Subsidiaries of the Company
EXHIBIT 4(t)
<PAGE>
NEITHER THIS OPTION NOR THE UNDERLYING COMMON SHARES HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE CORPORATION WILL NOT TRANSFER THIS OPTION OR THE
UNDERLYING COMMON SHARES UNLESS THERE IS AN EFFECTIVE REGISTRATION COVERING SUCH
OPTION OR SUCH SHARES, AS THE CASE MAY BE, UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATES SECURITIES LAWS
Void after 5:00 pm, New York Time on April 23, 2000.
OPTION
TO PURCHASE UP TO TEN PERCENT
OF
TIREX AMERICA INC.
Whereas, in connection with the industry recycling effort of Continental
General Tire Inc. ("Continental Tire"), CG TIRE, INC., a wholly-owned subsidiary
of Continental Tire, has expressed its willingness to explore with Tirex America
Inc. (the "Corporation") the possibility of:
(a) the Corporation, its existing subsidiary, Tirex Canada Inc., and/or
one or more other subsidiaries of the Corporation established for such
purposes: (i) furnishing Continental Tire with all or part of its
80-mesh rubber crumb requirements and (ii) establishing local tire
recycling centers for the purpose of accepting for disintegration
scrap tires from Continental Tire's network of independent dealers;
and
(b) advising the Corporation with respect to Continental Tire's
specifications for its rubber crumb requirements, any further
development of such specifications in the future, the suitability of
the Corporation's Cryogenic tire disintegration technology for meeting
such specifications, and the further development of the Corporation's
technology in coordination with Continental Tire's product development
requirements.
This is to certify that, in consideration of the foregoing, CG TIRE, INC.,
a corporation headquartered at 1800 Continental Boulevard, Charlotte, NC 28273,
(the "Optionee") is entitled to purchase, subject to the provisions of this
Option, from Tirex America Inc. a Delaware
<PAGE>
corporation headquartered at 3767 Thimens, Suite 207, Ville St.Laurent, Quebec,
Canada H4R 1W4 (the "Corporation"), the number of shares of the common stock,
$.001 par value per share, of the Corporation at the price and on the terms set
forth below:
1. Optioned Shares and Exercise Price
This Option entitles the Optionee to purchase at a per share price equal to
fifty percent (50%) of the average of the final bid and ask prices of the common
stock of the Corporation, as quoted in the NASDAQ electronic Bulletin Board
during the ten business days preceding the date of a notice of exercise given by
the Optionee pursuant to Section 2, below (the "Exercise Price"), all, or any
part of, the number of shares of the common stock of the Corporation (the
"Optioned Shares") which shall constitute upon their issuance, on a fully
diluted basis, ten percent (10%) of the issued and outstanding common stock of
the corporation.
2. Exercise of Option.
Subject to the provisions hereof, Optionee may purchase the Optioned
Shares, in whole or in part, at any time, and from time to time, during the
two-year period commencing on April 24, 1997 and terminating at 5:00 p.m., New
York Time, on April 23, 2000 (the "Exercise Period"). Exercise shall be effected
by presentation and surrender of this Option (or any option for which this
Option has been exchanged) to the Corporation at its principal office with a
written notice of exercise specifying the number of Optioned Shares being
purchased pursuant to such exercise, duly executed and accompanied by payment of
the Exercise Price for the number of shares specified. The date of receipt by
the Corporation of the foregoing shall be deemed to be the "Exercise Date" and
the Optionee shall be deemed to be the holder of record of the Optioned Shares
issuable upon such exercise, notwithstanding that the stock transfer books of
the Corporation shall then be closed or that certificates representing such
Optioned Shares shall not then be actually delivered to the Optionee.
3. Reservation and Status of Shares.
The Corporation hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of this Option such number of its common
shares as shall be required for issuance and delivery upon exercise of this
Option, and that such shares, when issued in accordance with the terms of this
Option, shall be validly issued, fully paid, and non-assessable.
115
<PAGE>
4. Fractional Shares.
Fractional Shares or script representing fractional Shares may be issued
upon the exercise of this Option.
5. Exchange or Loss of Option.
Upon receipt by the Corporation of evidence satisfactory to it of the loss,
theft, destruction, or mutilation of this Option, and (in the case of loss,
theft, or destruction) of reasonably satisfactory indemnification, and (in the
case of mutilation) upon surrender and cancellation of this Option, the
Corporation will execute and deliver a new Option, which shall not constitute an
additional contractual obligation on the part of the Corporation, should this
Option so lost, stolen, destroyed, or mutilated be at any time enforceable by
anyone.
6. Rights of the Optionee.
Except as provided in the last sentence of Section 2, the Optionee
shall not, by virtue hereof, be entitled to any rights of a shareholder in the
Corporation, either at law or equity. The rights of the Optionee are limited to
those expressed in this Option and are not enforceable against the Corporation
except to the extent set forth herein.
7. Adjustments
The securities purchasable upon the exercise of this Option shall be
subject to adjustment from time to time as follows:
7.1 In the event that the Corporation shall consolidate or merge into or
with another corporation, or in the event that the Corporation shall sell or
convey to any other person or persons all or substantially all the property of
the Corporation, the Optionee shall thereafter be entitled, upon exercise, to
receive the kind and amount of shares, other securities, cash, and property
receivable upon such consolidation, merger, sale, or conveyance by a holder of
the number of Common Shares which might have been purchased upon exercise of
this Option for the Exercise Price immediately prior to such consolidation,
merger, sale, or conveyance, and shall have no other conversion rights. In any
such event, effective provision shall be made, in the certificate or articles of
incorporation of the resulting or surviving corporation, in any contracts of
sale and conveyance, or otherwise so that, so far as appropriate and as nearly
as reasonably may be, the provisions set forth herein for the protection of the
rights of the Optionee of this Option shall thereafter be made applicable.
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7.2 In the event that at any time, as a result of an adjustment made
pursuant to this Section 7, the Optionee shall become entitled to receive upon
exercise of this Option cash, property, or securities other than Shares, then
references to Shares in this Section 7 shall be deemed to apply, so far as
appropriate and as nearly as may be, to such cash, property, or other
securities.
8. Registration Rights
8.1 The Corporation shall once, at the Corporation's sole expense, during
the period (the "Registration Period") which terminates on the later of: (i)
April 23, 2000 or (ii) one year after the last Exercise Date, register such of
the Optioned Shares which are not then exempt from the registration requirements
of the Securities Act pursuant to Rule 144 thereof (whether issued or issuable)
upon the written request of the Optionee and in connection therewith the
Corporation shall, as promptly as practicable, file with the Securities and
Exchange Commission (the "SEC") a registration Statement on Form SB-2 or such
other Form as shall be available and will use its best efforts to have such
registration statement declared effective and remain effective until the
securities registered thereby have been sold and a prospectus is no longer
required to be delivered, and to qualify the Optioned Shares under the state
securities laws of such of the jurisdictions as the Optionee shall reasonably
request and as shall be possible without undue burden on the Corporation.
describing a proposed offering of the Optioned Shares by the Optionee,
8.2 If the Corporation at any time during the Registration Period proposes
to register any of its securities, either for its own account or the account of
security holders, other than a registration on Form S-8, or any registration on
a Form which does not permit secondary sales, the Corporation shall, each such
time, give written notice of such intention to the Optionee and, upon written
request of the Optionee received by the Corporation within twenty (20) days
after the Corporation has given such notice, include in such registration (and
all related qualifications under state securities laws) all Optioned Shares
(whether issued or issuable) specified in such written request. If the
registration involves any underwriting, the Corporation shall so advise the
Optionee in the notice, and the right of the Optionee to have the Optioned
Shares included in the registration shall, if the underwriter shall so require,
be conditioned upon the Optioned Shares being included in the underwriting
arrangements with the underwriters on the same terms as other persons selling
common stock or other Corporation securities to the underwriters.
Notwithstanding the foregoing, if the underwriters determine that marketing
factors require a limitation of the number of shares to be underwritten, the
number of Shares to be registered for the account of the Optionee may be limited
as the underwriter shall so require.
8.3 All expenses of registration and qualification incurred in connection
with a registration under paragraph 8.2, above, shall be borne by the
Corporation, except that the Optionee shall bear the fees and expenses of its
own counsel, if any, and the underwriting
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commission or discount applicable to the Optioned Shares being sold. The
Corporation will keep the Optionee advised of the status of the registration and
will furnish such number of preliminary and final prospectuses as the Optionee
may reasonably request. The Optionee will furnish to the Corporation such
information regarding the Optionee as may be required in connection with the
registration.
9. Indemnifications
The following provisions shall apply to any registration effected pursuant
to paragraph 8.2, above:
(a) The Corporation shall indemnify and hold harmless the Optionee and
each person, if any, who controls the Optionee within the meaning of
the Securities Act of 1933, as amended (the "Securities Act") from and
against any and all losses, claims, damages, expenses or liabilities,
joint and several, to which they or any of them may become subject
under the Securities Act or under any other statute or at common law
or otherwise, and, except as hereinafter provided, will reimburse the
Optionee and each such controlling person, if any, for any legal or
other expenses reasonably incurred by any of them in connection with
investigating or defending any actions, whether or not resulting in
any liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in
the registration statement, any preliminary prospectus or the final
prospectus (or the registration statement or prospectus as from time
to time amended or supplemented by the Corporation) or arise out of or
are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to
make the statements therein not misleading, unless such untrue
statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Corporation in connection
therewith by the Optionee expressly for use therein. Promptly after
receipt by the Optionee or any person controlling the Optionee of
notice of the commencement of any action in respect of which indemnity
may be sought against the Corporation, the Optionee will notify the
Corporation in writing of the commencement thereof, and, subject to
the provisions hereinafter stated, the Corporation shall assume the
defense of such action (including the employment of counsel, who shall
be counsel satisfactory to the Optionee or such person, as the case
may be, and the payment of legal expenses) insofar as such action
shall relate to any alleged liability in respect of which indemnity
may be sought against the Corporation. The Optionee or any such
controlling person shall have the right to employ separate counsel in
any such action and to participate in the defense thereof but the fees
and expenses of such counsel shall not be at the expense of the
Corporation unless the
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employment of such counsel has been specifically authorized by the
Corporation, which authorization shall be given whenever the party
seeking indemnity has been advised by its counsel that one or more
legal defenses may be available to it that are not available to the
Corporation or that for other reasons separate representation may be
necessary, to avoid a conflict. The Corporation shall not be liable to
indemnify any person for any settlement of any such action effected
without the consent of the Corporation.
(b) The Optionee will indemnify and hold harmless the Corporation, each of
its directors and each of its officers who have signed the
registration statement and each person, if any, who controls the
Corporation within the meaning of the Securities Act from and against
any and all losses, claims, damages, expenses of liabilities, joint
and several, to which they are or any of them may become subject under
the Securities Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse the
Corporation and each such director, officer or controlling person for
any legal and other expenses reasonably incurred by any of them in
connection with investigating or defending any actions, whether or not
resulting in any liability, insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact
contained in the registration statement, in any preliminary prospectus
or in the final prospectus (or the registration statement or
prospectus as from time to time amended or supplemented) or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary in order to
make the statements therein not misleading, but only insofar as any
such statement or omission was made in reliance upon and in conformity
with information furnished in writing to the Corporation in connection
therewith by the Optionee expressly for use therein. Promptly after
receipt of notice of the commencement of any action in respect of
which indemnity may be sought against the Optionee, the Corporation
will notify the Optionee in writing of the commencement thereof, and
the Optionee shall, subject to the provisions hereinafter stated,
assume the defense of such action (including the employment of
counsel, who shall be counsel satisfactory to the Corporation, and the
payment of legal expenses) insofar as such action shall relate to an
alleged liability in respect of which indemnity may be sought against
the Optionee. The Corporation and each such director, officer or
controlling person shall have the right to employ separate counsel in
any such action and to participate in the defense thereof but the fees
and expenses of such counsel shall not be at the expense of the
Optionee unless the employment of such counsel has been specifically
authorized by the Optionee, which authorization shall be given
whenever separate representation may be necessary to avoid a conflict.
The Optionee shall not be liable to indemnify
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any person or any settlement of any such action effected without the
consent of the Optionee.
(c) The indemnity provisions of this Section 9 shall be in addition to any
liability the indemnitor may otherwise have.
10. Officer's Certificate.
Whenever the number or kind of the securities purchasable upon exercise of
this Option shall be adjusted as required by the provisions of Section 7, above,
the Corporation shall forthwith file with its Secretary or Assistant Secretary
at its principal office an officer's certificate showing the adjusted number
and/or kind of securities purchasable upon exercise of this Option determined as
herein provided and setting forth in reasonable detail such facts as shall be
necessary to show the reason for and the manner of computing such adjustments.
Each such officer's certificate shall be made available at all reasonable times
for inspection by the Optionee and the Corporation shall, forthwith after each
such adjustment, mail by certified mail a copy of such certificate to the
Optionee.
11. Notices to Optionee.
So long as this Option shall be outstanding, if the Corporation shall
propose to take any action that would cause an adjustment to be made pursuant to
Section 7, the Corporation shall mail by certified mail or recognized overnight
courier, in all cases with written proof of receipt required, to the Optionee,
before, or not later than 15 days after, the date on which such adjustment would
become effective, a notice setting forth in reasonable detail the action so
taken.
12. Notice.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or delivered by recognized overnight courier, in all cases
with written proof of receipt required, if to the Optionee, at:
CG TIRE, INC.
1800 Continental Boulevard
Charlotte, NC 28273
Attn: Corporate Secretary
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and if to the Corporation, at:
Tirex America Inc.
3767 Thimens, Suite 207
Ville St.Laurent
Quebec H4R 1W4, Canada
or such other address as a party shall so notify the other party in writing. Any
notice or other communication given hereunder shall be deemed given at the time
of receipt thereof.
13. General
13.1 Any masculine personal pronoun shall be considered to mean the
corresponding feminine or neuter personal pronoun, as the context requires.
13.2 This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, United States of America.
13.3 All section titles or captions contained in this Agreement are for
convenience only and shall not be deemed part of the context nor effect the
interpretation of this Agreement.
13.4 In computing any period of time pursuant to this Agreement, the day of
the act, event or default from which the designated period of time begins to run
shall be included, unless it is a Saturday, Sunday, or a legal holiday, in which
event the period shall begin to run on the next day which is not a Saturday,
Sunday, or legal holiday, in which event the period shall run until the end of
the next day thereafter which is not a Saturday, Sunday, or legal holiday.
13.5 This Agreement or any section thereof shall not be construed against
any party due to the fact that said Agreement or any section thereof was drafted
by said party.
13.6 The parties hereto shall execute and deliver all documents, provide
all information and take or forbear from all such action as may be necessary or
appropriate to achieve the purposes of the Agreement.
13.7 Nothing herein shall be construed to be to the benefit of any third
party, nor is it intended that any provision shall be for the benefit of any
third party.
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13.8 The provisions of this Option shall be binding upon and inure to the
benefit of (i) the parties hereto, (ii) the successors and assigns of the
Corporation, (iii) provided however, that this Option shall be deemed personal
to the Optionee and may not be assigned by it without the consent of the
Corporation.
Dated: April 24, 1997 TIREX AMERICA INC
By /s/ Terence C. Byrne
----------------------------
Terence C. Byrne, President
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EXHIBIT 10(aaaa)
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----------
TIREX AMERICA INC.
----------
AMENDMENT NO. 1
TO FINANCIAL CONSULTING AGREEMENT
OF MAY 3, 1997
----------
Amendment, made as of the 1st day of July 1997, by and between
Tirex America Inc.
740 St. Maurice, Suite 201
Montreal, Quebec
Canada H4R 1W4
("the Corporation")
and
The NAIS Corp.
94 Washington Avenue
Lawrence, NY 11559
(the "Consultant")
the original parties to a certain Financial Consultant Agreement, dated May 3,
1997 (the "Consulting Agreement"). Terms used in this Amendment which are
defined in the Consulting Agreement and not defined herein shall have the same
meaning herein as therein.
Whereas, it has at all times been the intention of the parties that the
services to be rendered by the Consultant under the Consulting Agreement shall
be limited to providing advice and opinions to the Corporation with respect to
evaluating the managerial, professional, and
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financial requirements of the Company and advising and assisting the Company
with respect to its budgetary and business plan requirements, marketing,
stockholder relations, public relations, financial arrangements, mergers,
acquisitions, consolidations, joint ventures, and similar corporate
transactions.
Whereas, the parties are concerned that certain activities included in the
Consulting Agreement as duties of the Consultant were: (i) not expressive of the
actual intentions of the parties and (ii) capable of being misconstrued as
direct involvement in the effectuation of a private placement or public offering
of the securities of the Company so as to be deemed to affect the underwriting
compensation payable in connection therewith;
Now therefore, in consideration of the premises and of the mutual promises
and covenants hereinafter set forth, the parties agree to set forth herein
certain amendments to the Consulting Agreement, as follows:
A. AMENDMENTS
Consulting Services
2.1 All services to be rendered hereunder, on the part of the Consultant,
shall be rendered by Mr. Jack Ehrenhause ("Ehrenhaus") and shall consist of: (i)
evaluation of the Company's managerial and financial requirements; (ii)
assistance in the preparation of budgets and business plans; (iii) assistance in
recruiting, screening, evaluating and recommending key personnel, directors,
accountants, commercial and investment bankers, underwriters, attorneys and
other professional consultants; (iv) advice with regard to sales planning and
sales activities; (v) advice with regard to stockholder relations and public
relations matters; (vi) evaluation of financial requirements and assistance in
financial arrangements; and (vii) advice and assistance in connection with
mergers, acquisitions, consolidations, joint ventures, and similar corporate
finance transactions.
B. NO OTHER AMENDMENTS
Except as expressly provided in this Amendment, all of the terms and
conditions of the Consulting Agreement remain in full force and effect.
C. COUNTERPARTS
This Amendment may be executed in any number of counterparts and by each
party on a separate counterpart, each of which when so executed and delivered
shall be an original, but all of which together shall constitute one Amendment.
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In Witness Whereof, the parties hereto have caused this Amendment to be
executed the day and year first above written.
Tirex America Inc.
By /s/ Terence C. Byrne
---------------------------
Terence C. Byrne, President
The NAIS CORP.
By /s/ Jack Ehrenhaus
---------------------------
Jack Ehrenhaus
126
EXHIBIT 10(cccc)
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<PAGE>
----------
TIREX AMERICA INC.
----------
EMPLOYMENT AGREEMENT
Employment Agreement, made this 29th day of April 1997, to be effective as
of September 1, 1996, by and between
Tirex America Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
Tirex Canada Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
(the "Company")*
and
Vijay Kachru
513 Beaurepaire
Beaconsfield, Quebec
H9W 3C7
(the "Employee")
- ----------
* Unless context necessarily implies otherwise, all references herein to
the "Company" shall be to Tirex America Inc. and Tirex Canada Inc., and all
other corporations, partnerships, or other entities, now or in the future
controlled by, under common control with, or in control of, Tirex America Inc.,
jointly and severally.
Whereas, On September 1, 1996 (the "Effective Date"), pursuant to the
informal consent of the Executive Committee of the Board of Directors of the
Company, Vijay Kachru was appointed as the Company's Vice President of Market
Development. This appointment was confirmed, ratified, and adopted,
contemporaneously herewith, in the written unanimous consent of the said
Executive Committee of April 29, 1997.
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Whereas, it has at all times since the Effective Date been the intention of
the parties to set forth the terms and conditions under which the Employee has
been providing services and receiving compensation, but inadvertently such
agreement was not put into writing prior to the date hereof;
Whereas, the Company and the Employee desire that the term of this
Agreement begin as at the Effective Date and continue for the three-year period
ending on August 31, 1999;
Whereas, The Company is a "start-up" company in its very early stage of
development, with negligible or no hard assets, no income, no operations, and
only limited financial resources on hand to finance the development of its
technology and the commencement of operations. Its future financial prospects
and position are therefore highly contingent and impossible to predict. Based
upon the foregoing, unregistered shares of Tirex America's common stock, which
cannot be sold into the public market for an extended period of time, have a
value which reflects the Company's poor financial position and uncertain future,
and can be expected to be saleable by the Company, in arm's length transactions,
for not more than fifty percent (50%) of the current market value of the
publicly traded stock of Tirex America, or for substantially less.
Now therefore, in consideration of the premises and of the mutual promises
and covenants hereinafter set forth, the parties agree as follows:
1. Employment
The Company agrees to employ the Employee and the Employee agrees to accept
the employment described in this Agreement.
2. Duties
The Employee shall serve as Vice President of Market Development, her
powers and duties in that capacity to be such as may be determined by the
President and the Board of Directors of the Company. During the term of this
agreement, the Employee shall serve also, without additional compensation, in
such other offices of the Company to which she may be elected or appointed by
the Board of Directors. With respect to all capacities in which the Employee
shall serve, she shall report solely to the President of the Company.
3. Extent of Services
The Employee shall devote her entire working time, attention, and energies
to the performance of her duties and shall not be engaged in any other business
activity, whether or not pursued for gain without the consent of the Company.
The Employee may invest her personal assets in such form or manner as will not
require services on her part. The Employee shall at
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all times faithfully and to the best of her ability perform her duties under
this Agreement. The duties shall be rendered at the Company's office in Ville
St.Laurent, Quebec, or at such other place or places and at such times as the
needs of the Company may from time-to-time dictate.
4. Term
The term of this Agreement shall be deemed to have begun on the Effective
Date, and shall continue for the three year period which commenced on the
Effective Date and shall end on August 31, 1999. The parties presently
anticipate that the employment relationship may continue beyond this three-year
term. This Agreement shall not give the Employee any enforceable right to
employment beyond this term.
5. Compensation
As her entire compensation for the services to the Company, during the term
of this agreement, in whatever capacity rendered, the Company shall pay to the
Employee a salary in the following amounts:
(a) through and until March 31, 1998, ninety thousand Canadian dollars
(CAN $90,000) per year:
(b) Commencing as of February 1, 1998, ninety thousand United States
dollars (US $90,000) per year.
The above stated salary will be payable in accordance with the Company's
standard payroll procedures. The Employee's performance shall be reviewed every
six months with respect to her eligibility for performance-based raises and
bonuses, but there is no assurance or expectation that raises or bonuses will be
granted or paid. Raises will be granted and bonuses will be paid, if at all, in
the sole discretion of the Board of Directors.
6. Issuance of Stock in Lieu of Base Salary
6.1 Compensation Shares. In the event that, from time to time, the Board of
Directors, in its sole discretion, determines that the Company does not have
adequate financial resources to fully compensate the Employee in cash, then the
Company's obligation to pay such compensation will be satisfied by the issuance
to the Employee of shares of the common stock of Tirex America, Inc., $.001, par
value, per share ("Compensation Shares"), which shares shall constitute
compensation pursuant to the terms of this Employee Agreement.
6.2 Valuation. All Compensation Shares will be issued to the Employee at a
value equal to fifty percent (50%) of the average of the high and low bid prices
of Tirex America's common
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stock as traded in the over-the-counter market and quoted in the NASDAQ
Electronic Bulletin Board during the period when such Compensation Shares were
earned, or such other value which the Board of Directors, in its sole
discretion, shall determine.
6.3 Registration Rights. From time to time, all or part of the Compensation
Shares may be registered by the Company under a Registration Statement on Form
S-8, including a Re-offer Prospectus, as and at such time as the Board of
Directors of the Company or the executive committee thereof shall determine.
7. Benefits
The Employee shall receive medical and dental insurance and other fringe
benefits to the extent that such benefits are provided to all full-time,
non-union employees of the Company.
8. Expenses
The Company shall reimburse the Employee for reasonable, documented,
out-of-pocket expenses incurred by the Employee in fulfilling her duties.
9. Termination
9.1 For Cause. The Company may terminate the Employee's employment at any
time "for cause" with immediate effect upon delivering written notice to the
Employee. For purposes of this Agreement, "for cause" shall include: (a)
embezzlement, theft, larceny, material fraud, or other acts of dishonesty; (b)
material violation by employee of any of her obligations under this Agreement;
(c) conviction of or entrance of a plea of guilty or nolo contendere to a felony
or other crime which has or may have a material adverse effect on the Employee's
ability to carry out her duties under this Agreement or upon the reputation of
the Company; (d) conduct involving moral turpitude; (e) gross insubordination or
repeated insubordination after written warning by the President of the Company;
or (f) material and continuing failure by the Employee to perform the duties
described in Section 2 above in a quality and professional manner for at least
thirty (30) days after written warning by the Board of Directors or the
President of the Company. Upon termination for cause, the Company's sole and
exclusive obligation will be to pay the Employee her compensation earned through
the date of termination, and the Employee shall not be entitled to any
compensation after the date of termination.
9.2 Upon Death. In the event of the Employee's death during the term of the
this Agreement, the Company's sole and exclusive obligation will be to pay to
the Employee's spouse, if living, or to her estate, if her spouse is not then
living, the Employee's compensation earned through the date of death.
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<PAGE>
9.3 Upon Disability. The Company may terminate the Employee's employment
upon the Employee's total disability. The Employee shall be deemed to be totally
disabled if she is unable to perform her duties under this Agreement by reason
of mental or physical illness or accident for a period of three consecutive
months. Upon termination by reason of the Employee's disability, the Company's
sole and exclusive obligation will be to pay the Employee her compensation
earned through the date of termination.
9.4 Without Cause. The Company may terminate the Employee's employment
without cause at any time after expiration of the three-year term of this
Agreement.
10. Covenant Not to Compete
10.1 Covenant. At all times during the terms of this Agreement, during any
period following the term of this Agreement when the Employee shall continue to
be employed by the Company in any capacity whatsoever, and during the one year
period after the Employee's employment with the Company has been terminated by
either party and for any reason, the Employee will not directly or indirectly:
(a) enter into or attempt to enter into the "Restricted Business" (as
defined below) in the continental United States or Canada;
(b) induce or attempt to persuade any former, current or future employee,
agent, manager, consultant, director, or other participant in the
Company's business to terminate such employment or other relationship
in order to enter into any relationship with the Employee, any
business organization in which the Employee is a participant in any
capacity whatsoever, or any other business organization in competition
with the Company's business; or
(c) use contracts, proprietary information, trade secrets, confidential
information, customer lists, mailing lists, goodwill, or other
intangible property used or useful in connection with the Company's
business.
10.2 Indirect Activity. The term "indirectly," as used in Section 7.1
above, includes acting as a paid or unpaid director, officer, agent,
representative, employee of, or consultant to any enterprise, or acting as a
proprietor of an enterprise, or holding any direct or indirect participation in
any enterprise as an owner, partner, limited partner, joint venturer,
shareholder, or creditor, except a 10% or less equity position in a publicly
traded company.
10.3 Restricted Business. The term "Restricted Business" means any business
related to the disintegration of scrap tires, the manufacture of equipment used
for such purpose, or the sale or brokerage of the by-products from the
disintegration of scrap tires. Nevertheless, the Employee may own not more than
five percent of the outstanding equity securities of a
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corporation that is engaged in the Restricted Business if the equity securities
are listed for trading on a national stock exchange or are registered under the
Securities Exchange Act of 1934.
11. Severability
The covenants set forth in Section 10 above shall be construed as a series
of separate covenants, one for each county in each of the states of the United
States and one for each of the analogous jurisdictions in Canada to which such
restriction applies. If, in any judicial proceeding, a court of competent
jurisdiction shall refuse to enforce any of the separate covenants deemed
included in this Agreement, or shall find that the term or geographic scope of
one or more of the separate covenants is unreasonably broad, the parties shall
use their best good faith efforts to attempt to agree on a valid provision which
shall be a reasonable substitute for the invalid provision. The reasonableness
of the substitute provision shall be considered in light of the purpose of the
covenants and the reasonable protectable interests of the Company and the
Employee. The substitute provision shall be incorporated into this Agreement. If
the parties are unable to agree on a substitute provision, then the invalid or
unreasonably broad provision shall be deemed deleted or modified to the minimum
extent necessary to permit enforcement.
12. Confidentiality
The Employee acknowledges that she will develop and be exposed to
information that is or will be confidential and proprietary to the Company. The
information includes customer lists, technology designs, plans and information,
marketing plans, pricing data, product plans, software, and other intangible
information. Such information shall be deemed confidential to the extent not
generally known within the trade. The Employee agrees to make use of such
information only in the performance of her duties under this Agreement, to
maintain such information in confidence and to disclose the information only to
persons with a need to know.
13. Remedies
The Employee acknowledges that monetary damages would be inadequate to
compensate the Company for any breach by the Employee of the covenants set forth
in Sections 10 and 12 above. The Employee agrees that, in addition to other
remedies which may be available, the Company shall be entitled to obtain
injunctive relief against the threatened breach of this Agreement or the
continuation of any breach, or both, without the necessity of proving actual
damages.
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14. Waiver
The waiver by the Company of the breach of any provision of this Agreement
by the Employee shall not operate or be construed as a waiver of any subsequent
breach by the Employee.
15. Assignment
This Agreement may be assigned by the Company as part of the sale of
substantially all of its business; provided, however, that the purchaser shall
expressly assume all obligations of the Company under this Agreement. Further,
this Agreement may be assigned by the Company to an affiliate, provided that any
such affiliate shall expressly assume all obligations of the Company under this
Agreement, and provided further that the Company shall then fully guarantee the
performance of the Agreement by such affiliate. Employee agrees that if this
Agreement is so assigned, all the terms and conditions of this Agreement shall
obtain between such assignee and himself with the same force and effect as if
said Agreement had been made with such assignee in the first instance. This
Agreement is personal to the Employee and shall not be assigned without written
consent of the Company.
16. Notices
All notices required or permitted to be given hereunder shall be mailed by
certified mail, or delivered by hand or by recognized overnight courier to the
party to whom such notice is required or permitted to be given hereunder, in all
cases with written proof of receipt required. Any such notice shall be deemed to
have been given when received by the party to whom notice is given, as evidenced
by written and dated receipt of the receiving party.
Any notice to the Company or to any assignee of the Company shall be
addressed as follows:
Tirex America Inc.
3767 Thimens, Suite 207
Ville St. Laurent
Quebec, Canada H4R 1W4
Any notice to Employee prior to May 1, 1997 shall be addressed as follows:
Vijay Kachru
513 Beaurepaire
Beaconsfield, Quebec
H9W 3C7
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Any notice to Employee on or after May 1, 1997 shall be addressed as follows:
Vijay Kachru
1598 Pine Avenue West
Montreal, Quebec
H38 1B4
17. General
17.I. Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
17.2 Titles and Captions. All section titles or captions contained in this
Agreement are for convenience only and shall not be deemed part of the context
nor effect the interpretation of this Agreement.
17.3 Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
17.4 Agreement Binding. This Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
17.5 Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
17.6 Savings Clause. If any provision of this Agreement, or the application
of such provision to any person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those as to which it is held invalid, shall not be
affected thereby.
17.7 Survival of Certain Agreements. The covenants and agreements set forth
in Articles 10, 12, and 13 shall all survive the expiration of the term of this
Agreement and shall all survive termination of this Agreement and remain in full
force and effect regardless of the cause of such termination.
17.8 Separate Counsel. The parties acknowledge that the Company has been
represented in this transaction by Frances Katz Levine, Esq., that the Employee
has not been represented in
135
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this transaction by the Company's attorney, and the Employee has been advised
that it is important for the Employee to seek separate legal advise and
representation in this matter.
18. Prior Agreements
This Agreement supersedes and cancels any and all prior agreements, whether
written or oral, between the parties.
In Witness Whereof, the parties hereto have executed the above Agreement as
of the day and year first above written.
TIREX AMERICA INC.
By /s/ Terence C. Byrne
---------------------------
Terence C. Byrne, President
TIREX CANADA INC.
By /s/ Terence C. Byrne
---------------------------
Terence C. Byrne, President
/s/ Vijay Kachru
---------------------------
Vijay Kachru, Individually
136
EXHIBIT 10(dddd)
137
<PAGE>
----------
TIREX AMERICA INC.
----------
AMENDMENT NO. 2
TO STOCK RESTRICTION AGREEMENT
OF APRIL 1, 1996 AS AMENDED MAY 30, 1996
----------
Second Amendment, made this 1st day of May 1997, by and between
Tirex America Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
Tirex Canada Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
(collectively, the "Corporation"*)
and
Louis V. Muro
435 Roy Avenue
Dorval, Quebec
Canada H95 3E2
("Muro")
the original parties to a certain stock restriction agreement, dated April 1,
1996, as amended May 30, 1996 (the "Stock Restriction Agreement"). Terms used in
this Amendment which are defined in the Stock Restriction Agreements and not
defined herein shall have the same meaning herein as therein.
138
<PAGE>
Whereas, the parties wish to amend the terms of the Stock Restriction
Agreement to reflect certain changes in Rule 144 of the Securities Act of 1933,
as amended, and to shorten the period required before shares or the
Corporation's common stock, received by Muro as compensation, are permitted to
be included in a registration statement on Form S-8.
Now therefore, in consideration of the premises and of the mutual promises
and covenants hereinafter set forth, the parties agree to amend the Stock
Restriction Agreement, as follows:
A. AMENDMENTS
Stock Transfer Restrictions and Forfeitures
Paragraph 1.1 is amended so as to read as follows:
1.1 The Stock may be sold, hypothecated, donated or otherwise
disposed of, as permitted under the Rules and Regulations of the
Securities Act of 1933, as amended, provided however that the Stock
may not be sold under a registration statement on Form S-8, until not
less than eighteen months have elapsed after its issuance.
B. NO OTHER AMENDMENTS
Except as expressly provided in this Amendment, all of the terms and
conditions of the Stock Restriction Agreement remain in full force and effect.
C. COUNTERPARTS
This Amendment may be executed in any number of counterparts and by each
party on a separate counterpart, each of which when so executed and delivered
shall be an original, but all of which together shall constitute one Amendment.
139
<PAGE>
In Witness Whereof, the parties hereto have caused this Amendment to be
executed the day and year first above written.
TIREX AMERICA INC.
By /s/ Terence C. Byrne
---------------------------------
Terence C. Byrne President and
Member of the Executive
Committee of the Board of
Directors.
TIREX AMERICA INC.
By /s/ John G. Hartley
---------------------------------
John G. Hartley, Member of the
Executive Committee of the
Board of Directors
EXECUTIVE
/s/ Louis V. Muro
-----------------------------------
Louis V. Muro
140
EXHIBIT 10(eeee)
141
<PAGE>
-------------------
TIREX AMERICA INC.
-------------------
AMENDMENT NO. 2
TO STOCK RESTRICTION AGREEMENT
OF JUNE 1, 1995, AS AMENDED MAY 30, 1996
-------------------
Second Amendment, made this 1st day of May 1997, by and between
Tirex America Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
Tirex Canada Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
(collectively, the "Corporation"*)
and
Terence C. Byrne
489 Grosvner Street
Westmount, Quebec
H3Y 2S5
(the "Byrne").
the original parties to a certain stock restriction agreement, dated as of June
1, 1995, as amended May 30, 1996 (the "Stock Restriction Agreement"). Terms used
in this Amendment which are defined in the Stock Restriction Agreement and not
defined herein shall have the same meaning herein as therein.
142
<PAGE>
Whereas, the parties wish to amend the terms of the Stock Restriction
Agreement to reflect certain changes in Rule 144 of the Securities Act of 1933,
as amended, and to shorten the period required before shares or the
Corporation's common stock, received by Byrne as compensation, are permitted to
be included in a registration statement on Form S-8.
Now therefore, in consideration of the premises and of the mutual
promises and covenants hereinafter set forth, the parties agree to amend the
Stock Restriction Agreement, as follows:
A. AMENDMENTS
Stock Transfer Restrictions and Forfeitures
Paragraph 1.1 is amended so as to read as follows:
1.1 The Stock may be sold, hypothecated, donated or
otherwise disposed of, as permitted under the Rules and
Regulations of the Securities Act of 1933, as amended,
provided however that the Stock may not be sold under a
registration statement on Form S-8, until not less than
eighteen months have
elapsed after its issuance.
B. NO OTHER AMENDMENTS
Except as expressly provided in this Amendment, all of the terms and
conditions of the Stock Restriction Agreement remain in full force and effect.
C. COUNTERPARTS
This Amendment may be executed in any number of counterparts and by
each party on a separate counterpart, each of which when so executed and
delivered shall be an original, but all of which together shall constitute one
Amendment.
143
<PAGE>
In Witness Whereof, the parties hereto have caused this Amendment to be
executed the day and year first above written.
TIREX AMERICA INC.
By /s/ Louis V. Muro
--------------------------------------
Louis V. Muro, Vice President of
Engineering and Member of the
Executive Committee of the Board
of Directors.
TIREX AMERICA INC.
By /s/ John G. Hartley
--------------------------------------
John G. Hartley, Member of the
Executive Committee of the Board
of Directors
EXECUTIVE
/s/ Terence C. Byrne
----------------------------------------
Terence C. Byrne
144
EXHIBIT 10(ffff)
145
<PAGE>
-------------------
TIREX AMERICA INC.
-------------------
AMENDMENT NO. 2
TO STOCK RESTRICTION AGREEMENT
OF JUNE 1, 1995, AS AMENDED MAY 30, 1996
-------------------
Second Amendment, made this 1st day of May 1997, by and between
Tirex America Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
Tirex Canada Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
(collectively, the "Corporation"*)
and
Frances Katz Levine
621 Clove Road
Staten Island, NY 10310
(the "Levine").
the original parties to a certain stock restriction agreement, dated as of June
1, 1995, as amended May 30, 1996 (the "Stock Restriction Agreement"). Terms used
in this Amendment which are defined in the Stock Restriction Agreement and not
defined herein shall have the same meaning herein as therein.
146
<PAGE>
Whereas, Levine and the Corporation were parties to a certain Executive
Agreement, dated as of June 18, 1995 (the "First Employment Agreement"), which
was terminated as of December 21, 1996;
Whereas, Levine and the Corporation are parties to a certain Corporate
and United States Securities Counsel Employment Agreement, dated December 22,
1997 (the "Second Employment Agreement");
Whereas, The terms and provisions of the Stock Restriction Agreement
apply to all securities of the Company issued to Levine pursuant to the terms
and provisions of the First Employment Agreement and the parties wish to amend
the terms of the Stock Restriction Agreement so as to: (i) make all securities
issued to Levine under the Second Employment Agreement subject to the terms and
provisions of the said Stock Restriction Agreement, and (ii) reflect certain
changes in Rule 144 of the Securities Act of 1933, as amended, and to shorten
the period required before shares or the Corporation's common stock, received by
Levine as compensation, are permitted to be included in a registration statement
on Form S-8.
Now therefore, in consideration of the premises and of the mutual
promises and covenants hereinafter set forth, the parties agree to amend the
Stock Restriction Agreement, as follows:
A. AMENDMENTS
1. Stock Transfer Restrictions and Forfeitures
Paragraph 1.1 is amended so as to read as follows:
1.1 The Stock may be sold, hypothecated, donated or
otherwise disposed of, as permitted under the Rules and
Regulations of the Securities Act of 1933, as amended,
provided however that the Stock may not be sold under a
registration statement on Form S-8, until not less than
eighteen months have
elapsed after its issuance.
2. Paragraph 1.3 is amended so as to read as follows:
1.3 The terms and provisions of this Stock
Restriction Agreement shall apply to all securities of the
Company heretofore or hereafter issued to Levine pursuant to
the terms and provisions of the Executive Agreement between
Levine and the Corporation, dated as of January 18, 1995 and
to all securities of the Company heretofore or hereafter
issued to Levine pursuant to the terms and
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<PAGE>
provisions of the Corporate and United States Securities
Counsel Employment Agreement between Levine and the
Corporation, dated December 22, 1996 and all of the Additional
Stock Restriction Agreements are hereby deemed to be merged
into and to be a part of this Agreement.
B. NO OTHER AMENDMENTS
Except as expressly provided in this Amendment, all of the terms and
conditions of the Stock Restriction Agreement remain in full force and effect.
C. COUNTERPARTS
This Amendment may be executed in any number of counterparts and by
each party on a separate counterpart, each of which when so executed and
delivered shall be an original, but all of which together shall constitute one
Amendment.
In Witness Whereof, the parties hereto have caused this Amendment to be
executed the day and year first above written.
EMPLOYEE TIREX AMERICA INC.
/s/ Frances Katz Levine By /s/ Terence C. Byrne
- ----------------------------- ------------------------------------
Frances Katz Levine Terence C. Byrne, President
and Member of the Executive
Committee of the Board of
Directors.
TIREX AMERICA INC.
By /s/ Louis V. Muro
----------------------------------------
Louis V. Muro,Vice President of
Engineering and Member of the
Executive Committee of the Board
of Directors
148
EXHIBIT 10(gggg)
149
<PAGE>
TIREX AMERICA INC.
---------------------
CORPORATE
AND
UNITED STATES SECURITIES COUNSEL
EMPLOYMENT AGREEMENT
---------------------
This Corporate and United States Securities Counsel Employment
Agreement (the "Agreement") is made and entered into as of this 22nd day of
December 1996 (the "Effective Date") by and between
Tirex America Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
Tirex Canada Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
(collectively, the "Corporation"*)
and
Frances Katz Levine
621 Clove Road
Staten Island, NY 10310
(the "Employee").
Whereas, the Employee and the Corporation were parties to a certain
employment agreement, dated as of January 18, 1995, as amended as of May 31,
1996 (the "Executive Agreement") pursuant to which the Employee served as
Secretary and General Counsel to the Corporation and which Executive Agreement
the parties agree shall be terminated upon execution of this Agreement and a
certain Release of even date herewith from the Corporation and each of its
directors to the Employee.
Whereas, the Corporation desires to employ the Employee as its
Corporate and United States Securities Counsel and the Employee is willing to
accept such employment by the Corporation, on the terms and subject to the
conditions set forth in this Agreement.
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<PAGE>
Whereas, because of the Corporation's lack of financial resources, the
Employee was compensated for services rendered by her under the Executive
Agreement by way of the issuance of unregistered shares of the common stock of
Tirex (the "Compensation Shares") in lieu of cash salary payments, which
Compensation Shares were issued by the Corporation and accepted by the Employee
on the basis of such shares eventually having some liquid value through the
market sale thereof pursuant to the exemption from the registration requirements
of the Securities Act of 1933, as amended (the "Securities Act") provided by
Rule 144 thereof ("Rule 144") and/or pursuant to the registration of such shares
by the Corporation under the Securities Act pursuant to a Form S-8 registration
statement or such other Form as should be available and practicable for such
purpose;
Whereas, because the Corporation may during the term of this Agreement
continue to lack the financial resources to meet its financial obligations
hereunder in cash, the parties acknowledge that the Employee may receive
compensation under the terms of this Agreement by way of the issuance of
additional Compensation Shares in lieu of cash and that such Shares will be
issued and accepted on the basis of such shares eventually having some liquid
value through the market sale thereof pursuant to the exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") provided by Rule 144 thereof ("Rule 144") and/or pursuant to
the registration of such shares by the Corporation under the Securities Act
pursuant to a Form S-8 registration statement or such other Form as should be
available and practicable for such purpose;
Whereas, The Corporation is a "start-up" company in its very early
stage of development, with negligible or no hard assets, no income, no
operations, and no financial resources on hand to finance the development of its
technology and the commencement of operations. Its future financial prospects
and position are therefore highly contingent and impossible to predict. Based
upon the foregoing, unregistered shares of the Corporation's common stock, which
cannot be sold into the public market for an extended period of time, have a
value which reflects the Corporation's poor financial position and uncertain
future, and can be expected to be saleable by the Corporation, in arm's length
transactions, for not more than fifty percent (50%) of the current market value
of the publicly traded stock of the Corporation or for substantially less.
Now Therefore, it is agreed as follows:
1. Definitions
For the purposes of this Agreement the following terms shall have the
following meanings:
1.0 The "Corporation" shall mean Tirex America Inc. and Tirex Canada
Inc., and all other corporations, partnerships, or other entities, now or in the
future controlled by, under common control with, or in control of, Tirex America
Inc., jointly and severally.
151
<PAGE>
1.1 "Change in Control" shall mean (i) the time that the Corporation
first determines that any person and all other persons who constitute a group
(within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934
("Exchange Act") have acquired direct or indirect beneficial ownership (within
the meaning of Rule 13d-3 under the Exchange Act) of twenty percent (20%) or
more of the Corporation's outstanding securities, unless a majority of the
"Continuing Directors", as that term is defined in Paragraph 1.3, approves the
acquisition not later than ten (10) business days after the Corporation makes
that determination, or (ii) the first day on which a majority of the members of
the Corporation's Board of Directors are not "Continuing Directors."
1.2 "Compensation Shares" shall mean all shares of the common stock of
Tirex America hereafter issued to the Employee in lieu of cash salary payments
as compensation for services rendered pursuant to the terms of this agreement as
well as all shares heretofore issued to the Employee in lieu of cash salary
payments as compensation for services rendered pursuant to the terms of a
certain Executive Agreement, dated as of January 18, 1995, as amended as of May
31, 1996.
1.3 "Constructive Termination" shall mean termination by the
Corporation of the Employee's employment by reason of material breach of this
Agreement or by the Corporation's violation, against the Employee's advice or
without the Employee's knowledge, of the laws of any jurisdiction if such
violation could reflect upon the reputation of the Employee as an attorney at
law or involve, or give the appearance of involving, any misconduct by the
Employee. If caused by a breach of this agreement, such "Constructive
Termination" to be effective upon 30 days written notice thereof from the
Employee to the Corporation; If caused by a violation of the law, such
"Constructive Termination" to be effective immediately upon written notice
thereof from the Employee to the Corporation;
1.4 "Continuing Directors" shall mean, as of any date of determination,
any member of the Board of Directors of the Corporation who (i) was a member of
that Board of Directors on January 19, 1995, (ii) has been a member of that
Board of Directors for the two years immediately preceding such date of
determination, or (iii) was nominated for election or elected to the Board of
Directors with the affirmative vote of the greater of (x) a majority of the
Continuing Directors who were members of the Board at the time of such
nomination or election or (y) at least four Continuing Directors.
1.5 "Effective Date" shall mean January 8, 1997.
1.6 Termination For Cause" shall mean termination by the Corporation of
the Employee's employment by the Corporation by reason of the Employee's willful
dishonesty towards, fraud upon, or deliberate injury or attempted injury to, the
Corporation or by reason of the Employee's willful material breach of this
Agreement which has resulted in material injury to the Corporation. For purposes
of this paragraph, no act, or failure to act, on the Employee's part shall be
considered "willful" or "deliberate" unless done, or omitted to be done, by her
not in good faith and without reasonable belief that her action or omission was
in the best interest
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<PAGE>
of the Corporation and the Corporation's retention of Outside Counsel pursuant
to Paragraph 3.1 hereof, or otherwise, at the volition of the Corporation or of
the Employee shall not under any circumstances whatsoever constitute "Cause" for
termination of this Agreement. Notwithstanding the foregoing, the Employee shall
not be deemed to have been terminated for Cause without (i) written notice to
the Employee setting forth the reasons for the Corporation's intention to
terminate for Cause, (ii) an opportunity on not less than 20 days written notice
from the Corporation to the Employee for the Employee, together with her
counsel, to be heard before the full Board of Directors of the Corporation, and
(iii) delivery to the Employee of a Notice of Termination as defined in
Paragraph 6.9 hereof from the Board of Directors finding that, following such
hearing before the Board, in the good faith opinion of such Board, the Employee
was guilty of conduct set forth above and specifying the particulars thereof in
detail.
1.7 "Termination for 'Good Reason'" shall mean termination by the
Employee of the Employee's employment by the Corporation because of: (i) a
"Change in Control", as defined in Paragraph 1.1, above, (ii) a failure by the
Corporation to comply with any material provision of this Agreement which has
not been cured within ten (10) days after notice of such noncompliance has been
given by the Employee to the Company, (iii) the determination by the Employee
that because of changes in the composition or policies of the Board of Directors
of the Corporation, or of other events or occurrences of material effect, that
the Employee can no longer properly and effectively discharge her
responsibilities as Corporate and United States Securities Counsel of the
Corporation after giving the Corporation not less than thirty (30) days prior
written notice of the effective date of such termination, or (iv) any purported
termination of the Employee's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of Paragraph 6.9 hereof (and
for purposes of this agreement no such purported termination shall be
effective).
1.8 "Termination Other Than For Cause" shall mean termination by the
Corporation of the Employee's employment by the Corporation (other than in a
Termination for Cause) and shall include "Constructive Termination", as that
term is defined in Paragraph 1.2.
1.9 "Termination Upon a Change in Control" shall mean a termination by
the Corporation of the Employee's employment with the Corporation within 120
days following a "Change in Control", as that term is defined in Paragraph 1.1.
1.10 "Voluntary Termination" shall mean termination by the Employee of
the Employee's employment by the Corporation other than (i) Constructive
Termination, (ii) Termination Upon a Change in Control, (iii) Termination for
Good Reason, and (iv) termination by reason of the Employee's death or
disability as described in Paragraphs 6.4 and 6.5.
2. Employment
During the term of this Agreement, the Employee agrees to be employed
by the Corporation and to serve as its Corporate and United States Securities
Counsel, and the Corporation agrees to employ and retain the Employee in such
capacity.
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<PAGE>
3. Duties and Responsibilities
3.1 The services to be rendered by the Employee as Corporate and United
States Securities Counsel shall be of a legal and non-business nature and shall
consist of those corporate and United States securities legal services
specifically requested by the Corporation, by way of providing legal advice and
guidance, reviewing and/or drafting related documents; filing such documents
with appropriate authorities; attending meetings and conferences; and
communicating and dealing with federal and state agencies, securities exchanges
and associations, transfer agents, attorneys, accountant, stockholders and all
other appropriate persons and all related legal services, except that, to the
extent that any such required services shall, in the judgment of either the
Corporation or the Employee, be beyond the expertise of capacity of the Employee
or shall, for any other reason whatsoever, not be able to be performed by the
Employee, the Corporation shall engage other appropriate legal counsel for the
performance of such services ("Outside Counsel").
3.2 Employee shall devote such of her time, energy, and skill to the
affairs of the Corporation, as shall be required for her duties, reporting
solely to the its President, and at all times during the term of this Agreement
the Employee shall have powers and duties at least commensurate with her
position as Corporate and United States Securities Counsel.
3.3 The Corporation hereby acknowledges that the Employee has reviewed
with the Board of Directors of this corporation, her present directorships and
other positions held by her in business organizations and legal practices, and
the Corporation agrees to and approves of the Employee's continuance in such
present capacities unless the Board determines, in a particular case, that there
is a potential material conflict with the business of the Corporation. Any
future proposed directorships and positions which may pose a potential conflict
with the business of the Corporation shall be subject to review by the
Corporation's Board of Directors, providing however, that such Board shall not
prohibit any such activities unless such potential material conflict with the
business of the Corporation shall exist.
4. Term of Employment
The term of employment of the Employee by the Corporation shall be for
a period of four (4) years beginning with the Effective Date (the "Initial
Term"), unless terminated earlier pursuant to Section 6. At any time prior to
the expiration of the Initial Term, the Corporation and the Employee may by
mutual written agreement extend the Employee's employment under the terms of
this Agreement for such additional periods as they shall mutually agree.
5. Salary, Benefits and Bonus Compensation
5.1 Base Salary. As payment for the services to be rendered by the
Employee as provided in Section 3, the Corporation agrees to pay to the Employee
a "Base Salary" for the twelve (12) calendar months beginning the Effective Date
at the rate of one hundred fifty
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<PAGE>
thousand dollars ($150,000) per annum payable in 12 equal monthly installments
of $12,500 subject to annual review and increase, as the board of directors
shall determine, provided however that the Employee shall be considered for
bonuses or salary increases at such times as the Corporation is considering
granting bonuses or salary increases to its executive officers and directors
other than the Chief Executive Officer. The Corporation shall promptly notify
the Employee of bonuses and salary increases granted to any of the executive
officers and/or directors of the Corporation. A failure to so notify the
Employee pursuant to this paragraph 5.1 shall be considered a material breach of
this agreement. All salary increases shall be reviewed annually by the
Compensation Committee, if any shall be in existence.
5.2 Bonuses. the Employee shall be eligible to receive a discretionary
bonus for each year (or portion thereof) during the term of this Agreement and
any extensions thereof, with the actual amount of any such bonus to be
determined in the sole discretion of the Board of Directors based upon its
evaluation of the Employee's performance during such year, provided however that
the Employee shall be considered for bonuses at such times as the Corporation is
considering granting bonuses to its executive officers and directors other than
the Chief Executive Officer. The Corporation shall promptly notify the Employee
of bonuses granted to any of the executive officers and/or directors of the
Corporation. A failure to so notify the Employee pursuant to this paragraph 5.2
shall be considered a material breach of this agreement. All such bonuses shall
be reviewed annually by the Compensation Committee, if any shall be in
existence.
5.3 Additional Benefits. During the term of this Agreement, the
Employee shall be entitled to the following fringe benefits:
5.3.1 Employee Benefits. The Employee shall be eligible to
participate in such of the Corporation's benefits and
deferred compensation plans as are now generally
available or later made generally available to executive
officers of , including, without limitation, the
Corporation's Stock Option Plan, profit sharing plans,
annual physical examinations, dental and medical plans,
personal catastrophe and disability insurance, financial
planning, retirement plans and supplementary executive
retirement plans, if any. For purposes of establishing
the length of service under any benefit plans or programs
of the Corporation, the Employee's employment with will
be deemed to have commenced on the Effective Date.
5.3.2 Vacation. The Employee shall be entitled to vacation time
during each year during the term of this Agreement and
any extensions thereof, in an amount to be determined by
the Employee in her sole discretion.
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<PAGE>
5.3.3 Automobile. The Corporation shall provide the Employee
with the use of an automobile for the term of this
agreement and any extensions thereof, or in lieu thereof,
the Corporation shall provide the Employee with an
automobile allowance equivalent to the highest such
allowance received by any executive officer of the
Corporation other than the Chief Executive Officer.
5.4 Reimbursement for Expenses. During the term of this Agreement, the
Corporation shall reimburse the Employee for reasonable and properly documented
out-of-pocket business and/or entertainment expenses incurred by the Employee in
connection with her duties under this Agreement, including without limitation
cash payments, telecopier, telefax, courier, photocopier, travel and all other
disbursements.
5.5 Issuance of Stock in Lieu of Base Salary
5.5.1 In the event that, from time to time, the Corporation shall not
have the financial resources to pay the Base Salary, then, with the consent of
the Employee, the Corporation's obligation to pay the Base Salary will be
satisfied by the issuance to the Employee of shares of Compensation Shares,
which shares shall constitute compensation pursuant to the terms of this
Agreement, provided however that the Corporation will use its best efforts to
allocate such cash resources as are available to it to meet any obligations
which the Corporation may have under the United States Federal, State, or other
applicable tax laws and provided further that, upon advice from the
Corporation's and/or the Employee's tax accountant or attorney, the Corporation
will amend any other aspects of this paragraph 5.5.1 if any changes are required
in order for the Employee and the Corporation to be in compliance with such tax
laws.
5.5.2 All Compensation Shares will be issued to the Employee at a value
equal to fifty percent (50%) of the average of the high and low bid prices of
Tirex America's common stock as traded in the over-the-counter market and quoted
in the NASDAQ Electronic Bulletin Board during the period when such Compensation
Shares were earned.
5.5.4 The Corporation shall on a continuing basis, upon the request of
the Employee, register the Compensation Shares hereafter issued to the Employee
in lieu of cash salary payments as compensation for services rendered pursuant
to the terms of this Agreement and all Compensation Shares heretofore issued to
the Employee in lieu of cash salary payments as compensation for services
rendered pursuant to the terms of a certain Executive Agreement, dated as of
January 18, 1995, as amended as of May 31, 1996, under a Registration Statement
on Form S-8, including a Re-offer Prospectus, in amounts sufficient to allow the
Employee to offer and sell thereunder, exclusive of any shares sold by the
Employee under Rule 144, during every three-month period, a number of
Compensation Shares equal to one percent of the total number of shares of common
stock of the Corporation then issued and outstanding. Notwithstanding the
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<PAGE>
foregoing, the Corporation shall be under no obligation to register any
Compensation Shares unless and until such shares shall have been held by the
Employee for a period of not less than eighteen months or such other shorter
period as the parties shall agree. Request for registration of any Compensation
Shares which the Employee is entitled to have registered under the provisions of
this Paragraph 5.5.4 shall be submitted by the Employee in writing at any time
commencing ten days prior to the three-month period in which such Compensation
Shares may be offered and sold.
5.5.5 The Corporation acknowledges that it has received from the
Employee good and adequate consideration for all of the Compensation Shares
heretofore issued to her as compensation under the Executive Agreement, dated as
of January 18, 1995, as amended as of May 31, 1996 and that any shares hereafter
issued to the Employee as compensation under this Agreement will be, upon their
issuance, fully paid and nonassessable and agrees that so long as all conditions
for the sale of any of the Compensation Shares under Rule 144 shall be met, the
Corporation shall not withhold or instruct its attorney to withhold the legal
opinion letter required for the consummation of the sale of such Compensation
Shares under Rule 144.
5.5.6 In the event that the Corporation fails to register any of the
Compensation Shares in accordance with Paragraph 5.5.4 above within ten business
days of the Employee's submission of the written request therefor, the
Corporation agrees that the Employee will be entitled to liquidated damages in
an amount equal to three times the amount of any losses incurred by the Employee
as a result of such failure to register such shares on a timely basis. In
addition, if any of the Compensation Shares are eligible for sale in accordance
with the requirements of Rule 144 and the Corporation fails to furnish the to
Employee or the Corporation's transfer agent, as the case may be, the required
legal opinion approving such Rule 144 sale within ten days of the request for
such legal opinion, the Corporation agrees that the Employee will be entitled to
liquidated damages in an amount equal to three times the amount of any losses
incurred by the Employee as a result of such failure to furnish such legal
opinion on a timely basis.
6. Termination
6.1 Termination For Cause. Termination For Cause may be effected by the
Corporation in accordance with the procedures set forth in Paragraph 1.6 at any
time during the term of this Agreement and shall be effected by written
notification to the Employee in accordance with Paragraph 6.9, below. Upon the
effectiveness of a Termination For Cause, the Employee shall promptly be paid
all accrued salary, bonus compensation to the extent earned, vested deferred
compensation (other than pension pay or profit sharing plan benefits which will
be paid in accordance with the applicable plan), any benefits under any plans of
in which the Employee is a participant to the full extent of the Employee's
rights under such plans, accrued vacation pay and any appropriate business
expenses incurred by the Employee in connection with her duties hereunder, all
to the date of termination, but the Employee shall not be paid any other
compensation or reimbursement of any kind.
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6.2 Termination Other Than For Cause. Notwithstanding anything else in
this Agreement, the Corporation may effect a Termination Other Than For Cause at
any time upon giving written notice to the Employee of such termination. Upon
the effectiveness of any Termination Other Than For Cause, the Employee shall
promptly be paid all accrued salary, bonus compensation to the extent earned,
vested deferred compensation (other than pension plan or profit sharing plan
benefits which will be paid in accordance with the applicable plan), any
benefits under any plans of in which the Employee is a participant to the full
extent of the Employee's rights under such plans (including accelerated vesting,
if any, of awards granted to the Employee under the Corporation's stock option
plan), accrued vacation pay and any appropriate business expenses incurred by
the Employee in connection with her duties hereunder, all to the date of
termination, and all severance compensation as provided in Paragraph 7.1.
6.3 Termination For Good Reason. Notwithstanding anything else in this
Agreement, the Employee may effect a Termination for Good Reason at any time
upon giving written notice to the Corporation of such termination in accordance
with the provisions of Paragraph 6.9 hereof. Upon the effectiveness of any
Termination for Good Reason the Employee shall promptly be paid all accrued
salary, bonus compensation to the extent earned, vested deferred compensation
(other than pension plan or profit sharing plan benefits which will be paid in
accordance with the applicable plan), any benefits under any plans of in which
the Employee is a participant to the full extent of the Employee's rights under
such plans (including accelerated vesting, if any, of awards granted to the
Employee under's stock option plan), accrued vacation pay and any appropriate
business expenses incurred by the Employee in connection with her duties
hereunder, all to the date of termination, and all severance compensation as
provided in Paragraph 7.1.
6.4 Termination by Reason of Disability. If, during the term of this
Agreement, the Employee fails to perform her duties under this Agreement on
account of illness or physical or mental incapacity, and such illness or
incapacity continues for a period of more than twelve (12) consecutive months,
the Corporation shall have the right to terminate the Employee's employment
hereunder by written notification to the Employee and payment to the Employee of
all accrued salary, bonus compensation to the extent earned, vested deferred
compensation (other than pension plan or profit sharing plan benefits which will
be paid in accordance with the applicable plan), any benefits under any plans of
in which the Employee is a participant to the full extent of the Employee's
rights under such plans, accrued vacation pay and any appropriate business
expenses incurred by the Employee in connection with her duties hereunder, all
to the date of termination, with the exception of medical and dental benefits
which shall continue through the expiration of this Agreement, but the Employee
shall not be paid any other compensation or reimbursement of any kind.
6.5 Death. In the event of the Employee's death during the term of this
Agreement, the Employee's employment shall be deemed to have terminated as of
the last day of the month during which her death occurs and the Corporation
shall promptly pay to her estate or such beneficiaries as the Employee may from
time to time designate all accrued salary, bonus compensation to the extent
earned, vested deferred compensation (other than pension plan or
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profit sharing plan benefits which will be paid in accordance with the
applicable plan), any benefits under any plans of in which the Employee is a
participant to the full extent of the Employee's rights under such plans,
accrued vacation pay and any appropriate business expenses incurred by the
Employee in connection with her duties hereunder, all to the date of
termination, but the Employee's estate shall not be paid any other compensation
or reimbursement of any kind.
6.6 Voluntary Termination. In the event of a Voluntary Termination, the
Corporation shall promptly pay all accrued salary, bonus compensation to the
extent earned, vested deferred compensation (other than pension plan or profit
sharing plan benefits which will be paid in accordance with the applicable
plan), any benefits under any plans of in which the Employee is a participant to
the full extent of the Employee's rights under such plans, accrued vacation pay
and any appropriate business expenses incurred by the Employee in connection
with her duties hereunder, all to the date of termination, but no other
compensation or reimbursement of any kind.
6.7 Termination Upon a Change in Control. In the event of a Termination
Upon the effectiveness of a Change in Control, the Employee shall immediately be
paid all accrued salary, bonus compensation to the extent earned, vested
deferred compensation (other than pension plan or profit sharing plan benefits
which will be paid in accordance with the applicable plan), any benefits under
any plans of in which the Employee is a participant to the full extent of the
Employee's rights under such plans (including accelerated vesting, if any, of
any awards granted to the Employee under the Corporation's Stock Option Plan),
accrued vacation pay and any appropriate business expenses incurred by the
Employee in connection with her duties hereunder, all to the date of
termination, and all severance compensation as provided in Paragraph 7.1.
6.8 Constructive Termination. The Employee may give notice to the
Corporation that the Corporation has effected a Constructive Termination of the
Employee's employment by reason of the Corporation's material breach of this
Agreement, by written notification to the Corporation in accordance with
Paragraph 6.9, below. Upon the effectiveness of any Constructive Termination the
Employee shall immediately be paid all accrued salary, bonus compensation to the
extent earned, vested deferred compensation (other than pension plan or profit
sharing plan benefits which will be paid in accordance with the applicable
plan), any benefits under any plans of the Corporation in which the Employee is
a participant to the full extent of the Employee's rights under such plans
(including accelerated vesting, if any, of any awards granted to the Employee
under the Corporation's Stock Option Plan), accrued vacation pay and any
appropriate business expenses incurred by the Employee in connection with her
duties hereunder, all to the date of termination, and all severance compensation
provided in Paragraph 7.1.
6.9 Notice of Termination. The Corporation may effect a termination of
this Agreement pursuant to the provisions of this Section upon giving thirty
(30) days' written notice to the Employee of such termination. The Employee may
effect a termination of this Agreement
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pursuant to the provisions of this Section upon giving thirty (30) days' written
notice to the Corporation of such termination.
7. Severance Compensation
7.1 Severance Compensation in the Event of: Termination Other Than for
Cause Pursuant to Paragraph 6.2; Termination for Good Reason Pursuant to
Paragraph 6.3; Termination Upon a Change in Control Pursuant to Paragraph 6.7;
or a Constructive Termination Pursuant to Paragraph 6.8. In the event the
Employee's employment is terminated in a termination: Other Than for Cause
pursuant to Paragraph 6.2; for Good Reason pursuant to Paragraph 6.3; a Change
in Control pursuant to Paragraph 6.7; or a Constructive Termination pursuant to
Paragraph 6.8, the Employee shall be paid as severance compensation twice the
amount of her Base Salary (at the rate payable at the time of such termination),
for a period of twelve (12) months from the date of such termination.
Notwithstanding anything in this Paragraph to the contrary, the Employee may in
the Employee's sole discretion, by delivery of a notice to the Corporation
within thirty (30) days following a Termination Upon a Change in Control, elect
to receive from Compensation a lump sum severance payment by bank cashier's
check equal to the present value of the flow of cash payments that would
otherwise be paid to the Employee pursuant to this Paragraph. The Employee shall
also be entitled to an accelerated vesting of any awards granted to the Employee
under the Corporation's Stock Option Plan or any other employee or to the extent
provided in the stock executive compensation plans then in effect, stock option
or other affiliated agreement, if any, entered into at the time of grant or
award. The Employee shall continue to accrue retirement benefits and shall
continue to enjoy any benefits under any plans of in which the Employee is a
participant to the full extent of the Employee's rights under such plans,
including any perquisites provided under this Agreement, though the remaining
term of this Agreement; provided, however, that the benefits under any such
plans of in which the Employee is a participant, including any such perquisites,
shall cease upon re-employment by a new employer. By way of additional severance
compensation, the Corporation shall issue to the Employee within five (5)
business days of the date of termination, a number of shares of the common stock
of the Corporation equal to the number of shares of such common stock, if any,
which the Employee shall have forfeited under the terms of the Stock Restriction
Agreement, attached as Exhibit "A" hereto, which stock shall be fully registered
under a Form S-8 registration statement, if available to the Corporation, or if
such Form shall not be available to the Corporation, the Corporation shall
immediately take steps to register such shares with the Securities and Exchange
Commission on such Form of registration statement as shall then be available to
the Corporation, including without limitation Form S-1.
7.2 No Severance Compensation Upon Other Termination. In the event of
Termination For Cause pursuant to Paragraph 6.1, or termination by reason of the
Employee's Disability or Death pursuant to Paragraphs 6.4 or 6.5, or Voluntary
Termination pursuant to Paragraph 6.6 hereof, neither the Employee nor her
estate shall not be paid any severance compensation.
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8. Outside Activities of the Employee
The Corporation acknowledges that the Employee has commitments and
business activities including the practice of law, not related to the
Corporation. There shall be no restriction on the Employee's ability to fulfill
such commitments or engage in such business activities, provided that during the
term of the Employee's employment under this Agreement or for a period of six
months after the termination of such employment (other than a Termination Other
Than For Cause or a Termination Upon Change in Control) the Employee shall not
divert away from, for the Employee's personal benefit, or for the benefit of an
organization in which the Employee has a material financial interest, any
opportunity, arising during such period, in the tire recycling industry unless
the Board of Directors of the Corporation have determined not to pursue such
opportunity.
9. Payment Obligations
The Corporation's obligation to pay the Employee the compensation and
to make the arrangements provided herein shall be unconditional, and the
Employee shall have no obligation whatsoever to mitigate damages hereunder. If
litigation after a Change in Control shall be brought to enforce or interpret
any provision contained herein, the Corporation, to the extent permitted by
applicable law and the Corporation's Articles of Incorporation and Bylaws,
hereby indemnifies the Employee for the Employee's reasonable attorneys' fees
and disbursements incurred in such litigation.
10. Confidentiality
The Employee agrees that all confidential and proprietary information
relating to the business of the Corporation shall be kept and treated as
confidential both during and after the term of this Agreement, except as may be
permitted in writing by the Corporation's Board of Directors or as such
information is within the public domain or comes within the public domain
without any breach of this Agreement.
11. Withholdings
All compensation and benefits to the Employee hereunder shall be
reduced by all federal, state, local and other withholdings and similar taxes
and payments required by applicable law.
12. Indemnification
12.1 In addition to any rights to indemnification to which the Employee
is entitled to under the Corporation's Articles of Incorporation and Bylaws, the
Delaware Business Corporation Law or any successor provision thereof, and any
other applicable state law, the Corporation shall at all times during and after
the term of this Agreement indemnify and hold the Employee
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harmless from and against any and all losses, claims, damages, liabilities and
obligations of any kind and description, including any reasonable attorney fees
incurred by the Employee in investigating, defending or settling such losses,
claims, damages, liabilities and obligations, arising out of or in anyway
connected with the Employee's serving as legal counsel to the Corporation
pursuant to her engagement under this Agreement or her previous engagement under
the Executive Agreement, dated January 18, 1995, as amended May 31, 1996, and
the Corporation shall pay the Employee's expenses in defending any civil or
criminal action, suit, or proceeding in advance of the final disposition of such
action, suit or proceeding.
12.2 The Employee agrees to give prompt notice to the Corporation
immediately upon her having actual knowledge of any claims as to which indemnity
shall or may be sought, and shall permit the Corporation (at its expense) to
assume the defense of any such claim or any litigation resulting therefrom;
provided that counsel for the Corporation, who shall conduct the defense of said
claim or litigation, shall be reasonably satisfactory to the Employee, and the
Employee may participate in such defense; provided, further, that the failure by
the Employee to give notice as provided herein shall not relieve the Corporation
of its obligations under Paragraph 12.1 hereof except to the extent that the
failure results in an omission of actual notice to the Corporation and the
Corporation is damaged solely as a result of the failure to give notice. The
Corporation, in the defense of any such claim or litigation, shall not, except
with the consent of the Employee, consent to the entry of any judgment or enter
into any settlement that does not include as an unconditional term, the giving
by the claimant or plaintiff to the Employee of a release from all liability in
respect to such claim or litigation.
13. Notices
Any notices permitted or required under this Agreement shall be
delivered by hand, certified mail, or recognized overnight courier, in all cases
with written proof of receipt required, addressed to the parties as set forth
below and shall be deemed given upon receipt to the Corporation at:
Tirex America, Inc.
3767 Thimens, Suite 207
Ville St. Laurent, Quebec
H4R 1W4
addressed to the Employee at:
Frances Katz Levine
621 Clove Road
Staten Island, NY 10310
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or at any other address as any party may, from time to time, designate by notice
given in compliance with this Paragraph.
14. Law Governing
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
15. General
15.1 Titles and Captions. All section titles or captions contained in
this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
15.2 Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
15.3 Agreement Binding. This Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
15.4 Attorney Fees. In the event an arbitration, suit or action is
brought by any party under this Agreement to enforce any of its terms, or in any
appeal therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or
appellate court.
15.5 Computation of Time. In computing any period of time pursuant to
this Agreement, the day of the act, event or default from which the designated
period of time begins to run shall be included, unless it is a Saturday, Sunday,
or a legal holiday, in which event the period shall begin to run on the next day
which is not a Saturday, Sunday, or legal holiday, in which event the period
shall run until the end of the next day thereafter which is not a Saturday,
Sunday, or legal holiday.
15.6 Pronouns and Plurals. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular, or plural
as the identity of the person or persons may require.
15.7 Presumption. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
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15.8 Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
15.9 Parties in Interest. Nothing herein shall be construed to be to
the benefit of any third party, nor is it intended that any provision shall be
for the benefit of any third party.
15.10 Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
TIREX AMERICA, INC.
By /s/ Terence C. Byrne
--------------------------
Terence C. Byrne, President
TIREX CANADA, INC.
By /s/ Terence C. Byrne
--------------------------
Terence C. Byrne, President
By/s/ Frances Katz Levine
--------------------------
Frances Katz Levine
164
EXHIBIT 10(hhhh)
165
<PAGE>
------------------------
TIREX AMERICA INC.
------------------------
AMENDMENT NO. 1
TO EMPLOYMENT AGREEMENT
OF DECEMBER 22, 1996
------------------------
Amendment, made this 1st day of May 1997, by and between
Tirex America Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
Tirex Canada Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
(collectively, the "Corporation"*)
and
Frances Katz Levine
621 Clove Road
Staten Island, NY 10310
(the "Employee").
the parties to a certain Corporate and United States Securities Counsel
Employment Agreement, dated December 22, 1996 (the "Second Employment
Agreement"). Terms used in this Amendment which are defined in the Second
Employment Agreement and not defined herein shall have the same meaning herein
as therein.
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Whereas, the Employee and the Corporation were parties to a certain
employment agreement, dated as of January 18, 1995, as amended as of May 31,
1996 (the "First Employment Agreement") pursuant to which the Employee served as
Secretary and General Counsel to the Corporation;
Whereas, On December 22, 1996, the First Employment Agreement was
terminated by the parties and replaced by the Second Employment Agreement for
the purposes of continuing the employment of the Employee, in her new capacity
of Corporate and United States Securities Counsel, under terms and provisions
virtually identical to those contained in the First Employment Agreement;
Whereas, It was the intention of the parties, when they entered into
the Second Employment Agreement, and remains the intention of the parties as at
the date hereof, that the Employee retain the right to receive any bonuses
granted by the board of directors of the corporation for services rendered under
the First Employment Agreement, notwithstanding that the grant of such bonuses
might be effected after the December 22, 1996 termination of the First
Employment Agreement, but the parties inadvertently omitted providing explicitly
for such event.
Now therefore, in consideration of the premises and of the
mutual promises and covenants hereinafter set forth, the parties agree to amend
the Second Employment Agreement, as follows:
A. AMENDMENT
Section 5.2 of the Second Employment Agreement is hereby amended so as
to read as follows:
5.2 Bonuses. the Employee shall be eligible to receive a
discretionary bonus for each year (or portion thereof) during the term
of this Agreement and any extensions thereof and for services
heretofore rendered by the Employee for each year (or portion thereof)
during which the Employee served as Secretary and General Counsel under
her Executive Agreement of January 18, 1995, with the actual amount of
any such bonus to be determined in the sole discretion of the Board of
Directors based upon its evaluation of the Employee's performance
during such year, provided however that the Employee shall be
considered for bonuses at such times as the Corporation is considering
granting bonuses to its executive officers and directors other than the
Chief Executive Officer. The Corporation shall promptly notify the
Employee of bonuses granted to any of the executive officers and/or
directors of the Corporation. A failure to so notify the Employee
pursuant to this paragraph 5.2 shall be considered a material breach of
this agreement. All such bonuses shall be reviewed annually by the
Compensation Committee, if any shall be in existence.
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B. NO OTHER AMENDMENTS
Except as expressly provided in this Amendment, all of the terms and
conditions of the Second Employment Agreement remain in full force and effect.
C. COUNTERPARTS
This Amendment may be executed in any number of counterparts and by
each party on a separate counterpart, each of which when so executed and
delivered shall be an original, but all of which together shall constitute one
Amendment.
In Witness Whereof, the parties hereto have caused this Amendment to be
executed the day and year first above written.
TIREX AMERICA INC.
By /s/ Terence C. Byrne
--------------------------------
Terence C. Byrne, President
TIREX CANADA INC.
By /s/ Terence C. Byrne
---------------------------------
Terence C. Byrne, President
EXECUTIVE
/s/ Frances Katz Levine
---------------------------------
Frances Katz Levine
168
EXHIBIT 10(iiii)
169
<PAGE>
------------------------
TIREX AMERICA INC.
------------------------
AMENDMENT NO. 2
TO EXECUTIVE AGREEMENT
OF JANUARY 18, 1995 AS AMENDED MAY 30, 1996
------------------------
Second Amendment, made this 1st day of May 1997, by and between
Tirex America Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
Tirex Canada Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
(collectively, the "Corporation"*)
and
Terence C. Byrne
489 Grosvner Street
Westmount, Quebec
H3Y 2S5
(the "Executive").
the parties to a certain executive agreement, dated as of January 18, 1995 and
amended as of May 30, 1996 (the "Executive Agreement"). Terms used in this
Amendment which are defined in the Executive Agreement and not defined herein
shall have the same meaning herein as therein.
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Whereas, the Executive is employed by the Corporation as its President
and Treasurer, serving in such positions as its Chief Executive Officer,
pursuant to the provisions of the said Executive agreement, the term of which is
scheduled to expire on January 17, 1998;
Whereas, The Executive has since the Commencement Date performed all of
his duties and met all of his responsibilities under the terms of the Executive
Agreement in a superlative manner and the board of directors of the Corporation
has determined that it will be in the best interests of the Corporation, and the
Executive has agreed, to extend the term of the Executive Agreement to December
31, 2003;
Now therefore, in consideration of the premises and of the
mutual promises and covenants hereinafter set forth, the parties agree to amend
the Executive Agreement, as follows:
A. AMENDMENTS
Section 4 of the Executive Agreement is hereby amended so as to read as
follows:
4. Term of Employment
The term of employment of the Executive by the Corporation
shall be extended beyond the Initial Term of three (3) years, which
began on the Effective Date and, unless terminated earlier pursuant to
Section 6, shall continue until December 31, 2003. At any time prior
December 31, 2003, the Corporation and the Executive may by mutual
written agreement further extend the Executive's employment under the
terms of this Agreement for such additional periods as they shall
mutually agree.
B. NO OTHER AMENDMENTS
Except as expressly provided in this Amendment, all of the terms and
conditions of the Executive Agreement remain in full force and effect.
C. COUNTERPARTS
This Amendment may be executed in any number of counterparts and by
each party on a separate counterpart, each of which when so executed and
delivered shall be an original, but all of which together shall constitute one
Amendment.
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In Witness Whereof, the parties hereto have caused this Amendment to be
executed the day and year first above written.
TIREX AMERICA INC.
By /s/ Louis V. Muro
------------------------------------
Louis V. Muro, Vice President of
Engineering and Member of the
Executive Committee of the Board
of Directors.
TIREX AMERICA INC.
By /s/ John G. Hartley
------------------------------------
John G. Hartley, Member of the
Executive Committee of the Board
of Directors
TIREX CANADA INC.
By /s/ Louis V. Muro
------------------------------------
Louis V. Muro, Vice President
EXECUTIVE
/s/ Terence C. Byrne
--------------------------------------
Terence C. Byrne
172
EXHIBIT 10(kkkk)
173
<PAGE>
------------------------
TIREX AMERICA INC.
-------------------------
AMENDMENT NO. 2
TO EXECUTIVE AGREEMENT
OF JANUARY 1, 1996 AS AMENDED MAY 30, 1996
-------------------------
Second Amendment, made this 1st day of May 1997, by and between
Tirex America Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
Tirex Canada Inc.
3767 Thimens
Ville St. Laurent
Quebec, Canada H4R 1W4
(collectively, the "Corporation"*)
and
Louis V. Muro
435 Roy Avenue
Dorval, Quebec
Canada H95 3E2
(the "Executive").
the parties to a certain executive agreement, dated as of January 1, 1996 and
amended as of May 30, 1996 (the "Executive Agreement"). Terms used in this
Amendment which are defined in the Executive Agreement and not defined herein
shall have the same meaning herein as therein.
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Whereas, the Executive is employed by the Corporation as its Vice
President In Charge of Engineering, pursuant to the provisions of the said
Executive agreement, the term of which is scheduled to expire on December 31,
1998;
Whereas, The Executive has since the Commencement Date performed all of
his duties and met all of his responsibilities under the terms of the Executive
Agreement in a superlative manner and the board of directors of the Corporation
has determined that it will be in the best interests of the Corporation, and the
Executive has agreed, to extend the term of the Executive Agreement to December
31, 2000;
Now therefore, in consideration of the premises and of the
mutual promises and covenants hereinafter set forth, the parties agree to amend
the Executive Agreement, as follows:
A. AMENDMENTS
Section 4 of the Executive Agreement is hereby amended so as to read as
follows:
4. Term of Employment
The term of employment of the Executive by the Corporation
shall be extended beyond the Initial Term of three (3) years, which
began on the Effective Date and, unless terminated earlier pursuant to
Section 6, shall continue until December 31, 2000. At any time prior
December 31, 2000, the Corporation and the Executive may by mutual
written agreement further extend the Executive's employment under the
terms of this Agreement for such additional periods as they shall
mutually agree.
B. NO OTHER AMENDMENTS
Except as expressly provided in this Amendment, all of the terms and
conditions of the Executive Agreement remain in full force and effect.
C. COUNTERPARTS
This Amendment may be executed in any number of counterparts and by
each party on a separate counterpart, each of which when so executed and
delivered shall be an original, but all of which together shall constitute one
Amendment.
175
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In Witness Whereof, the parties hereto have caused this Amendment to be
executed the day and year first above written.
TIREX AMERICA INC.
By /s/ Terence C. Byrne
---------------------------------
Terence C. Byrne President and
Member of the Executive
Committee of the Board of
Directors.
TIREX AMERICA INC.
By /s/ John G. Hartley
---------------------------------
John G. Hartley, Member of the
Executive Committee of the
Board of Directors
EXECUTIVE
/s/ Louis V. Muro
---------------------------------
Louis V. Muro
176
EXHIBIT 10(kkkk)
177
<PAGE>
---------------------
TIREX AMERICA INC.
---------------------
EQUIPMENT LEASE AND PURCHASE AGREEMENT
Equipment Lease and Purchase Agreement, made, as of the 29th day of May
1997, between:
Oceans Tire Recycling & Processing
Co., Inc., a New Jersey Corporation
1497 Lakewood Road
Toms River, N.J. 08755
(the "Operator")
and
Tirex America Inc.
3767 Thimens, Suite 207
Ville St. Laurent
Quebec, Canada H4R 1W4
(the "Manufacturer")
1. DEFINITIONS
1.1 "Acceptance Date" shall mean the first day following the completion
of the Test Period.
1.2 "Anticipated Delivery Date" shall mean September 15, 1997 or such
other date as the parties hereto shall mutually agree.
1.3 "Leased Proprietary Equipment" shall mean all of the following
constituent, integral parts of the TCS-1 System and all substitutions,
replacements, and improvements, and all repair and renewal parts installed
therein, as specified in the plans and specifications therefor, attached as
Schedule 1.3 hereto:
(a) the disintegration system including but not limited to all
grinders contained therein, and
(b) the separation systems, including but not limited to:
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(i) a magnetic separator;
(ii) a fiber/crumb separator;
(iii) fiber collector
(iv) crumb rubber sizing system; and
(v) all integrated conveyance and exit belts, chutes, and
other components
1.4 "Maintenance Agreement" shall mean the maintenance agreement of
even date herewith between the Manufacturer and the Operator respecting the
maintenance of the TCS-1 System.
1.5 "Manufacturer" shall mean Tirex America Inc. and Tirex-Canada Inc.,
and all other corporations, partnerships, or other entities, now or in the
future controlled by, under common control with, or in control of, Tirex America
Inc., jointly and severally.
1.6 "Non Proprietary Equipment" shall mean all of the following
constituent, integral parts of the TCS-1 System:
(a) all bailing systems contained in the TCS-1 System, including all
associated ancillary equipment and conveyance and exit belts,
chutes and/or other components combined or integrated therewith,
as specified in the pertinent plans and specifications therefore;
and
(b) freezing chambers and cryogenic systems and all substitutions,
replacements, and improvements, and all repair and renewal parts
installed therein, as specified in the plans and specifications
therefore, attached as Schedule 1.6 (b).
1.7 "Operator" shall mean Oceans Tire Recycling & Processing Co., Inc.,
a New Jersey Corporation owned 87.5% by Ocean Utility Contracting, Inc. and
12.5% by Bentley Environmental Engineering Sources, Inc., and all other
corporations, partnerships, or other entities, now or in the future controlled
by, under common control with, or in control of, Ocean Utility Contracting Inc.
or Bentley Environmental Engineering Sources, Inc., or either one of them,
jointly and severally.
1.8 "Proprietary Front-End System" shall mean the manufacturer's
proprietary front-end tire preparation system, all substitutions, replacements,
and improvements, and all repair and renewal parts installed therein, as
specified in the plans and specifications therefor, attached as Schedule 1.8
hereto.
1.9 "Purchased Equipment" shall mean the Proprietary Front-End System
and the NonLeased Proprietary Equipment, as those terms are defined in Sections
1.8 and 1.6 (b), collectively.
1.10 "Site" shall mean the Operator's premises at 1497 Lakewood Road,
Tom's River, NJ 08755.
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1.11 "TCS-1 System" shall mean the Manufacturer's proprietary cryogenic
tire disintegration system, patent pending, consisting of the Proprietary
Front-End System, the Nonproprietary Equipment and the Leased Proprietary
Equipment, as specified in the plans and specifications attached as Schedule
1.3, 1.6 (b), and 1.8 hereto and all substitutions, replacements, and
improvements, and all repair and renewal parts installed therein.
1.12 "Test Period" shall mean a three (3) day period which shall
commence within ten (10) business days after completion of the installation of
the TCS-1 System, during which Test Period, the TCS-1 System shall be operated
continually for up to 12 hours per day exclusive of any time devoted to
adjustments and acclamation.
2. RECITALS
Whereas:
2.1 The Manufacturer has invented, built, and patented (patent
pending), and is the sole and exclusive owner, directly or indirectly, through
one or more subsidiaries, of all right title and interest in the TCS-1 System.
2.2 The Operator is a New Jersey Corporation, 87.5% of which is owned
by Ocean Utility Contracting, Inc. and 12.5% of which is owned by Bentley
Environmental Engineering Sources, Inc; The Operator was organized by its
shareholders for the principal purpose of commercially exploiting, directly or
indirectly, through one or more subsidiaries, the TCS-1 System by purchasing the
Purchased Equipment, leasing the Leased Proprietary Equipment, and operating the
TCS-1 System.
2.3 The Manufacturer and the Operator's affiliate Ocean Venture III,
Inc. are parties to a certain Letter Agreement, dated October 5, 1995, between
them (the "Letter Agreement") respecting the purchase and/or lease by the
Operator of a TCS-1 System from the Manufacturer.
2.4 The parties hereto wish to terminate the Letter Agreement and
restate the terms and conditions of the transactions contemplated therein this
Equipment purchase and Lease Agreement in accordance with Section 20 of this
agreement.
3. AGREEMENT FOR PURCHASE AND SALE OF PROPRIETARY FRONT-END
AND NON PROPRIETARY EQUIPMENT
3.1 Purchase and Sale
The Operator agrees to purchase, and the Manufacturer agrees to sell,
the Proprietary Front-End System and the Non Proprietary Equipment, as defined
in Sections 1.6 and 1.8, above (collectively, the "Purchased Equipment"), above,
in accordance with the terms and conditions
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of this Agreement. The Operator may at its election take title to the Purchased
Equipment in a wholly owned subsidiary corporation to be formed by it for such
purpose. Such election by the Operator shall nowise modify, diminish, or
otherwise affect the Operator's liability hereunder to the Manufacturer. The
purchase and payment for the Purchased Equipment by the Operator, and the sale,
assignment, transfer, and delivery thereof by the Manufacturer, shall take place
subject to the fulfillment of the conditions hereinafter provided.
3.2 Purchase Price
The purchase price for the Purchased Equipment (the "Purchase Price"),
installed and set in operation pursuant to Section 7 and 8 hereof, shall be the
sum of one million, two hundred twenty-five thousand United States dollars (US
$1,225,000), FOB Montreal, which shall be deemed allocated as follows:
(a) Freezing Chamber and
Cryogenic Systems US $ 810,000
(b) Front End Tire
Preparation and
Bailing Systems 415,000
---------------
Total US $1,225,000
3.3 Payment Terms
The Purchase Price shall be paid by the Operator to the Manufacturer
through financing arrangements which Ocean Utility Contracting, Inc. and Bentley
Environmental Engineering Sources, Inc. have entered into with Blockwell Funding
Corp., which provide for Blockwell's advancement of purchase financing to the
Operator, as construction and delivery milestones are met, and the Operator's
paying over to the Manufacturer all funds released by Blockwell, immediately
upon release.
4. AGREEMENT FOR OPERATING LEASE OF LEASED PROPRIETARY
EQUIPMENT
4.1 Agreement to Lease Equipment
The Manufacturer, as lessor, and the Operator, as lessee, hereby enter
into an operating lease (the "Lease") for the Leased Proprietary Equipment, as
defined in Section 1.3 above, subject to the following terms and conditions:
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4.2 Term of the Lease
4.2.1 The term of the Lease shall be sixty (60) months commencing on
the Acceptance date.
4.2.2 At the expiration of the full original term hereof, if this Lease
has remained in effect and the Operator has duly performed all its obligations
thereunder during the entire such term, then the Operator shall have the option
to either:
(a) Obtain a new lease agreement in the form then being generally
offered by the Operator to the trade with renewal terms, as agreed
by the parties;
(b) Continue to use the same equipment installed hereunder and thereby
extend the term of this Lease at a reduced rental rate of US
$8,770 per month for a period of one year with further successive
automatic one-year extensions subject to either party's right to
terminate this Lease at the end of any extension year by at least
90 days prior written notice of termination of the other; or
(c) Request that the Manufacturer exercise its right of first refusal
to repurchase the Purchased Equipment pursuant to Section 13.1 of
this Agreement, in which event the Manufacturer shall have thirty
(30) days to either: (i) notify the Operator of its intent to
repurchase the Purchased Equipment and, within sixty (60) days of
such notice, effectuate such repurchase and thereupon enter upon
the premises where the said TCS-1 System is located and remove the
entire TCS-1 System from the Operator's premises at the
Manufacturer's expense, or (ii) notify the Operator that it does
not intend to repurchase the Purchased Equipment and, within
thirty (30) days of such notice, enter upon the premises where the
TCS-1 System is located, take possession of the Leased Proprietary
Equipment without previous demand or notice and without legal
process, retrieve the Leased Proprietary Equipment from the TCS-1
System and remove the Leased Proprietary Equipment from the
Operator's premises at the Manufacturer's expense.
4.3 Rent Payments
4.3.1 The Operator shall pay to the Manufacturer monthly rental
payments (the "Rent Payments") for the Leased Proprietary Equipment at the rate
of eight thousand seven hundred and seventy United States dollars (US $8,770)
per month, payable in advance, as follows:
(a) the Rent Payment for the first 30-day period (the "Set-Off
Period") following the Acceptance Date shall be paid by way of a
set-off in the amount of US $8,770 against the deposit heretofore
paid by the Operator;
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(b) the Rent Payment for the period (the "Partial-Month Period") which
commences on the first day following the Set-Off Period and ends
on the last day of the calendar month in which such Partial-Month
Period falls, will be payable in cash on the first day of such
Partial-Month Period, on a pro rata basis.
(c) Normal monthly Rent Payments of US $8,770 will commence and be
payable on the first day of the first full calendar month
following the Partial-Month Period.
EXAMPLE:
Acceptance Date: September 15th
Set-Off Period: September 16th through October 15th.
Partial-Month
Period: October 15th through October 31st,
with Rent Payment in the amount of
$4,385 due and payable on October 15th.
Commencement of Regular November 1st, with normal monthly
Monthly Rental Payments Rent Payment of $8,770 due and payable
on such date.
4.3.2 In the event of that payment of any Rent Payment is made by the
Operator more than ten (10) days after the date when such payment shall have
been due, the Operator shall pay a late charge of one and a half percent (1.5 %)
of the entire amount of such Rent Payment for every month in which such
delinquency occurs or continues.
5. TITLE TO EQUIPMENT
5.1 Title to Purchased Equipment
5.1.1 Title to the Purchased Equipment shall pass to the Operator upon
payment in full of the balance of the Purchase Price, due on the Acceptance
Date.
5.1.2 No rights to any plans or designs respecting the TCS-1 System
shall pass to the Operator and the Operator shall not copy, reproduce, design,
or build, or cause, assist, or suffer to be copied, reproduced, designed, or
built by any other person, firm, or corporation any equipment in any way similar
to, or based upon, the design or structure of the TCS-1 System.
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5.2 Title to Leased Proprietary Equipment
5.2.1 The Leased Proprietary Equipment shall at all times remain the
sole and exclusive property of the Manufacturer (which reserves the right to
assign or encumber the Leased Proprietary Equipment) and the Operator shall have
no right, title, or interest to the Leased Proprietary Equipment but only the
right to use such Equipment under this Lease. The Leased Proprietary Equipment
shall not be transferred or sublet by the Operator to any other person, firm or
corporation, the Operator shall not permit any other person, firm, or
corporation to use the Leased Proprietary Equipment, and this agreement may not
be assigned by the Operator either by its own act or by operation of law.
5.2.2 The Leased Proprietary Equipment shall remain personal property
and shall not be deemed otherwise by reason of becoming attached to the
premises.
5.2.3 The Manufacturer shall have the right at any time or from time to
time to modify the Leased Proprietary Equipment in a manner which will not
lessen the utility of the Leased Proprietary Equipment;
5.2.4 The Operator shall not enter into, remove, tamper with, or breach
the security of, the Leased Proprietary Equipment. The Operator shall not copy,
reproduce, design, or build, or cause, assist, or suffer to be copied,
reproduced, designed, or built by any other person, firm, or corporation any
equipment in any way similar to, or based upon, the design or structure of the
Leased Proprietary Equipment, or of any part thereof. The Operator shall not
permit any Leased Proprietary Equipment to be abused, not permit the removal of
any descriptions, instructions, warnings plate or markings, or other writings of
any kind whatsoever put on the Leased Proprietary Equipment by the Manufacturer,
nor attach anything to or remove anything from the Leased Proprietary Equipment.
5.2.5 In accordance with the terms of the Maintenance Agreement, the
Operator will not allow any repairs to the TCS-1 or replacement of parts to be
done by any person or persons except technicians authorized by the Manufacturer.
5.2.6 The Operator agrees that, in consideration of the Manufacturer
entering into this Lease, it will not move the TCS-1 System, of which the Leased
Proprietary Equipment forms a part, to any location outside of the state in
which the Site is located or outside of a fifty (50) mile radius of the Site,
without the prior written consent of the Manufacturer.
6. SITE PREPARATION
6.1 Site Plan Specifications
Within thirty (30) days of execution of this Agreement, the
Manufacturer will furnish to the Operator "Site Plan Specifications" respecting
the electrical, ventilation, water supply and
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disposal, and any other specifications required at the site for the installation
and operation of the TCS-1 System.
6.2 Preparation of Site
6.2.1 Prior to the Delivery and installation of the TCS-1 System, the
Operator shall make, at its own expense, all alterations to and changes in its
premises and equipment required to bring the site into complete conformance with
the above referenced Site Plan Specifications, with respect to which the
Operator shall obtain all necessary permissions and inspections, and which shall
include but not be limited to making any required structural changes and the
installation of:
(a) electrical equipment and power lines up to the electrical inputs
or control boxes attached to the TCS-1 System, as designated on
the Site Plan Specifications;
(b) water supply sources and equipment up to the water inflow points
designated on the Site Plan Specifications;
(c) water drainage and disposal sites and equipment from the water
outflow points designated on the Site Plan Specifications;
(d) air ventilation sources and equipment as designated on the Site
Plan Specifications
6.3 Notice to Inspect
6.3.1 The Operator shall, not later than one month prior to the
anticipated Delivery Date, give written notice to the Manufacturer (the "Notice
to Inspect") that: (i ) preparation of the site for the installation and
operation of the TCS-1 has been completed in accordance with the Site Plan
Specifications and (ii) all applicable governmental regulations have been
complied with and all required permits, licenses, and standards have been
obtained or met (together with copies of all documentary evidence thereof) and
request that the Manufacturer inspect the site in order to confirm the
foregoing.
6.4 Manufacturer's Right to Inspect Site
6.4.1The Manufacturer shall have the right, at any time within two
weeks of its receipt of the Notice to Inspect, to inspect the site and notify
the Operator in writing (the "Notice of Approval") that the Site is in
conformance with the Site Plan Specifications and that all legal requirements
have been met.
6.4.2 In the event that, after inspecting the Site, the Manufacturer
determines that the Site is not in conformance with the Site Plan Specifications
or that any legal requirements have not
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been met, then the Manufacturer shall have the right to require that the
Operator make any and all changes or additions required to bring the Site into
such conformance, at the sole expense of the Operator prior to the Delivery Date
and to reschedule the Delivery Date after all such changes or additions are
completed and/or all legal requirements are complied with. In such event, the
Operator shall, upon completion of the required changes or additions, give
written notice to the Manufacturer ("Notice to Re-inspect") that such changes or
additions have been made in accordance with the Manufacturer's instructions or
governmental regulations and that the Site is in complete conformance with the
Site Plan Specifications and all applicable regulations. The Manufacturer shall
have the right, within two weeks of its receipt of such Notice to reinspect the
Site. Such procedures may be repeated, and the Manufacturer shall have no
obligation to deliver the TCS-1 System, until the Manufacturer confirms upon
inspection that the Site is in conformance with the Site Plan Specifications,
all governmental regulations are complied with, and the Delivery Date is
rescheduled in accordance with this Paragraph 6.4.2.
7. DELIVERY AND INSTALLATION
7.1 Delivery
7.1.1 If, by a date not later than fifteen business days prior to the
Anticipated Delivery Date, the Site is in conformance with the Site Plan
Specifications and all legal requirements have been met in accordance with
Section 6.4, above, then the Manufacturer shall deliver the TCS-1 System to the
Site on or before the Anticipated Delivery Date set forth in Paragraph 1.2,
above.
7.1.2 In the event that the Operator shall not meet the requirements of
Paragraph 7.1.1, above, for delivery not later than the Anticipated Delivery
Date, then, within ten business days of the date when the Site Plan
Specifications and all legal requirements have been met, the Manufacturer shall
reschedule a new delivery date, which new delivery date shall not be later than
fourteen months from the date of such rescheduling.
7.1.3 Delivery shall be made F.O.B. Montreal, Canada. The equipment
comprising the TCS-1 System shall be placed in suitably protected containers the
nature of which shall be determined by the Manufacturer. The Operator shall pay
all costs of transportation and delivery of the TCS-1 System from the
Manufacturer's plant in Montreal to the Site.
7.1.4 In the event that delivery of the TCS-1 System, or any part
thereof, for a period not exceeding sixty (60) days, shall be prevented by
causes beyond the control of the Seller, including but not limited to acts of
God, labor troubles, failure of essential means of transportation, or changes in
policy with respect to exports or otherwise by the government of the
jurisdiction in which the Operator is located, the Delivery Date shall be
rescheduled after all of such causes have been eliminated. In the event,
however, that such nondelivery continues after such extended period, the
Operator and the Manufacturer shall each have the right to cancel this agreement
by written notice, and in such case there shall be no obligation or liability on
the part of either party with respect to such undelivered equipment.
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7.2 Installation
7.2.1 Within 5 days of the delivery of the TCS-1 System to the Site,
the Manufacturer shall, at its own expense, install the TCS-1 System at the
Site.
7.2.2 Upon installation, the TCS-1 System shall be in complete working
order and shall consist of the Nonproprietary Equipment and the Leased
Proprietary Equipment, as specified in the plans and specifications set forth in
Schedules 1.3,1.6 (b, and 1.8 hereto.
8. EQUIPMENT TESTING AND OPERATOR'S ACCEPTANCE
8.1 Notice of Availability for Testing
Upon completion of the installation of the TCS-1 System at the Site,
the Manufacturer shall give the Operator written notice that the TCS-1 System is
available for testing operations.
8.2 Test Period
8.2.1 Immediately upon giving notice to the Operator that the TCS-1
System is available for testing operations, the Manufacturer shall, within ten
business days, at its own expense, provide a technical representative to
supervise the operation of the TCS-1 for a period of three (3) days (the "Test
Period"). During the Test Period, the TCS-1 System shall operate in accordance
with the specifications set forth in Schedule 8.2 hereto, continually for up to
12 hours per day.
8.2.2 All power, fuel, light, water, oil, or other necessary supplies
and all necessary personnel (other than the engineering technician furnished by
the Manufacturer) for the successful operation of the TCS-1 System, shall be
provided by the Operator.
8.2.3 The Manufacturer shall furnish to the Operator all data regarding
the TCS-1 System in order to enable the Operator to operate such System and, in
addition to the training to be provided pursuant to the Maintenance Agreement,
the Manufacturer shall, during the Test Period, instruct at least 2 of the
Operator's employees with respect to the operation, and operating maintenance of
the TCS-1 System, and use reasonable care in training such employee, provided
that if in the Manufacturer's sole opinion any employee is not adequately
qualified, the Operator shall designate another of its employees to receive such
instruction.
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8.3 Acceptance
8.3.1 Unless the TCS-1, or any part of it, fails to operate in
accordance with the specifications set forth in Schedule 8.2 hereto, the
Manufacturer's offer to sell the NonLeased Proprietary Equipment and to lease
the Leased Proprietary Equipment to the Operator shall automatically be deemed
to have been accepted by the Operator as of the Acceptance Date, which shall
occur on the first day following the completion of the Test Period and the
Operator shall have no right to revoke such acceptance for any reason.
8.3.2 If the TCS-1, or any part of it, fails to operate in accordance
with the specifications set forth in Schedule 8.2 hereto, the Manufacturer shall
have 30 days in which to cure the problems responsible for such failure. Costs
of all parts and labor required to bring the TCS-1 into full working condition
shall be borne by the Manufacture unless the failure to operate in accordance
with the specifications set forth in Schedule 8.2. shall have been caused by any
act or failure to act on the part of the Operator or its personnel, including
but not limited to the failure of the Operator to have brought the Site into
conformance with the Site Plan Specifications.
8.3.3 Upon written notice to the Operator that the problems which
caused the TCS-1 System to fail to operate as required during the Test Period
have been cured, the Manufacturer shall, at the request of the Operator,
commence a second Test Period for up to three (3) days, in which case the
acceptance criteria of Paragraph 8.2.1 shall pertain to such second Test Period
(or any subsequent Test Period) with the same force and effect as to the initial
Test Period.
9. RISK OF LOSS
9.1 The risk of loss, injury, or destruction of the Leased Proprietary
Equipment from any cause whatsoever, except negligence or willful destruction by
the Operator shall be borne by the Manufacturer during the term of the Lease
therefor provided hereunder.
9.2 The risk of loss, injury, or destruction of the NonLeased
Proprietary Equipment from any cause whatsoever, except negligence or willful
destruction by the Operator shall be borne by the Manufacturer only until title
passes to the Operator.
9.3 Any loss, injury, or destruction to the TCS-1, or any part of it,
after title to the Nonproprietary Equipment passes to the Operator, shall not
serve in any manner to release the Operator from the obligation to pay the Rent
Payments provided for Section 4.3, above.
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10. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE
MANUFACTURER
The Manufacturer hereby represents, warrants, and covenants to the
Operator, as follows:
10.1 Corporate Status
Tirex America Inc. is (i) duly organized corporation, validly existing
and in good standing under the laws of the State of Delaware; (ii) has full
power to own all of its properties and carry on its business; and (iii) is
qualified to do business as a foreign entity in each of the jurisdictions in
which it operates, if any, unless the character of the properties owned by it or
the nature of the business transacted by it, does not make qualification
necessary in any other jurisdiction or jurisdictions.
10.2 Corporate Action
Prior to the date hereof, the board of directors of the Manufacturer
has duly adopted resolutions approving the execution and delivery to the
Manufacturer of this Agreement and authorizing and consenting to each and every
one of the terms, warranties, representations, covenants and conditions herein
contained.
10.3 Patents
10.3.1 The Manufacturer has applied for a patent in the United States
and Canada for the Disintegration System forming part of the Leased Proprietary
Equipment. The Manufacturer is the sole owner of such patent application and,
upon the granting of a patent in respect thereof, the Manufacturer shall be the
sole owner of such patent and of all rights thereunder.
10.3.2 The Manufacturer shall defend, to the best of its ability and at
its own expense, all actions, suits, or proceedings instituted against the
Operator insofar as the same are based on any claims that the said Leased
Proprietary Equipment, or any part thereof, constitutes an infringement of any
patent of the United States or Canada and shall indemnify the Operator against
all damages, costs, and expenses which the Operator may incur as a result of any
action which may be brought or threatened against the Operator with respect to
the equipment covered by such patent, provided that:
(a) The Manufacturer shall have the right at any time or from time to
time to modify the TCS-1 System in a manner which will not lessen
the utility thereof;
(b) The Operator gives the Manufacturer immediate notice in writing of
the institution of the action, suit, or proceeding and permits the
Manufacturer, through its
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counsel, to defend same, and gives the Manufacturer all
information, assistance, and authority to enable the Manufacturer
to do; and
(c) The Operator has made no change of any kind in the TCS-1 System
without obtaining the prior written permission of the
Manufacturer.
10.3.3 When information is brought to the attention of the Manufacturer
or the Operator that others are unlawfully infringing on the patents covering
the machine, the Manufacturer shall prosecute diligently any infringer at the
Manufacturer's own expense.
10.4 Warranties
Subject to any default on the part of the Operator under the
Maintenance Agreement, the Manufacturer warrants that the TCS-1 will conform to
the descriptions contained in Schedules 1.3, 1.6 (b), and 1.8. The Manufacturer
further warrants the TCS-1 System against defects in workmanship and materials
or failure to perform in accordance with the specifications set forth in
Schedule 8.2 for one year after the Acceptance Date. No other representations or
warranties have been made by the Manufacturer or relied upon by the Buyer. If
any defects in the Manufacturer's work or materials are discovered within one
year of delivery the Operator shall give notice within seven (7) days of such
discovery. THIS WARRANTY IS EXPRESSLY IN LIEU OF ANY AND ALL OTHER WARRANTIES.
11. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE OPERATOR
The Operator hereby represents, warrants, and covenants to the
Manufacturer, as follows:
11.1 Corporate Status of Ocean Utility Contracting Inc.
Ocean Utility Contracting Inc. is (i) a duly organized Corporation,
validly existing and in good standing under the laws of the State of New Jersey;
(ii) has full power to own all of its properties and carry on its business; and
(iii) is qualified to do business as a foreign entity in each of the
jurisdictions in which it operates, if any, unless the character of the
properties owned by it or the nature of the business transacted by it, does not
make qualification necessary in any other jurisdiction or jurisdictions.
11.2 Corporate Status of Bentley Environmental Engineering Sources Inc.
Bentley Environmental Engineering Sources Inc. is (i) a duly organized
Corporation, validly existing and in good standing under the laws of the State
of Oklahoma; (ii) has full power to own all of its properties and carry on its
business; and (iii) is qualified to do business as a
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foreign entity in each of the jurisdictions in which it operates, if any, unless
the character of the properties owned by it or the nature of the business
transacted by it, does not make qualification necessary in any other
jurisdiction or jurisdictions.
11.3 Financial Condition of the Operator
The books and records of the Operator are complete and accurate and
fairly present the financial condition and the results of operations of the
Operator as of the date hereof. There are no material liabilities, either fixed
or contingent, not reflected in such books and records other than contracts or
obligations in the ordinary and usual course of business; and no such contracts
or obligations in the usual course of business constitute liens or other
liabilities which, if disclosed, would alter substantially the financial
condition of the Operator as reflected in such books and records.
11.4 Defaults and Conflicts
There are no defaults on the part of the Operator under any contract,
lease, mortgage, pledge, credit agreement, title retention agreement, security
agreement, lien, encumbrance or any other commitment, contract, agreement or
undertaking to which the Operator is a party. The execution of this Agreement
will not violate or breach any material agreement, contract, or commitment to
which the Operator is a party.
11.5 Corporate Action
Prior to the date hereof, the boards of directors of the Operator has
duly adopted resolutions approving the execution and delivery to the
Manufacturer of this Agreement and authorizing and consenting to each and every
one of the terms, warranties, representations, covenants and conditions herein
contained.
11.6 Insurance and Damage to Equipment
11.6.1 The Operator, at its own cost and expense, shall insure the
Leased Proprietary Equipment against burglary, theft, fire, and vandalism in the
amount of $500,000, or such other amount that the parties shall agree is
required for replacement costs, and obtain public liability insurance with
minimum limits of $500,000 per occurrence and $1,000,000 collectively, for
bodily injury and for property damage in such form and with such insurance
companies as shall be satisfactory to the Manufacturer. All insurance policies
shall name both the Operator and the Manufacturer as insured parties and copies
of the policies and the receipts for the payment of
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premiums shall be furnished to the Manufacturer. Each damage policy shall
provide for payment of all losses directly to the Manufacturer. Each liability
policy shall provide that all losses be paid on behalf of the Operator and the
Manufacturer, as their respective interests appear.
11.6.2 In the event that the Operator shall fail to comply with the
provisions of Paragraph 11.6.1, above, then the Operator shall pay to the
Manufacturer an adequate premium in advance per annum to enable the Manufacturer
to insure the Leased Proprietary Equipment and all such insurance policies shall
be held in the custody of the Manufacturer.
11.6.3 In the event that all or any part of the TCS-1 System is
damaged, due to any cause whatsoever, to the extent that the TCS-1 System is not
useable, notwithstanding that the Manufacturer may have been partially or fully
compensated for the Leased Proprietary Equipment forming part of such damaged
TCS-1 System by way of insurance or otherwise, the Manufacturer shall
immediately have possession of the said Leased Proprietary Equipment and the
Manufacturer may enter upon the premises where the TCS-1 System is located,
remove the Leased Proprietary Equipment from the damaged TCS-1 System and take
possession of the said Leased Proprietary Equipment without previous demand or
notice and without legal process, and remove it from the Operator's premises at
the Manufacturer's expense.
11.7 Access
The Operator shall insure that the Manufacturer, and its agents and
employees, shall at all times have free access to the Operator's premises for
the purpose of inspecting the Leased Proprietary Equipment and observing its use
and operation, and making alterations, improvements, or additions thereto; and
the Operator shall afford all reasonable facilities therefor, and shall allow
the Manufacturer to make such reasonable alterations, improvements, or additions
as the Manufacturer shall deem necessary, at the expense of the Manufacturer.
11.8 Taxes
The Operator shall pay all taxes, assessments, penalties, and fees
which may be levied or assessed on or with respect to the installation of the
TCS-1 System and, at all times during the term of the Lease of the Leased
Proprietary Equipment, the Operator shall pay all taxes and assessments which
may be levied upon or in respect of the TCS-1 System or its operation, and shall
pay any other liability of any character which may be imposed or incurred as an
incident to the physical possession or operation of such System.
11.9 Compliance with Applicable Law
The Operator shall provide, at its own expense, all requisite permits
and licenses necessary for the installation and operation of the TCS-1 System at
the Site and shall exercise its best
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efforts to maintain its compliance with all applicable federal, state, and local
laws, statutes, rules, and regulations and, in the event of any non-compliance
which renders impossible the operation of the Site as a tire recycling facility,
the Operator shall exercise its best efforts to cure such non-compliance
promptly.
11.10 Subordination
Not less than three (3) months prior to the anticipated Delivery Date,
the Operator shall procure from every owner, landlord, mortgagee, or other
secured party having any interest in the real property on which the TCS-1 System
is to be installed or in the Operator's place of business or the equipment
therein, and deliver to the Manufacturer, a written consent to such installation
and a writing to the effect that the lien of any such mortgage or other interest
is subordinate to the rights of the Manufacturer with respect to the Leased
Proprietary Equipment.
11.11 Ancillary Agreements
11.11.1 The Operator will, simultaneously with the execution of this
Agreement, and in consideration of the premises and the mutual promises and
agreements made herein, enter into the following agreements with the
Manufacturer or such person, corporation, firm, partnership, or other entity as
the Manufacturer shall appoint in its stead:
(a) The Royalty Agreement, of even date herewith, between the
Manufacturer and the Operator providing for the Operator to
pay to the Manufacturer a royalty of three percent (3%) of the
gross proceeds from the sale by the Operator of rubber crumb
fiber and steel from scrap tires disintegrated by the Operator
through the utilization of the TCS-1 System, a copy of which
Royalty Agreement is attached as Schedule 11.10(b) hereto; and
(b) The Maintenance Agreement, of even date herewith, between the
Operator and the Manufacturer, respecting the maintenance of
the TCS-1 System, a copy of which Maintenance Agreement is
attached as Schedule 11.10(b) hereto.
11.11.2 In addition, the Operator will, at such time during the term of
the Lease as the Manufacturer shall request, in further consideration of the
premises and the mutual promises and agreements made herein, enter into an
agreement with the Manufacturer or such person, corporation, firm, partnership,
or other entity as the manufacturer shall appoint in its stead, pursuant to
which the Operator shall agree to sell up to forty percent (40%) of the rubber
crumb to the Manufacturer or such person as the Manufacturer shall appoint in
its stead:
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12. DEFAULTS
12.1 Default by Manufacturer
12.1.1 Each of the following events shall be deemed to constitute
breach of this Agreement and, unless cured within ninety (90) days, shall
constitute a default hereunder by the Manufacturer:
(a) If at any time prior to the delivery of the TCS-1 System to
the Site:
(i) The Manufacturer makes an assignment for the benefit
of creditors;
(ii) A voluntary or involuntary petition is filed by or
against the Manufacturer under any law having for its
purpose and adjudication of the Manufacturer a
bankrupt or the extension of the time of payment of,
adjustment of, or other arrangement affecting the
liabilities of the Manufacturer, or the
reorganization of the Manufacturer and such petition
is not discharged or dismissed within one hundred
twenty (120) days after such petition is filed;
(iii) A Receiver is appointed for the property of the
Manufacturer and is not discharged or dismissed
within one hundred twenty (120) days after such
appointment;
or
(iv) Any distress, execution, or attachment is levied upon
the Manufacturer's property to the extent that the
Manufacturer is not able to fulfill its obligations
to deliver the TCS-1 within ninety (90) of the
anticipated Deliver Date.
(b) The Manufacturer fails to deliver the TCS-1 System in
accordance with the terms and provisions of Section 7, above,
within ninety (90) days of the Delivery Date unless prior
thereto, the Operator has failed to meet the payment
provisions set forth above in Section 3.3 of this Agreement;
(c) The TCS-1 System fails to operate for a full Test (or re-test)
Period, in accordance with Section 8.2 hereof, as specified
Schedule 8.2 hereto , within ninety (90) days from the date
the TCS-1 System is actually delivered to the Site.
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12.2 Default by Operator
Each of the following events shall be deemed to constitute breach of
this Agreement and, unless cured within ninety (90) days, shall constitute a
default hereunder by the Operator:
(a) The Operator fails to make any payment required to be made
pursuant to Sections 3.3 or 4.3 of this Agreement or any
payment required to be made by the Operator under the
Maintenance Agreement and such failure to make payment shall
have continued for a period of ten (10) days after written
notice from the Manufacturer;
(b) The Operator refuses to accept or allow the Manufacturer to
install or test the TCS-1 System in accordance with Sections
7.2, 8.2, and 8.3 of this Agreement, notwithstanding that such
System has been: (i) delivered to the Operator's Site on a
timely basis or (ii) delivered to the Site and has performed
in accordance with the specifications set forth in Schedule
8.2 hereof for the prescribed Test Period;
(c) The Operator makes an assignment for the benefit of creditors;
(d) A voluntary or involuntary petition is filed by or against the
Operator under any law having for its purpose and adjudication
of the Operator a bankrupt or the extension of the time of
payment of, adjustment of, or other arrangement affecting the
liabilities of the Operator, or the reorganization of the
Operator and such petition is not discharged or dismissed
within one hundred twenty (120) days after such petition is
filed;
(e) A Receiver is appointed for the property of the Operator;
(f) Any distress, execution, or attachment is levied upon the
machines or the Operator's property; or
(g) The Operator fails to faithfully and fully comply with the
terms and provisions of Section 5.2 of this Agreement, with
any such failure deemed to be an irremediable material breach
of this Agreement immediately upon its occurrence.
(h) The Operator fails to faithfully and fully perform each of its
obligations under the Maintenance Agreement and fails to cure
such breach within the time period specified therein with
respect to such failure.
12.3 Remedies Available to the Operator upon Default by Manufacturer
If the Manufacture shall be in default pursuant to Paragraphs 12.1.1
(a), (b), or (c) of this Agreement, unless such default shall have been caused
by any act or failure to act on the part of the Operator or its personnel,
including but not limited to the failure of the Operator to have
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brought the Site into conformance with the Site Plan Specifications, the
Operator shall have the right to rescind this agreement by serving written
notice ("Notice of Rescission") upon the Manufacturer. In such event, the
Manufacturer shall, at its own expense, remove the TCS-1 System not later than
forty-five (45) days following its receipt of such Notice of Rescission and all
monies theretofore paid by the Operator to the Manufacturer pursuant to Section
4.3, above, shall be returned by the Manufacturer to the Operator.
12.4 Remedies Available to the Manufacturer upon Default by the Operator
12.4.1 The Operator acknowledges and agrees that its breach of any
provision contained in Section 5.2 of this Agreement will cause irreparable harm
to the Manufacturer. The Operator therefore agrees that, if it is alleged by the
Manufacturer that the Operator or any of the Operator's affiliates, agents,
employees, or associates has breached, or is attempting or threatening to
breach, any provision contained hereinabove in the said Section 5.2, then the
Manufacturer shall have the right to obtain from any court or arbitrator having
jurisdiction, such equitable relief as may be appropriate, including a decree
enjoining the Operator from any further such breach of such provisions, and
enjoining the Operator from engaging in the tire recycling business, either
directly or indirectly through or in association with any other person, firm,
corporation, or organization during the term of this Agreement.
12.4.2 In the event of any default by the Operator under this
Agreement, the Manufacturer may at its option, at any time thereafter terminate
this Agreement by written notice ("Notice of Termination"), given in Accordance
with Section 16 hereof. such termination may be made effective, at the option of
the Manufacturer, simultaneously with or at any time after the happening of any
such default.
12.4.3 Upon any termination of this Agreement prior to payment in full
of the entire Purchase Price of US $2,250,000 for Purchased Equipment, in
accordance with the terms of Section 3.3 of this Agreement, the Manufacturer
shall immediately have possession of the entire TCS-1 System, and the
Manufacturer may enter upon the premises where the said TCS-1 System is located,
take possession of it without previous demand or notice and without legal
process, and remove it from the Operator's premises at the Operator's expense.
12.4.4 Upon any termination of this Agreement after payment in full of
the entire Purchase Price of US $ 2,250,000 for the Purchased Equipment has been
made by the Operator, the Manufacturer shall immediately have possession of the
Leased Proprietary Equipment and the Manufacturer may enter upon the premises
where the TCS-1 System is located, remove the Leased Proprietary Equipment from
the said TCS-1 System and take possession of the Leased Proprietary Equipment
without previous demand or notice and without legal process, and remove it from
the Operator's premises at the Operator's expense.
12.4.5 The Operator acknowledges and agrees that any refusal on its
part to permit the Manufacturer to enter its premises and remove either the
TCS-1 System or the Leased Proprietary
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Equipment in accordance with Paragraph 12.4.3 or 12.4.4 of this Agreement will
cause irreparable harm to the Manufacturer. The Operator therefore agrees that
in the event of any such refusal on its part, the Manufacturer shall have the
right to obtain from any court or arbitrator having jurisdiction, such equitable
relief as may be appropriate, including a decree enjoining the Operator from any
further such refusal of entry and removal.
12.4.6 In the event of any default by the Operator prior to the
Acceptance Date, the Manufacturer shall be entitled to damages including but not
limited to retention of the full deposit paid by the Operator and all costs of
delivering and removing and re-delivering the TCS- 1 System.
12.4.7 In the event of any default by the Operator after the Acceptance
Date or pursuant to Paragraph 12.2(b) of this Agreement, the Manufacturer shall
be entitled to damages including but not limited to retention of the full
deposit paid by the Operator, all costs of delivering and removing and
re-delivering the TCS-1 System, and damages for the Operator's failure to
perform for the full term of the Lease provided in Section 4.2 of this
Agreement, including but not limited to immediate payment of the balance of all
Rent Payments due under the full term of the Lease,
12.4.8 In the event of any default on the part of the Operator pursuant
to Paragraphs 12.2(a) or 12.2(b) of this Agreement, the Manufacturer shall have
the right to allow the Operator, for a period of sixty (60) days, to obtain a
buyer for the TCS-1 System, satisfactory to the Manufacture, provided however
that, unless specifically waived in writing by the Manufacturer, the Operator
shall continue liable under this Agreement lease for the full term of the Lease
provided for in Section 4.2 of this Agreement.
12.4.9 In the event of any default on the part of the Operator, the
Manufacturer shall not be deemed to have waived any of its rights hereunder by
reason of its failure to assert its rights or its failure to take cognizance of
such breach.
12.4.10 The foregoing remedies provided herein for the benefit of the
Manufacturer shall not be exclusive but in addition to any other remedies the
Manufacturer may have by virtue of the breach by the Operator, in law or in
equity, from any court or arbitration proceeding having jurisdiction over such
matter.
13. OPERATOR'S SALE OF NONLEASED PROPRIETARY EQUIPMENT
13.1 Manufacturer's Right to Retrieve Leased Proprietary Equipment Prior to Sale
In the event that, during or after the term of the Lease provided in
Section 4.2 of this Agreement, the Operator wishes to divest itself of the TCS-1
System, pursuant to the discontinuance of its business, or otherwise, the
Operator will give to the Manufacturer written notice to that effect and the
Manufacturer shall have all rights of entry and removal provided
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above in Paragraphs 12.4.4 and 12.4.5 of this Agreement, provided however that
in addition to such rights, if such event shall occur during the term of the
said Lease, the Manufacturer shall also have the rights provided to it in
Paragraph 12.4.7 of this Agreement.
13.2 Manufacturer's Right of First Refusal
In the event that, during or after the term of the Lease provided in
Section 4.2 of this Agreement, the Operator wishes to divest itself of the TCS-1
System, pursuant to the discontinuance of its business, or otherwise, the
Operator will give to the Manufacturer written notice to that effect and the
Manufacturer will have a right of first refusal to repurchase the TCS- 1 System,
at its fair market value, within a thirty-day period following the
Manufacturer's receipt of such notice;
14. ASSIGNMENT
The Operator shall not transfer, deliver, sublease, or encumber the
Leased Proprietary Equipment to any person, corporation, or firm, and the Lease
provided in Section 4.2 of this Agreement may not be assigned by the Operator
except with the Manufacturer's express prior written consent.
15. FAILURE OF PERFORMANCE
Delays in or failure of performance occasioned by war, fire, flood,
embargo, car shortage, accident, explosion, expropriation of plant or product by
federal or state authority, or other like cause beyond the control of the
Manufacturer, or Act of God, or by strike, lockout, or other labor trouble, or
inability to obtain sufficient labor interfering with the production or
transportation of the TCS-1 System, or any part thereof, or any replacement
therefor, whether because of governmental action affecting the Manufacturer or
its suppliers, or by any action or proceeding at law or in equity, or otherwise,
shall not subject the Manufacturer to any liability.
16. NOTICES
All notices required or permitted to be given hereunder shall be mailed
by certified mail, or delivered by hand or by recognized overnight courier to
the party to whom such notice is required or permitted to be given hereunder at
the address set forth above for such party, in all cases with written proof of
receipt required. Any such notice shall be deemed to have been given when
received by the party to whom notice is given, as evidenced by written and dated
receipt of the receiving party. Either party may change the address to which
notice to it is to be addressed, by written notice to the other party, as
provided herein.
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17. CONDITIONS PRECEDENT TO MANUFACTURER'S OBLIGATION
The obligations of the Manufacturer hereunder are subject to
fulfillment, prior to the Deliver Date, of the following conditions:
17.1 Truth of Representation
The representations and warranties by or on behalf of Operator
contained in this Agreement or in any document delivered to the Manufacturer
pursuant to the provisions hereof shall be true in all material respects at and
as of the Delivery Date as though such representations and warranties were made
at and as of such time.
17.2 Compliance with Covenants
The Operator shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with by or prior to the Delivery Date.
17.3 Collateral Agreements
Simultaneously with the execution of this Agreement, the Operator will:
(a) enter into the following agreements with the Manufacturer or
any joint venture to which the Manufacturer is a party:
(i) the Maintenance Agreement, attached as Schedule
19.1(a) to this Agreement;
(ii) the Royalty Agreement, attached as Schedule 19.1(b)
to this Agreement; and
(iii) the Rubber Crumb Purchase Agreement, attached as
Schedule 19.1(c) to this Agreement.
(b) furnish the Manufacturer with a copy of the resolutions of the
board of directors of the Operator authorizing the Operator to
purchase the NonLeased Proprietary Equipment and lease the
Leased Proprietary Equipment pursuant to the terms and
conditions of this Agreement;
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17.4 Financing Arrangements
The Operator will deliver to the Manufacturer, not less than one
hundred (100) days prior to the anticipated Delivery Date, to confirm the
Delivery Date, an irrevocable commitment for lease or letter of credit
financing, which commitment shall be:
(a) for the full amount of the Purchase Price of the
Nonproprietary Equipment then outstanding;
(b) subject only to the conditions that the TCS-1 will consist of
Equipment specified in, and will operate in conformance with,
Schedules 1.3, 1.6 (b), and 1.8, and respectively.
18. ARBITRATION
All controversies arising out of or relating to this Agreement, or any
modification thereof, shall be settled by arbitration in New York City, pursuant
to the rules then obtaining of the American Arbitration Association.
19. BINDING EFFECT.
19.1 This agreement shall bind and inure to the benefit of the parties
hereto and their respective legal representatives, successors and assigns,
provided, however, that this Agreement cannot be assigned by the Operator except
in accordance with Section 14 of this Agreement. Nothing herein expressed or
implied is intended or shall be construed to confer upon or to give any person,
firm or corporation other than the parties hereto and their respective legal
representatives, successors and assigns any rights or benefits under or by
reason of this Agreement.
19.2 All the right, title, and interest of the Manufacturer under the
Lease may be enforced by the Manufacturer, its successors, and assigns. The
Lease shall continue in full force and effect notwithstanding the death,
incapacity, or dissolution of the Operator or the increase, decrease, or change
in the personnel of or members of the Operator, and shall be binding upon the
Operator and the Operator's estate, legal representatives, heirs, and
successors.
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20. TERMINATION OF LETTER AGREEMENT BETWEEN THE MANUFACTURER
AND OPERATOR'S AFFILIATE
The parties agree that their mutual execution of this Agreement, shall
automatically cause the Letter Agreement, dated October 5, 1995, a copy of which
is attached as Schedule 3 hereto, to be canceled, terminated, void and of no
further force or effect to the end that the parties hereto shall have no further
obligations or liabilities under the said Letter Agreement, one against the
other, and in consideration of the agreement of each of the parties hereto ,
each of the parties does hereby remise, release, discharge, indemnify and hold
harmless the other party, and each shareholder, officer, director, affiliate,
associate, agent, and employee of such other party of and from manner of actions
and cause of action, suits, debts, dues, accounts, bonds, wages, benefits,
covenants, contracts, agreements, judgments, claims and demands whatsoever in
law or in equity, an including without limitation all such actions, claims and
demands, etc. arising out of, being based upon, or being in any way connected
with or related to the Letter Agreement.
21. GENERAL
21.1 Further Assurances
At any time, and from time to time, after the execution of this
Agreement, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out the intent
and purposes of this Agreement.
21.2 Waiver
Any failure on the part of any party hereto to comply with any of its
obligations, agreements or conditions hereunder may be waived in writing by the
party to whom such compliance is owed.
21.3 Brokers
Neither party has employed any brokers or finders with regard to this
Agreement, unless otherwise described in writing to all parties hereto.
21.4 Headings
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
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21.5 Governing Law
This Agreement shall be governed by the laws of the State of Delaware.
21.6 Entire Agreement
This Agreement is the entire agreement of the parties covering
everything agreed upon or understood in the transaction. There are no oral
promises, conditions, representations, understandings, interpretations or terms
of any kind as conditions or inducements to the execution hereof.
21.7 Severability
If any part of this Agreement is deemed to be unenforceable the balance
of this Agreement shall remain in full force and effect.
21.8 Publicity
All notices to third parties and all other publicity concerning the
transactions contemplated by this Agreement shall be subject to the prior
approval of counsel to the Manufacturer.
21.9 Counterparts
This Agreement may be executed in any number of counterparts and by
each party on a separate counterpart, each of which when so executed and
delivered shall be an original, but all of which together shall constitute one
Agreement.
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In Witness Whereof, the parties hereto have caused this Amendment to be
executed the day and year first above written.
TIREX AMERICA INC.
By /s/ Terence C. Byrne
--------------------------------------
Terence C. Byrne, President
OCEANS TIRE RECYCLING & PROCESSING CO., INC.
By /s/ Louis Sanzaro
---------------------------------------
Louis Sanzaro, President
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SCHEDULE 1.8
The proprietary front-end system will consist of:
(i) electronic passive measuring and tire counting devices;
(ii) one automated steel bead cutter;
(iii) one automated vertical debeader;
(iv) one automated sidewall/tread separator-cutter;
(v) one automated tread size-reduction cutter
(vi) one automated sidewall size-reduction cutter
(vii) one optional accumulation hopper;
(viii) one coalating table
(ix) all associated ancillary equipment and conveyance and exit
belts, chutes, and/or other components combined or integrated
with the foregoing, all tire cleaning equipment
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(Exhibit to Equipment Lease and Purchase Agreement with Oceans Tire Recycling &
Processing Co., Inc.)
Tirex America Inc.
----------
RUBBER CRUMB PURCHASE OPTION AGREEMENT
----------
Rubber Crumb Purchase Option Agreement, made this 29th day of May 1997,
between:
Oceans Tire Recycling & Processing
Co., Inc., a New Jersey Corporation
1497 Lakewood Road
Toms River, N.J. 08755
Tel: (908) 914-0372
Fax: (908) 914-0373
(the "Operator")
and
Tirex America Inc.
3767 Thimens, Suite 207
Ville St. Laurent
Quebec, Canada H4R 1W4
(the "Manufacturer")
Whereas, the Manufacturer and the Operator are parties to a certain
equipment lease and purchase agreement, of even date herewith (the "Equipment
Lease and Purchase Agreement"), between the Manufacturer and the Operator
respecting the sale by the Manufacturer and the Purchase by the Operator of the
"Nonproprietary Equipment" and the operating lease, between the Manufacturer, as
lessor, and the Operator, as lessee, respecting the "Proprietary Equipment", as
those terms are defined in the said Equipment Lease and Purchase Agreement.
Whereas, in consideration for the premises and the mutual promises made
therein, the Operator has agreed, pursuant to the Equipment Lease and Purchase
Agreement, to enter into this Option Agreement with the Manufacturer pursuant to
which the Operator hereby grants to the
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Manufacturer the option to purchase up to forty percent (40%) of the rubber
crumb yielded by the disintegration of scrap tires in the TCS-1 System which is
the subject of the said Equipment Lease and Purchase Agreement (the "Subject
TCS-1 System").
Now, Therefore, it is agreed as follows:
1. Definitions
1.2 "Manufacturer" shall mean Tirex America Inc. and its successors and
assigns.
1.3 "Operator" shall mean Ocean Utility Contracting, Inc. and Bentley
Environmental Engineering Sources, Inc., jointly and severally, and its
successors and assigns.
1.4 All other Capitalized terms used herein and not otherwise defined shall
have the respective meanings attributed thereto in the Equipment Lease and
Purchase Agreement.
2. Grant of Option
The Operator hereby grants to the Manufacturer an option (the "Option") to
purchase up to forty percent (40%) of the rubber crumb yielded by the
disintegration of scrap tires in the Subject TCS-1 System (the "Rubber Crumb
Output").
3. Term of Option
The term of the Option shall be coextensive with the life of the Subject
TCS-1 System and shall commence as of the Acceptance Date.
4. Conditions of Option
The Manufacturer's rights to purchase the Rubber Crumb Output pursuant to
this Option shall be subject to fulfillment of the following condition:
(a) the Manufacturer shall furnish to the Operator, in writing,
within ninety days of the Acceptance Date and every six months
thereafter, the Manufacturer's anticipated purchase projections
(the "Six-Month Projected Purchase Order") specifying the grades,
types, and quantities of Rubber Crumb Output which the
Manufacturer commits to purchase within the six-month period
following the date of such Projected Purchase Order;
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(b) the price specified in the Projected Purchase Order will be
negotiated every six months for a period of six months.
5. Inspection of Books
Upon written request, the Manufacturer or his designated agent may examine
the books and records of the Operator insofar as they relate to this Option
Agreement. Such examination shall take place at the offices of the Operator at
_________________________________________.
6. Assignment
6.1 This Option Agreement may not be assigned by the Operator except as
part of the assignment of the Equipment Lease and Purchase Agreement, which may
only be assigned pursuant to the express written consent of the Manufacturer,
and any such assignment shall not relieve the Operator of its obligations
hereunder unless expressly waived in writing by the Manufacturer.
6.2 This Option Agreement may be transferred, assigned, pledged, or
hypothecated by the Manufacture as part of the sale of its business or
otherwise.
7. Notices
All notices required or permitted to be given hereunder shall be mailed by
certified mail, or delivered by hand or by recognized overnight courier to the
party to whom such notice is required or permitted to be given hereunder at the
address set forth above for such party, in all cases with written proof of
receipt required. Any such notice shall be deemed to have been given when
received by the party to whom notice is given, as evidenced by written and dated
receipt of the receiving party. Either party may change the address to which
notice to it is to be addressed, by written notice to the other party, as
provided herein.
8. Binding Effect.
8.1 This Option Agreement shall bind and inure to the benefit of the
parties hereto and their respective legal representatives, successors and
assigns, provided, however, that this Option Agreement cannot be assigned by the
Operator except in accordance with Section 6.1 hereof. Nothing herein expressed
or implied is intended or shall be construed to confer upon or to give any
person, firm or corporation other than the parties hereto and their respective
legal
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representatives, successors and assigns any rights or benefits under or by
reason of this Option Agreement.
8.2 All the right, title, and interest of the Manufacturer under this
Option Agreement may be enforced by the Manufacturer, its successors, and
assigns. This Option Agreement shall continue in full force and effect
notwithstanding the death, incapacity, or dissolution of the Operator or the
increase, decrease, or change in the personnel of or members of the Operator,
and shall be binding upon the Operator and the Operator's estate, legal
representatives, heirs, and successors.
9. Further Assurances
At any time, and from time to time, after the execution of this Agreement,
each party will execute such additional instruments and take such action as may
be reasonably requested by the other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the intent and purposes
of this Agreement.
10. Waiver
Any failure on the part of any party hereto to comply with any of its
obligations, agreements or conditions hereunder may be waived in writing by the
party to whom such compliance is owed.
11. Brokers
Neither party has employed any brokers or finders with regard to this
Agreement, unless otherwise described in writing to all parties hereto.
12. Headings
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
13. Governing Law
This Agreement shall be governed by the laws of the State of Delaware.
14. Entire Agreement
This Agreement and the premises and mutual promises in the Equipment Lease
and Purchase Agreement constitute the entire agreement of the parties covering
everything agreed upon or understood with respect to the Option. There are no
oral promises, conditions,
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representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof.
15. Severability
If any part of this Agreement is deemed to be unenforceable the balance of
this Agreement shall remain in full force and effect.
16. Publicity
All notices to third parties and all other publicity concerning the
transactions contemplated by this Agreement shall be subject to the prior
approval of counsel to the Manufacturer.
17. Counterparts
This Agreement may be executed in any number of counterparts and by each
party on a separate counterpart, each of which when so executed and delivered
shall be an original, but all of which together shall constitute one Agreement.
In Witness Whereof, the parties hereto have caused this Option Agreement to
be executed the day and year first above written.
TIREX AMERICA INC.
By /s/ Terence C. Byrne
------------------------------------
Terence C. Byrne, President
OCEANS TIRE RECYCLING & PROCESSING CO., INC.
By /s/ Louis Sanzaro
-------------------------------------
Louis Sanzaro
209
<PAGE>
(Exhibit to Equipment Lease and Purchase Agreement with Oceans Tire Recycling &
Processing)
TIREX AMERICA INC.
----------
ROYALTY AGREEMENT
----------
Royalty Agreement, made this 29th day of May 1997, between:
Oceans Tire Recycling & Processing
Co., Inc., a New Jersey Corporation
1497 Lakewood Road
Toms River, NJ 08755
Tel: (908) 914-0372
Fax: (908) 914-0373
(the "Operator")
and
Tirex America Inc.
3767 Thimens, Suite 207
Ville St. Laurent
Quebec, Canada H4R 1W4
(the "Manufacturer")
Whereas, the Manufacturer and the Operator are parties to a certain
equipment lease and purchase agreement, of even date herewith (the "Equipment
Lease and Purchase Agreement"), between the Manufacturer and the Operator
respecting the sale by the Manufacturer and the Purchase by the Operator of the
"Proprietary Front-End System", the "Nonproprietary Equipment"(collectively, the
"Purchased Equipment") and the operating lease, between the Manufacturer, as
lessor, and the Operator, as lessee, respecting the "Leased Proprietary
Equipment", as those terms are defined in the said Equipment Lease and Purchase
Agreement.
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Whereas, in consideration for the premises and the mutual promises made
therein, the Operator has agreed, pursuant to the Equipment Lease and Purchase
Agreement, to enter into this Royalty Agreement with the Manufacturer whereby
the Operator will pay to the Manufacturer certain royalties calculated upon the
gross proceeds from all sales of rubber crumb, fiber and steel from scrap tires
disintegrated by the TCS-1 System which is the subject of the said Equipment
Lease and Purchase Agreement (the "Subject TCS-1 System"). Now, Therefore, it is
agreed as follows:
1. Definitions
1.2 "Manufacturer" shall mean Tirex America Inc. and its successors and
assigns.
1.3 "Operator" shall mean Ocean Utility Contracting, Inc. and Bentley
Environmental Engineering Sources Inc., jointly and severally and its successors
and assigns.
1.4 All other Capitalized terms used herein and not otherwise defined shall
have the respective meanings attributed thereto in the Equipment Lease and
Purchase Agreement.
2. Royalty Fee
2.1 The Operator shall pay to the Manufacturer, not more than fifteen (15)
days after the end of each month, a royalty fee equal to three percent (3%) of
the gross proceeds from all sales of rubber crumb, fiber, and steel from scrap
tires disintegrated by the Subject TCS-1 System (the "Royalty Fee").
2.2 For purposes of this Royalty Agreement, the term "gross proceeds" shall
mean all revenues from the sale of rubber crumb, fiber and steel from scrap
tires disintegrated by the Subject TCS-1 System.
3. Payment Periods
Royalty Fees shall be reported and paid by the Operator to the Manufacturer
every month from the Acceptance Date throughout the life of the Subject TCS-1
System.
4. Royalty Reports
The Operator shall prepare royalty reports ("Royalty Reports"), to be
delivered by the Operator to the Manufacturer, together with the Royalty Fee due
thereunder, covering the immediately preceding month (the"Reporting Periods"),
in the following manner:
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The initial Reporting Period shall be the Reporting Period in which the
Acceptance Date falls. For example, if the Acceptance Date is September 15,
1997, the initial Reporting Period is the two-week period which commenced on
September 15, 1997 and ended on September 30, 1997, and the Royalty Report and
Royalty Fee for such "Reporting Period" is due on October 15, 1997.
(b) Each Royalty Report shall disclose the gross revenues from all sales
of steel, fiber, and rubber crumb produced by the operation of the
Subject TCS-1 System and the amount of the Royalty Fee calculated upon
the gross proceeds therefrom.
5. Inspection of Books
Upon written request, the Manufacturer or his designated agent may examine
the books and records of the Operator insofar as they relate to this Royalty
Agreement. Such examination shall take place at the offices of the Operator at
__________________________________.
6. Assignment
6.1 This Royalty Agreement may not be assigned by the Operator except as
part of the assignment of the Equipment Lease and Purchase Agreement, which may
only be assigned pursuant to the express written consent of the Manufacturer,
and any such assignment shall not relieve the Operator of its liabilities
hereunder unless expressly waived in writing by the Manufacturer.
6.2 This Royalty Agreement may be transferred, assigned, pledged, or
hypothecated by the Manufacture as part of the sale of its business or
otherwise.
7. Notices
All notices required or permitted to be given hereunder shall be mailed by
certified mail, or delivered by hand or by recognized overnight courier to the
party to whom such notice is required or permitted to be given hereunder at the
address set forth above for such party, in all cases with written proof of
receipt required. Any such notice shall be deemed to have been given when
received by the party to whom notice is given, as evidenced by written and dated
receipt of the receiving party. Either party may change the address to which
notice to it is to be addressed, by written notice to the other party, as
provided herein.
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8. Binding Effect.
8.1 This Royalty Agreement shall bind and inure to the benefit of the
parties hereto and their respective legal representatives, successors and
assigns, provided, however, that this Royalty Agreement cannot be assigned by
the Operator except in accordance with Section 6.1 hereof. Nothing herein
expressed or implied is intended or shall be construed to confer upon or to give
any person, firm or corporation other than the parties hereto and their
respective legal representatives, successors and assigns any rights or benefits
under or by reason of this Royalty Agreement.
8.2 All the right, title, and interest of the Manufacturer under this
Royalty Agreement may be enforced by the Manufacturer, its successors, and
assigns. This Royalty Agreement shall continue in full force and effect
notwithstanding the death, incapacity, or dissolution of the Operator or the
increase, decrease, or change in the personnel of or members of the Operator,
and shall be binding upon the Operator and the Operator's estate, legal
representatives, heirs, and successors.
9. Further Assurances
At any time, and from time to time, after the execution of this Agreement,
each party will execute such additional instruments and take such action as may
be reasonably requested by the other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the intent and purposes
of this Agreement.
10. Waiver
Any failure on the part of any party hereto to comply with any of its
obligations, agreements or conditions hereunder may be waived in writing by the
party to whom such compliance is owed.
11. Brokers
Neither party has employed any brokers or finders with regard to this
Agreement, unless otherwise described in writing to all parties hereto.
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12. Headings
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
13. Governing Law
This Agreement shall be governed by the laws of the State of Delaware.
14. Entire Agreement
This Agreement and the premises and mutual promises in the Equipment Lease
and Purchase Agreement constitute the entire agreement of the parties covering
everything agreed upon or understood with respect to the Royalty Fees. There are
no oral promises, conditions, representations, understandings, interpretations
or terms of any kind as conditions or inducements to the execution hereof.
15. Severability
If any part of this Agreement is deemed to be unenforceable the balance of
this Agreement shall remain in full force and effect.
16. Publicity
All notices to third parties and all other publicity concerning the
transactions contemplated by this Agreement shall be subject to the prior
approval of counsel to the Manufacturer.
17. Counterparts
This Agreement may be executed in any number of counterparts and by each
party on a separate counterpart, each of which when so executed and delivered
shall be an original, but all of which together shall constitute one Agreement.
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In Witness Whereof, the parties hereto have caused this Royalty
Agreement to be executed the day and year first above written.
TIREX AMERICA INC.
By /s/ Terence C. Byrne
------------------------------------
Terence C. Byrne, President
OCEANS TIRE RECYCLING & PROCESSING CO., INC.
By /s/ Louis Sanzaro
--------------------------------------
Louis Sanzaro
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EXHIBIT 10(llll)
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----------
TIREX AMERICA INC.
----------
EQUIPMENT LEASE AND PURCHASE AGREEMENT
Equipment Lease and Purchase Agreement, made as of this 29th day of May
1997, among
Ocean Venture III Inc.,
a New Jersey corporation,
1497 Lakewood Road
Toms River, N.J. 08755
(the "Operator")
and
Tirex America Inc.
3767 Thimens, Suite 207
Ville St. Laurent
Quebec, Canada H4R 1W4
(the "Manufacturer")
1. DEFINITIONS
1.1 "Acceptance Date" shall mean the first day following the completion of
the Test Period.
1.2 "Anticipated Delivery Date" for each of the eight TCS-1 Systems to be
purchased and leased hereunder shall mean the respective dates set forth below,
or such other dates as the parties shall mutually agree:
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Equipment Anticipated Delivery MonthYear
--------- ------------------------------
TCS-1 System 001 October 1998
TCS-1 System 002 January 1999
TCS-1 System 003 April 1999
TCS-1 System 004 July 1999
TCS-1 System 005 October 1999
TCS-1 System 006 January 2000
TCS-1 System 007A April 2000
TCS-1 System 008 July 2000
1.3 "Leased Proprietary Equipment" shall mean all of the following
constituent, integral parts of the TCS-1 System and all substitutions,
replacements, and improvements, and all repair and renewal parts installed
therein, as specified in the plans and specifications therefor, attached as
Schedule 1.3 hereto:
(a) the disintegration system including but not limited to all
grinders contained therein, and
(b) the separation systems, including but not limited to
(i) a magnetic separator;
(ii) a fiber/crumb separator;
(iii) fiber collector
(iv) crumb rubber sizing system; and
(v) all integrated conveyance and exit belts, chutes,
and other components
1.4 "Maintenance Agreement" shall mean the maintenance agreement of even
date herewith between the Manufacturer and the Operator respecting the
maintenance of the TCS-1 System.
1.5 "Manufacturer" shall mean Tirex America Inc. and Tirex-Canada Inc., and
all other corporations, partnerships, or other entities, now or in the future
controlled by, under common control with, or in control of, Tirex America Inc.,
jointly and severally.
1.6 "Non Proprietary Equipment" shall mean all of the following
constituent, integral parts of the TCS-1 System:
(a) all bailing systems contained in the TCS-1 System, including all
associated ancillary equipment and conveyance and exit belts,
chutes and/or other components combined or integrated therewith,
as specified in the pertinent plans and specifications therefore;
and
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(b) freezing chambers and cryogenic systems and all substitutions,
replacements, and improvements, and all repair and renewal parts
installed therein, as specified in the plans and specifications
therefore, attached as Schedule 1.6 (b).
1.7 "Operator" shall mean Ocean Venture III Inc. and all other
corporations, partnerships, or other entities, now or in the future controlled
by, under common control with, or in control of, Ocean Venture III Inc.
1.8 "Proprietary Front-End System" shall mean the manufacturer's
proprietary front-end tire preparation system, all substitutions, replacements,
and improvements, and all repair and renewal parts installed therein, as
specified in the plans and specifications therefor, attached as Schedule 1.8
hereto.
1.9 "Purchased Equipment" shall mean the Proprietary Front-End System and
the NonLeased Proprietary Equipment, as those terms are defined in Sections 1.8
and 1.6 (b), collectively.
1.10 "Site" with respect to each of the eight TCS-1 Systems to be purchased
and leased hereunder shall mean the Operator's premises at 1497 Lakewood Road,
Tom's River, NJ 08755, or such other site as the parties shall agree.
1.11 "TCS-1 System" shall mean the Manufacturer's proprietary cryogenic
tire disintegration system, patent pending, consisting of the Proprietary
Front-End System, the Nonproprietary Equipment and the Leased Proprietary
Equipment, as specified in the plans and specifications attached as Schedule
1.3, 1.6 (b), and 1.8 hereto and all substitutions, replacements, and
improvements, and all repair and renewal parts installed therein.
1.12 "Test Period" shall mean a three (3) day period which shall commence
within ten (10) business days after completion of the installation of the TCS-1
System, during which Test Period, the TCS-1 System shall be operated continually
for up to 12 hours per day exclusive of any time devoted to adjustments and
acclamation.
2. RECITALS
Whereas:
2.1 The Manufacturer has invented, built, and patented (patent pending),
and is the sole and exclusive owner, directly or indirectly, through one or more
subsidiaries, of all right title and interest in the TCS-1 System.
2.2 The Operator is a Corporation organized for the principal purpose of
commercially exploiting, directly or indirectly, through one or more
subsidiaries, the TCS-1 System by
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purchasing the NonLeased Proprietary Equipment, leasing the Leased Proprietary
Equipment, and operating the TCS-1 System.
2.3 The Manufacturer and the Operator are parties to a certain Letter
Agreement, dated October 5, 1995, between them (the "Letter Agreement")
respecting the purchase and/or lease by the Operator of a TCS-1 System from the
Manufacturer.
2.4 The parties hereto wish to terminate the Letter Agreement and restate
the terms and conditions of the transactions contemplated therein this Equipment
purchase and Lease Agreement in accordance with Section 20 of this agreement.
3. AGREEMENT FOR PURCHASE AND SALE OF PROPRIETARY FRONT-END AND NON
PROPRIETARY EQUIPMENT
3.1 Purchase and Sale
The Operator agrees to purchase, and the Manufacturer agrees to sell, the
Proprietary Front-End System and the Non Proprietary Equipment, as defined in
Sections 1.6 and 1.8, above for eight TCS-1 Systems (collectively, the
"Purchased Agreement"), above, in accordance with the terms and conditions of
this Agreement. The Operator may at its election take title to the Purchased
Equipment for each of the said eight TCS-1 Systems in a wholly owned subsidiary
corporation to be formed by it for such purpose. Such election by the Operator
shall nowise modify, diminish, or otherwise affect the Operator's liability
hereunder to the Manufacturer. The purchase and payment for the Purchased
Equipment by the Operator, and the sale, assignment, transfer, and delivery
thereof by the Manufacturer, shall take place subject to the fulfillment of the
conditions hereinafter provided.
3.2 Purchase Price
The purchase price for the Purchased Equipment (the "Purchase Price")
for each of the eight TCS-1 Systems, installed and set in operation pursuant to
Section 7 and 8 hereof, shall be the sum of two million United States dollars
(US $2,250,000), FOB Montreal, which shall be deemed allocated as follows:
(a) Freezing Chamber and
Cryogenic Systems US $ 1,500,000
(b) Front End Tire Preparation
and Bailing Systems US $ 750,000
--------
Total US $ 2,250,000
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3.3 Payment Terms
3.3.1 In the absence of arrangements for lease or letter of credit
financing, satisfactory to the Manufacturer, the Purchase Price of the Purchased
Equipment for each of the eight TCS-1 Systems being purchased and leased
hereunder shall be paid as follows:
(a) US $ 25,000 14 months prior to the Anticipated Delivery Date;
(b) US $ 50,000 6 months prior to the anticipated Delivery Date.
(c) US $ 100,000 3 months prior to the anticipated Delivery Date.
(d) US $ 2,075,000 on the Acceptance Date.
3.3.2 Where the Operator has entered into arrangements, in respect of any
of the eight TCS-1 Systems being purchased and leased hereunder, for lease or
letter of credit financing , satisfactory to the Manufacturer, payment of the
Purchase Price with respect to such TCS-1 System shall be made in accordance
with such lease or letter of credit financing arrangements.
4. AGREEMENT FOR OPERATING LEASE OF LEASED PROPRIETARY
EQUIPMENT
4.1 Agreement to Lease Equipment
The Manufacturer, as lessor, and the Operator, as lessee, hereby enter into
an operating lease (the "Lease") for the Leased Proprietary Equipment, as
defined in Section 1.3 above, subject to the following terms and conditions:
4.2 Term of the Lease
4.2.1 The term of the Lease shall be sixty (60) months commencing on the
Acceptance date.
4.2.2 At the expiration of the full original term hereof, if this Lease has
remained in effect and the Operator has duly performed all its obligations
thereunder during the entire such term, then the Operator shall have the option
to either:
(a) Obtain a new lease agreement in the form then being generally offered
by the Operator to the trade with renewal terms, as agreed by the
parties;
(b) Continue to use the same equipment installed hereunder and thereby
extend the term of this Lease at a reduced rental rate of US $6,250
per month for a period
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of one year with further successive automatic one-year extensions
subject to either party's right to terminate this Lease at the end of
any extension year by at least 90 days prior written notice of
termination of the other; or
(c) Request that the Manufacturer exercise its right of first refusal to
repurchase the Purchased Equipment pursuant to Section 13.1 of this
Agreement, in which event the Manufacturer shall have thirty (30) days
to either: (i) notify the Operator of its intent to repurchase the
Purchased Equipment and, within sixty (60) days of such notice,
effectuate such repurchase and thereupon enter upon the premises where
the said TCS-1 System is located and remove the entire TCS-1 System
from the Operator's premises at the Manufacturer's expense, or (ii)
notify the Operator that it does not intend to repurchase the
Purchased Equipment and, within thirty (30) days of such notice, enter
upon the premises where the TCS-1 System is located, take possession
of the Leased Proprietary Equipment without previous demand or notice
and without legal process, retrieve the Leased Proprietary Equipment
from the TCS-1 System and remove the Leased Proprietary Equipment from
the Operator's premises at the Manufacturer's expense.
4.3 Rent Payments
4.3.1 The Operator shall pay to the Manufacturer monthly rental
payments (the "Rent Payments") for the Leased Proprietary Equipment at the rate
of twelve thousand, five hundred United States dollars (US $12,500) per month,
payable in advance, as follows:
(a) the Rent Payment for the first 30-day period (the "Set-Off Period")
following the Acceptance Date shall be paid by way of a set-off in the
amount of US $12,500 against the deposit heretofore paid by the
Operator;
(b) the Rent Payment for the period (the "Partial-Month Period") which
commences on the first day following the Set-Off Period and ends on
the last day of the calendar month in which such Partial-Month Period
falls, will be payable in cash on the first day of such Partial-Month
Period, on a pro rata basis.
(c) Normal monthly Rent Payments of US $12,500 will commence and be
payable on the first day of the first full calendar month following
the Partial-Month Period.
EXAMPLE:
- -------
Acceptance Date: September 15th
Set-Off Period: September 16th through October 15th.
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Partial-Month Period: October 15th through October 31st, with
Rent Payment in the amount of $6,250
due and payable on October 15th.
Commencement of Regular November 1st, with normal monthly Rent
Monthly Rental Payments Payment of $12,500 due and payable on
such date.
4.3.2 In the event of that payment of any Rent Payment is made by the
Operator more than ten (10) days after the date when such payment shall have
been due, the Operator shall pay a late charge of one and a half percent (1.5 %)
of the entire amount of such Rent Payment for every month in which such
delinquency occurs or continues.
5. TITLE TO EQUIPMENT
5.1 Title to Purchased Equipment
5.1.1 Title to the Purchased Equipment shall pass to the Operator upon
payment in full of the balance of the Purchase Price, due on the Acceptance
Date.
5.1.2 No rights to any plans or designs respecting the TCS-1 System shall
pass to the Operator and the Operator shall not copy, reproduce, design, or
build, or cause, assist, or suffer to be copied, reproduced, designed, or built
by any other person, firm, or corporation any equipment in any way similar to,
or based upon, the design or structure of the TCS-1 System.
5.2 Title to Leased Proprietary Equipment
5.2.1 The Leased Proprietary Equipment shall at all times remain the sole
and exclusive property of the Manufacturer (which reserves the right to assign
or encumber the Leased Proprietary Equipment) and the Operator shall have no
right, title, or interest to the Leased Proprietary Equipment but only the right
to use such Equipment under this Lease. The Leased Proprietary Equipment shall
not be transferred or sublet by the Operator to any other person, firm or
corporation, the Operator shall not permit any other person, firm, or
corporation to use the Leased Proprietary Equipment, and this agreement may not
be assigned by the Operator either by its own act or by operation of law.
5.2.2 The Leased Proprietary Equipment shall remain personal property and
shall not be deemed otherwise by reason of becoming attached to the premises.
5.2.3 The Manufacturer shall have the right at any time or from time to
time to modify the Leased Proprietary Equipment in a manner which will not
lessen the utility of the Leased Proprietary Equipment;
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5.2.4 The Operator shall not enter into, remove, tamper with, or breach the
security of, the Leased Proprietary Equipment. The Operator shall not copy,
reproduce, design, or build, or cause, assist, or suffer to be copied,
reproduced, designed, or built by any other person, firm, or corporation any
equipment in any way similar to, or based upon, the design or structure of the
Leased Proprietary Equipment, or of any part thereof. The Operator shall not
permit any Leased Proprietary Equipment to be abused, not permit the removal of
any descriptions, instructions, warnings plate or markings, or other writings of
any kind whatsoever put on the Leased Proprietary Equipment by the Manufacturer,
nor attach anything to or remove anything from the Leased Proprietary Equipment.
5.2.5 In accordance with the terms of the Maintenance Agreement, the
Operator will not allow any repairs to the TCS-1 or replacement of parts to be
done by any person or persons except technicians authorized by the Manufacturer.
5.2.6 The Operator agrees that, in consideration of the Manufacturer
entering into this Lease, it will not move the TCS-1 System, of which the Leased
Proprietary Equipment forms a part, to any location outside of the state in
which the Site is located or outside of a fifty (50) mile radius of the Site,
without the prior written consent of the Manufacturer.
6. SITE PREPARATION
6.1 Site Plan Specifications
Within thirty (30) days of execution of this Agreement, the Manufacturer
will furnish to the Operator "Site Plan Specifications" respecting the
electrical, ventilation, water supply and disposal, and any other specifications
required at the site for the installation and operation of the TCS-1 System.
6.2 Preparation of Site
6.2.1 Prior to the Delivery and installation of the TCS-1 System, the
Operator shall make, at its own expense, all alterations to and changes in its
premises and equipment required to bring the site into complete conformance with
the above referenced Site Plan Specifications, with respect to which the
Operator shall obtain all necessary permissions and inspections, and which shall
include but not be limited to making any required structural changes and the
installation of:
(a) electrical equipment and power lines up to the electrical inputs or
control boxes attached to the TCS-1 System, as designated on the Site
Plan Specifications;
(b) water supply sources and equipment up to the water inflow points
designated on the Site Plan Specifications;
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(c) water drainage and disposal sites and equipment from the water outflow
points designated on the Site Plan Specifications;
(d) air ventilation sources and equipment as designated on the Site Plan
Specifications
6.3 Notice to Inspect
The Operator shall, not later than one month prior to the anticipated
Delivery Date, give written notice to the Manufacturer (the "Notice to Inspect")
that: (i ) preparation of the site for the installation and operation of the
TCS-1 has been completed in accordance with the Site Plan Specifications and
(ii) all applicable governmental regulations have been complied with and all
required permits, licenses, and standards have been obtained or met (together
with copies of all documentary evidence thereof) and request that the
Manufacturer inspect the site in order to confirm the foregoing.
6.4 Manufacturer's Right to Inspect Site
6.4.1 The Manufacturer shall have the right, at any time within two
weeks of its receipt of the Notice to Inspect, to inspect the site and notify
the Operator in writing (the "Notice of Approval") that the Site is in
conformance with the Site Plan Specifications and that all legal requirements
have been met.
6.4.2 In the event that, after inspecting the Site, the Manufacturer
determines that the Site is not in conformance with the Site Plan Specifications
or that any legal requirements have not been met, then the Manufacturer shall
have the right to require that the Operator make any and all changes or
additions required to bring the Site into such conformance, at the sole expense
of the Operator prior to the Delivery Date and to reschedule the Delivery Date
after all such changes or additions are completed and/or all legal requirements
are complied with. In such event, the Operator shall, upon completion of the
required changes or additions, give written notice to the Manufacturer ("Notice
to Re-inspect") that such changes or additions have been made in accordance with
the Manufacturer's instructions or governmental regulations and that the Site is
in complete conformance with the Site Plan Specifications and all applicable
regulations. The Manufacturer shall have the right, within two weeks of its
receipt of such Notice to reinspect the Site. Such procedures may be repeated,
and the Manufacturer shall have no obligation to deliver the TCS-1 System, until
the Manufacturer confirms upon inspection that the Site is in conformance with
the Site Plan Specifications, all governmental regulations are complied with,
and the Delivery Date is rescheduled in accordance with this Paragraph 6.4.2.
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7. DELIVERY AND INSTALLATION
7.1 Delivery
7.1.1 If, by a date not later than fifteen business days prior to each of
the Anticipated Delivery Dates, the Site is in conformance with the Site Plan
Specifications and all legal requirements have been met in accordance with
Section 6.4, above, then the Manufacturer shall deliver the respective TCS-1
System, which has been assigned for such Anticipated Delivery Date, to the Site
on or before the applicable Anticipated Delivery Date set forth in Paragraph
1.2, above.
7.1.2 In the event that the Operator shall not meet the requirements of
Paragraph 7.1.1, above for any of the eight respective TCS-1 Systems to be
purchased and leased hereunder, for delivery not later than the particular
Anticipated Delivery Date assigned to such System, then, within ten business
days of the date when the respective Site Plan Specifications and all legal
requirements have been met, the Manufacturer shall reschedule a new delivery
date for that particular TCS-1 System, which new delivery date shall not be
later than fourteen months from the date of such rescheduling.
7.1.3 Delivery shall be made F.O.B. Montreal, Canada. The equipment
comprising the TCS-1 System shall be placed in suitably protected containers the
nature of which shall be determined by the Manufacturer. The Operator shall pay
all costs of transportation and delivery of the TCS-1 System from the
Manufacturer's plant in Montreal to the Site.
7.1.4 In the event that delivery of the TCS-1 System, or any part thereof,
for a period not exceeding sixty (60) days, shall be prevented by causes beyond
the control of the Seller, including but not limited to acts of God, labor
troubles, failure of essential means of transportation, or changes in policy
with respect to exports or otherwise by the government of the jurisdiction in
which the Operator is located, the Delivery Date shall be rescheduled after all
of such causes have been eliminated. In the event, however, that such
nondelivery continues after such extended period, the Operator and the
Manufacturer shall each have the right to cancel this agreement by written
notice, and in such case there shall be no obligation or liability on the part
of either party with respect to such undelivered equipment.
7.2 Installation
7.2.1 Within 5 days of the delivery of the TCS-1 System to the Site, the
Manufacturer shall, at its own expense, install the TCS-1 System at the Site.
7.2.2 Upon installation, the TCS-1 System shall be in complete working
order and shall consist of the Nonproprietary Equipment and the Leased
Proprietary Equipment, as specified in the plans and specifications set forth in
Schedules 1.3,1.6 (b, and 1.8 hereto.
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8. EQUIPMENT TESTING AND OPERATOR'S ACCEPTANCE
8.1 Notice of Availability for Testing
Upon completion of the installation of the TCS-1 System at the Site, the
Manufacturer shall give the Operator written notice that the TCS-1 System is
available for testing operations.
8.2 Test Period
8.2.1 Immediately upon giving notice to the Operator that a particular
TCS-1 System is available for testing operations, the Manufacturer shall, within
ten business days, at its own expense, provide a technical representative to
supervise the operation of such TCS-1 for a period of three (3) days (the "Test
Period"). During the Test Period, the TCS-1 System shall operate in accordance
with the specifications set forth in Schedule 8.2 hereto, continually for up to
12 hours per day.
8.2.2 All power, fuel, light, water, oil, or other necessary supplies and
all necessary personnel (other than the engineering technician furnished by the
Manufacturer) for the successful operation of each of the TCS-1 Systems, shall
be provided by the Operator.
8.2.3 The Manufacturer shall furnish to the Operator all data regarding the
TCS-1 System in order to enable the Operator to operate such System and, in
addition to the training to be provided pursuant to the Maintenance Agreement,
the Manufacturer shall, during the Test Period, instruct at least two of the
Operator's employees with respect to the operation, and operating maintenance of
the TCS-1 System, and use reasonable care in training such employee, provided
that if in the Manufacturer's sole opinion any employee is not adequately
qualified, the Operator shall designate another of its employees to receive such
instruction.
8.3 Acceptance
8.3.1 Unless the TCS-1, or any part of it, fails to operate in accordance
with the specifications set forth in Schedule 8.2 hereto, the Manufacturer's
offer to sell the NonLeased Proprietary Equipment and to lease the Leased
Proprietary Equipment to the Operator shall automatically be deemed to have been
accepted by the Operator as of the Acceptance Date, which shall occur on the
first day following the completion of the Test Period and the Operator shall
have no right to revoke such acceptance for any reason.
8.3.2 If the TCS-1, or any part of it, fails to operate in accordance
with the specifications set forth in Schedule 8.2 hereto, the Manufacturer shall
have thirty (30) days in which to cure the problems responsible for such
failure. Costs of all parts and labor required to bring the TCS- 1 into full
working condition shall be borne by the Manufacture unless the failure to
operate in accordance with the specifications set forth in Schedule 8.2. shall
have been caused by any act or failure to act on the part of the Operator or its
personnel, including but not limited to the
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failure of the Operator to have brought the Site into conformance with the Site
Plan Specifications.
8.3.3 Upon written notice to the Operator that the problems which caused
the TCS-1 System to fail to operate as required during the Test Period have been
cured, the Manufacturer shall, at the request of the Operator, commence a second
Test Period for up to three (3) days, in which case the acceptance criteria of
Paragraph 8.2.1 shall pertain to such second Test Period (or any subsequent Test
Period) with the same force and effect as to the initial Test Period.
9. RISK OF LOSS
9.1 The risk of loss, injury, or destruction of the Leased Proprietary
Equipment from any cause whatsoever, except negligence or willful destruction by
the Operator shall be borne by the Manufacturer during the term of the Lease
therefor provided hereunder.
9.2 The risk of loss, injury, or destruction of the NonLeased Proprietary
Equipment from any cause whatsoever, except negligence or willful destruction by
the Operator shall be borne by the Manufacturer only until title passes to the
Operator.
9.3 Any loss, injury, or destruction to the TCS-1, or any part of it, after
title to the Nonproprietary Equipment passes to the Operator, shall not serve in
any manner to release the Operator from the obligation to pay the Rent Payments
provided for Section 4.3, above.
10. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE
MANUFACTURER
The Manufacturer hereby represents, warrants, and covenants to the
Operator, as follows:
10.1 Corporate Status
Tirex America Inc. is (i) duly organized corporation, validly existing
and in good standing under the laws of the State of Delaware; (ii) has full
power to own all of its properties and carry on its business; and (iii) is
qualified to do business as a foreign entity in each of the jurisdictions in
which it operates, if any, unless the character of the properties owned by it or
the nature of the business transacted by it, does not make qualification
necessary in any other jurisdiction or jurisdictions.
10.2 Corporate Action
Prior to the date hereof, the board of directors of the Manufacturer has
duly adopted resolutions approving the execution and delivery to the
Manufacturer of this Agreement and
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authorizing and consenting to each and every one of the terms, warranties,
representations, covenants and conditions herein contained.
10.3 Patents
10.3.1 The Manufacturer has applied for a patent in the United States and
Canada for the Disintegration System forming part of the Leased Proprietary
Equipment. The Manufacturer is the sole owner of such patent application and,
upon the granting of a patent in respect thereof, the Manufacturer shall be the
sole owner of such patent and of all rights thereunder.
10.3.2 The Manufacturer shall defend, to the best of its ability and at its
own expense, all actions, suits, or proceedings instituted against the Operator
insofar as the same are based on any claims that the said Leased Proprietary
Equipment, or any part thereof, constitutes an infringement of any patent of the
United States or Canada and shall indemnify the Operator against all damages,
costs, and expenses which the Operator may incur as a result of any action which
may be brought or threatened against the Operator with respect to the equipment
covered by such patent, provided that:
(a) The Manufacturer shall have the right at any time or from time to time
to modify the TCS-1 System in a manner which will not lessen the
utility thereof;
(b) The Operator gives the Manufacturer immediate notice in writing of the
institution of the action, suit, or proceeding and permits the
Manufacturer, through its counsel, to defend same, and gives the
Manufacturer all information, assistance, and authority to enable the
Manufacturer to do; and
(c) The Operator has made no change of any kind in the TCS-1 System
without obtaining the prior written permission of the Manufacturer.
10.3.3 When information is brought to the attention of the Manufacturer or
the Operator that others are unlawfully infringing on the patents covering the
machine, the Manufacturer shall prosecute diligently any infringer at the
Manufacturer's own expense.
10.4 Warranties
Subject to any default on the part of the Operator under the Maintenance
Agreement, the Manufacturer warrants that the TCS-1 will conform to the
descriptions contained in Schedules 1.3, 1.6 (b), and 1.8. The Manufacturer
further warrants the TCS-1 System against defects in workmanship and materials
or failure to perform in accordance with the specifications set forth in
Schedule 8.2 for one year after the Acceptance Date. No other representations or
warranties have been made by the Manufacturer or relied upon by the Buyer. If
any defects in the Manufacturer's work or materials are discovered within one
year of delivery the Operator shall
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give notice within seven (7) days of such discovery. THIS WARRANTY IS EXPRESSLY
IN LIEU OF ANY AND ALL OTHER WARRANTIES.
11. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE OPERATOR
The Operator hereby represents, warrants, and covenants to the
Manufacturer, as follows:
11.1 Corporate / Legal Status
The Operator is (i) duly organized corporation, validly existing and in
good standing under the laws of the State of New Jersey; (ii) has full power to
own all of its properties and carry on its business; and (iii) is qualified to
do business as a foreign entity in each of the jurisdictions in which it
operates, if any, unless the character of the properties owned by it or the
nature of the business transacted by it, does not make qualification necessary
in any other jurisdiction or jurisdictions.
11.2 Financial Condition of the Operator
The books and records of the Operator are complete and accurate and fairly
present the financial condition and the results of operations of the Operator as
of the date hereof. There are no material liabilities, either fixed or
contingent, not reflected in such books and records other than contracts or
obligations in the ordinary and usual course of business; and no such contracts
or obligations in the usual course of business constitute liens or other
liabilities which, if disclosed, would alter substantially the financial
condition of the Operator as reflected in such books and records.
11.3 Defaults and Conflicts
There are no defaults on the part of the Operator under any contract,
lease, mortgage, pledge, credit agreement, title retention agreement, security
agreement, lien, encumbrance or any other commitment, contract, agreement or
undertaking to which the Operator is a party. The execution of this Agreement
will not violate or breach any material agreement, contract, or commitment to
which the Operator is a party.
11.4 Corporate Action
Prior to the date hereof, the boards of directors of the Operator has duly
adopted resolutions approving the execution and delivery to the Manufacturer of
this Agreement and authorizing and consenting to each and every one of the
terms, warranties, representations, covenants and conditions herein contained.
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11.5 Insurance and Damage to Equipment
11.5.1 The Operator, at its own cost and expense, shall insure the Leased
Proprietary Equipment against burglary, theft, fire, and vandalism in the amount
of $500,000, or such other amount that the parties shall agree is required for
replacement costs, and obtain public liability insurance with minimum limits of
$500,000 per occurrence and $1,000,000 collectively, for bodily injury and for
property damage in such form and with such insurance companies as shall be
satisfactory to the Manufacturer. All insurance policies shall name both the
Operator and the Manufacturer as insured parties and copies of the policies and
the receipts for the payment of premiums shall be furnished to the Manufacturer.
Each damage policy shall provide for payment of all losses directly to the
Manufacturer. Each liability policy shall provide that all losses be paid on
behalf of the Operator and the Manufacturer, as their respective interests
appear.
11.5.2 In the event that the Operator shall fail to comply with the
provisions of Paragraph 11.5.1, above, then the Operator shall pay to the
Manufacturer an adequate premium in advance per annum to enable the Manufacturer
to insure the Leased Proprietary Equipment and all such insurance policies shall
be held in the custody of the Manufacturer.
11.5.3 In the event that all or any part of the TCS-1 System is damaged,
due to any cause whatsoever, to the extent that the TCS-1 System is not useable,
notwithstanding that the Manufacturer may have been partially or fully
compensated for the Leased Proprietary Equipment forming part of such damaged
TCS-1 System by way of insurance or otherwise, the Manufacturer shall
immediately have possession of the said Leased Proprietary Equipment and the
Manufacturer may enter upon the premises where the TCS-1 System is located,
remove the Leased Proprietary Equipment from the damaged TCS-1 System and take
possession of the said Leased Proprietary Equipment without previous demand or
notice and without legal process, and remove it from the Operator's premises at
the Manufacturer's expense.
11.6 Access
The Operator shall insure that the Manufacturer, and its agents and
employees, shall at all times have free access to the Operator's premises for
the purpose of inspecting the Leased Proprietary Equipment and observing its use
and operation, and making alterations, improvements, or additions thereto; and
the Operator shall afford all reasonable facilities therefor, and shall allow
the Manufacturer to make such reasonable alterations, improvements, or additions
as the Manufacturer shall deem necessary, at the expense of the Manufacturer.
11.7 Taxes
The Operator shall pay all taxes, assessments, penalties, and fees which
may be levied or assessed on or with respect to the installation of the TCS-1
System and, at all times during the
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term of the Lease of the Leased Proprietary Equipment, the Operator shall pay
all taxes and assessments which may be levied upon or in respect of the TCS-1
System or its operation, and shall pay any other liability of any character
which may be imposed or incurred as an incident to the physical possession or
operation of such System.
11.8 Compliance with Applicable Law
The Operator shall provide, at its own expense, all requisite permits and
licenses necessary for the installation and operation of the TCS-1 System at the
Site and shall exercise its best efforts to maintain its compliance with all
applicable federal, state, and local laws, statutes, rules, and regulations and,
in the event of any non-compliance which renders impossible the operation of the
Site as a tire recycling facility, the Operator shall exercise its best efforts
to cure such non-compliance promptly.
11.9 Subordination
Not less than three (3) months prior to the anticipated Delivery Date, the
Operator shall procure from every owner, landlord, mortgagee, or other secured
party having any interest in the real property on which the TCS-1 System is to
be installed or in the Operator's place of business or the equipment therein,
and deliver to the Manufacturer, a written consent to such installation and a
writing to the effect that the lien of any such mortgage or other interest is
subordinate to the rights of the Manufacturer with respect to the Leased
Proprietary Equipment.
11.10 Ancillary Agreements
11.10.1 The Operator will, simultaneously with the execution of this
Agreement, and in consideration of the premises and the mutual promises and
agreements made herein, enter into the following agreements with the
Manufacturer or such person, corporation, firm, partnership, or other entity as
the Manufacturer shall appoint in its stead:
(a) The Royalty Agreement, of even date herewith, between the Manufacturer
and the Operator providing for the Operator to pay to the Manufacturer
a royalty of three percent (3%) of the gross proceeds from the sale by
the Operator of rubber crumb fiber and steel from scrap tires
disintegrated by the Operator through the utilization of the TCS-1
System, a copy of which Royalty Agreement is attached as Schedule
11.10(b) hereto; and
(b) The Maintenance Agreement, of even date herewith, between the Operator
and the Manufacturer, respecting the maintenance of the TCS-1 System,
a copy of which Maintenance Agreement is attached as Schedule 11.10(b)
hereto.
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11.10.2 In addition, the Operator will, at such time during the term of
the Lease as the Manufacturer shall request, in further consideration of the
premises and the mutual promises and agreements made herein, enter into an
agreement with the Manufacturer or such person, corporation, firm, partnership,
or other entity as the manufacturer shall appoint in its stead, pursuant to
which the Operator shall agree to sell up to forty percent (40%) of the rubber
crumb to the Manufacturer or such person as the Manufacturer shall appoint in
its stead:
12. DEFAULTS
12.1 Default by Manufacturer
12.1.1 Each of the following events shall be deemed to constitute breach of
this Agreement and, unless cured within ninety (90) days, shall constitute a
default hereunder by the Manufacturer:
(a) If at any time prior to the delivery of the TCS-1 System to the Site:
(i) The Manufacturer makes an assignment for the benefit of
creditors;
(ii) A voluntary or involuntary petition is filed by or against the
Manufacturer under any law having for its purpose and
adjudication of the Manufacturer a bankrupt or the extension of
the time of payment of, adjustment of, or other arrangement
affecting the liabilities of the Manufacturer, or the
reorganization of the Manufacturer and such petition is not
discharged or dismissed within one hundred twenty (120) days
after such petition is filed;
(iii)A Receiver is appointed for the property of the Manufacturer and
is not discharged or dismissed within one hundred twenty (120)
days after such appointment;
or
(iv) Any distress, execution, or attachment is levied upon the
Manufacturer's property to the extent that the Manufacturer is
not able to fulfill its obligations to deliver the TCS-1 within
ninety (90) of the anticipated Deliver Date.
(b) The Manufacturer fails to deliver the TCS-1 System in accordance with
the terms and provisions of Section 7, above, within ninety (90) days
of the Delivery Date unless prior thereto, the Operator has failed to
meet the payment provisions set forth above in Section 3.3 of this
Agreement;
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(c) The TCS-1 System fails to operate for a full Test (or re-test) Period,
in accordance with Section 8.2 hereof, as specified Schedule 8.2
hereto , within ninety (90) days from the date the TCS-1 System is
actually delivered to the Site.
12.2 Default by Operator
Each of the following events shall be deemed to constitute breach of this
Agreement and, unless cured within ninety (90) days, shall constitute a default
hereunder by the Operator:
(a) The Operator fails to make any payment required to be made pursuant to
Sections 3.3 or 4.3 of this Agreement or any payment required to be
made by the Operator under the Maintenance Agreement and such failure
to make payment shall have continued for a period of ten (10) days
after written notice from the Manufacturer;
(b) The Operator refuses to accept or allow the Manufacturer to install or
test the TCS-1 System in accordance with Sections 7.2, 8.2, and 8.3 of
this Agreement, notwithstanding that such System has been: (i)
delivered to the Operator's Site on a timely basis or (ii) delivered
to the Site and has performed in accordance with the specifications
set forth in Schedule 8.2 hereof for the prescribed Test Period;
(c) The Operator makes an assignment for the benefit of creditors;
(d) A voluntary or involuntary petition is filed by or against the
Operator under any law having for its purpose and adjudication of the
Operator a bankrupt or the extension of the time of payment of,
adjustment of, or other arrangement affecting the liabilities of the
Operator, or the reorganization of the Operator and such petition is
not discharged or dismissed within one hundred twenty (120) days after
such petition is filed;
(d) A Receiver is appointed for the property of the Operator;
(e) Any distress, execution, or attachment is levied upon the machines or
the Operator's property; or
(f) The Operator fails to faithfully and fully comply with the terms and
provisions of Section 5.2 of this Agreement, with any such failure
deemed to be an irremediable material breach of this Agreement
immediately upon its occurrence.
(g) The Operator fails to faithfully and fully perform each of its
obligations under the Maintenance Agreement and fails to cure such
breach within the time period specified therein with respect to such
failure.
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12.3 Remedies Available to the Operator upon Default by Manufacturer
If the Manufacture shall be in default pursuant to Paragraphs 12.1.1 (a),
(b), or (c) of this Agreement, unless such default shall have been caused by any
act or failure to act on the part of the Operator or its personnel, including
but not limited to the failure of the Operator to have brought the Site into
conformance with the Site Plan Specifications, the Operator shall have the right
to rescind this agreement by serving written notice ("Notice of Rescission")
upon the Manufacturer. In such event, the Manufacturer shall, at its own
expense, remove the TCS-1 System not later than forty-five (45) days following
its receipt of such Notice of Rescission and all monies theretofore paid by the
Operator to the Manufacturer pursuant to Section 4.3, above, shall be returned
by the Manufacturer to the Operator.
12.4 Remedies Available to the Manufacturer upon Default by the Operator
12.4.1 The Operator acknowledges and agrees that its breach of any
provision contained in Section 5.2 of this Agreement will cause irreparable harm
to the Manufacturer. The Operator therefore agrees that, if it is alleged by the
Manufacturer that the Operator or any of the Operator's affiliates, agents,
employees, or associates has breached, or is attempting or threatening to
breach, any provision contained hereinabove in the said Section 5.2, then the
Manufacturer shall have the right to obtain from any court or arbitrator having
jurisdiction, such equitable relief as may be appropriate, including a decree
enjoining the Operator from any further such breach of such provisions, and
enjoining the Operator from engaging in the tire recycling business, either
directly or indirectly through or in association with any other person, firm,
corporation, or organization during the term of this Agreement.
12.4.2 In the event of any default by the Operator under this Agreement,
the Manufacturer may at its option, at any time thereafter terminate this
Agreement by written notice ("Notice of Termination"), given in Accordance with
Section 16 hereof. such termination may be made effective, at the option of the
Manufacturer, simultaneously with or at any time after the happening of any such
default.
12.4.3 Upon any termination of this Agreement prior to payment in full of
the entire Purchase Price of US $2,000,000 for Purchased Equipment, in
accordance with the terms of Section 3.3 of this Agreement, the Manufacturer
shall immediately have possession of the entire TCS-1 System, and the
Manufacturer may enter upon the premises where the said TCS-1 System is located,
take possession of it without previous demand or notice and without legal
process, and remove it from the Operator's premises at the Operator's expense.
12.4.4 Upon any termination of this Agreement after payment in full of the
entire Purchase Price of US $ 2,000,000 for the Purchased Equipment has been
made by the Operator, the Manufacturer shall immediately have possession of the
Leased Proprietary Equipment and the Manufacturer may enter upon the premises
where the TCS-1 System is located, remove the Leased Proprietary Equipment from
the said TCS-1 System and take possession of the Leased
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Proprietary Equipment without previous demand or notice and without legal
process, and remove it from the Operator's premises at the Operator's expense.
12.4.5 The Operator acknowledges and agrees that any refusal on its part to
permit the Manufacturer to enter its premises and remove either the TCS-1 System
or the Leased Proprietary Equipment in accordance with Paragraph 12.4.3 or
12.4.4 of this Agreement will cause irreparable harm to the Manufacturer. The
Operator therefore agrees that in the event of any such refusal on its part, the
Manufacturer shall have the right to obtain from any court or arbitrator having
jurisdiction, such equitable relief as may be appropriate, including a decree
enjoining the Operator from any further such refusal of entry and removal.
12.4.6 In the event of any default by the Operator prior to the Acceptance
Date, the Manufacturer shall be entitled to damages including but not limited to
retention of the full deposit paid by the Operator and all costs of delivering
and removing and re-delivering the TCS- 1 System.
12.4.7 In the event of any default by the Operator after the Acceptance
Date or pursuant to Paragraph 12.2(b) of this Agreement, the Manufacturer shall
be entitled to damages including but not limited to retention of the full
deposit paid by the Operator, all costs of delivering and removing and
re-delivering the TCS-1 System, and damages for the Operator's failure to
perform for the full term of the Lease provided in Section 4.2 of this
Agreement, including but not limited to immediate payment of the balance of all
Rent Payments due under the full term of the Lease,
12.4.8 In the event of any default on the part of the Operator pursuant to
Paragraphs 12.2(a) or 12.2(b) of this Agreement, the Manufacturer shall have the
right to allow the Operator, for a period of sixty (60) days, to obtain a buyer
for the TCS-1 System, satisfactory to the Manufacture, provided however that,
unless specifically waived in writing by the Manufacturer, the Operator shall
continue liable under this Agreement lease for the full term of the Lease
provided for in Section 4.2 of this Agreement.
12.4.9 In the event of any default on the part of the Operator, the
Manufacturer shall not be deemed to have waived any of its rights hereunder by
reason of its failure to assert its rights or its failure to take cognizance of
such breach.
12.4.10 The foregoing remedies provided herein for the benefit of the
Manufacturer shall not be exclusive but in addition to any other remedies the
Manufacturer may have by virtue of the breach by the Operator, in law or in
equity, from any court or arbitration proceeding having jurisdiction over such
matter.
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13. OPERATOR'S SALE OF NONLEASED PROPRIETARY EQUIPMENT
13.1 Manufacturer's Right to Retrieve Leased Proprietary Equipment Prior to Sale
In the event that, during or after the term of the Lease provided in
Section 4.2 of this Agreement, the Operator wishes to divest itself of the TCS-1
System, pursuant to the discontinuance of its business, or otherwise, the
Operator will give to the Manufacturer written notice to that effect and the
Manufacturer shall have all rights of entry and removal provided above in
Paragraphs 12.4.4 and 12.4.5 of this Agreement, provided however that in
addition to such rights, if such event shall occur during the term of the said
Lease, the Manufacturer shall also have the rights provided to it in Paragraph
12.4.7 of this Agreement.
13.2 Manufacturer's Right of First Refusal
In the event that, during or after the term of the Lease provided in
Section 4.2 of this Agreement, the Operator wishes to divest itself of the TCS-1
System, pursuant to the discontinuance of its business, or otherwise, the
Operator will give to the Manufacturer written notice to that effect and the
Manufacturer will have a right of first refusal to repurchase the TCS- 1 System,
at its fair market value, within a thirty-day period following the
Manufacturer's receipt of such notice;
14. ASSIGNMENT
The Operator shall not transfer, deliver, sublease, or encumber the Leased
Proprietary Equipment to any person, corporation, or firm, and the Lease
provided in Section 4.2 of this Agreement may not be assigned by the Operator
except with the Manufacturer's express prior written consent.
15. FAILURE OF PERFORMANCE
Delays in or failure of performance occasioned by war, fire, flood,
embargo, car shortage, accident, explosion, expropriation of plant or product by
federal or state authority, or other like cause beyond the control of the
Manufacturer, or Act of God, or by strike, lockout, or other labor trouble, or
inability to obtain sufficient labor interfering with the production or
transportation of the TCS-1 System, or any part thereof, or any replacement
therefor, whether because of governmental action affecting the Manufacturer or
its suppliers, or by any action or proceeding at law or in equity, or otherwise,
shall not subject the Manufacturer to any liability.
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16. NOTICES
All notices required or permitted to be given hereunder shall be mailed by
certified mail, or delivered by hand or by recognized overnight courier to the
party to whom such notice is required or permitted to be given hereunder at the
address set forth above for such party, in all cases with written proof of
receipt required. Any such notice shall be deemed to have been given when
received by the party to whom notice is given, as evidenced by written and dated
receipt of the receiving party. Either party may change the address to which
notice to it is to be addressed, by written notice to the other party, as
provided herein.
17. CONDITIONS PRECEDENT TO MANUFACTURER'S OBLIGATION
The obligations of the Manufacturer hereunder are subject to fulfillment,
prior to the Deliver Date, of the following conditions:
17.1 Truth of Representation
The representations and warranties by or on behalf of Operator contained in
this Agreement or in any document delivered to the Manufacturer pursuant to the
provisions hereof shall be true in all material respects at and as of the
Delivery Date as though such representations and warranties were made at and as
of such time.
17.2 Compliance with Covenants
The Operator shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with by or prior to the Delivery Date.
17.3 Collateral Agreements
Simultaneously with the execution of this Agreement, the Operator will:
(a) enter into the following agreements with the Manufacturer or any joint
venture to which the Manufacturer is a party:
(i) the Maintenance Agreement, attached as Schedule 19.1(a) to this
Agreement;
(ii) the Royalty Agreement, attached as Schedule 19.1(b) to this
Agreement; and
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(iii)the Rubber Crumb Purchase Agreement, attached as Schedule 19.1(c)
to this Agreement.
(b) furnish the Manufacturer with a copy of the resolutions of the board
of directors of the Operator authorizing the Operator to purchase the
NonLeased Proprietary Equipment and lease the Leased Proprietary
Equipment pursuant to the terms and conditions of this Agreement;
17.4 Financing Arrangements
The Operator will deliver to the Manufacturer, not less than one hundred
(100) days prior to the anticipated Delivery Date, to confirm the Delivery Date,
an irrevocable commitment for lease or letter of credit financing, which
commitment shall be:
(a) for the full amount of the Purchase Price of the Nonproprietary
Equipment then outstanding;
(b) subject only to the conditions that the TCS-1 will consist of
Equipment specified in, and will operate in conformance with,
Schedules 1.3, 1.6 (b), and 1.8, and respectively.
18. ARBITRATION
All controversies arising out of or relating to this Agreement, or any
modification thereof, shall be settled by arbitration in New York City, pursuant
to the rules then obtaining of the American Arbitration Association.
19. BINDING EFFECT.
19.1 This agreement shall bind and inure to the benefit of the parties
hereto and their respective legal representatives, successors and assigns,
provided, however, that this Agreement cannot be assigned by the Operator except
in accordance with Section 14 of this Agreement. Nothing herein expressed or
implied is intended or shall be construed to confer upon or to give any person,
firm or corporation other than the parties hereto and their respective legal
representatives, successors and assigns any rights or benefits under or by
reason of this Agreement.
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19.2 All the right, title, and interest of the Manufacturer under the Lease
may be enforced by the Manufacturer, its successors, and assigns. The Lease
shall continue in full force and effect notwithstanding the death, incapacity,
or dissolution of the Operator or the increase, decrease, or change in the
personnel of or members of the Operator, and shall be binding upon the Operator
and the Operator's estate, legal representatives, heirs, and successors.
20. TERMINATION OF LETTER AGREEMENT BETWEEN THE MANUFACTURER AND OPERATOR
The parties agree that their mutual execution of this Agreement, shall
automatically cause the Letter Agreement, dated October 5, 1995, to be canceled,
terminated, void and of no further force or effect of the end that the parties
hereto shall have no further obligations or liabilities under the said Letter
Agreement, one against the other, and in consideration of the agreement of each
of the parties hereto, each of the parties does hereby remise, release,
discharge, indemnify and hold harmless the other party, and each shareholder,
officer, director, affiliate, associate, agent, and employee of such other party
of and from manner of actions and cause of action, suits, debts, dues, accounts,
bonds, wages, benefits, covenants, contracts, agreements, judgments, claims and
demands whatsoever in law or in equity, and including without limitation all
such actions, claims and demands, etc. arising out of, being based upon, or
being in any way connected with or related to the Letter Agreement.
21. GENERAL
21.1 Further Assurances
At any time, and from time to time, after the execution of this Agreement,
each party will execute such additional instruments and take such action as may
be reasonably requested by the other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the intent and purposes
of this Agreement.
21.2 Waiver
Any failure on the part of any party hereto to comply with any of its
obligations, agreements or conditions hereunder may be waived in writing by the
party to whom such compliance is owed.
21.3 Brokers
Neither party has employed any brokers or finders with regard to this
Agreement, unless otherwise described in writing to all parties hereto.
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21.4 Headings
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
21.5 Governing Law
This Agreement shall be governed by the laws of the State of Delaware.
21.6 Entire Agreement
This Agreement is the entire agreement of the parties covering everything
agreed upon or understood in the transaction. There are no oral promises,
conditions, representations, understandings, interpretations or terms of any
kind as conditions or inducements to the execution hereof.
21.7 Severability
If any part of this Agreement is deemed to be unenforceable the balance of
this Agreement shall remain in full force and effect.
21.8 Publicity
All notices to third parties and all other publicity concerning the
transactions contemplated by this Agreement shall be subject to the prior
approval of counsel to the Manufacturer.
21.9 Counterparts
This Agreement may be executed in any number of counterparts and by each
party on a separate counterpart, each of which when so executed and delivered
shall be an original, but all of which together shall constitute one Agreement.
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In Witness Whereof, the parties hereto have caused this Amendment to be
executed the day and year first above written.
Tirex America Inc.
By /s/ Terence C. Byrne
---------------------------------
Terence C. Byrne, President
OCEAN VENTURE III INC.,
By /s/ Louis Sanzaro
---------------------------------
Louis Sanzaro, President
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(Exhibit to Equipment Lease and Purchase Agreement with Ocean Venture III, Inc.)
TIREX AMERICA INC.
----------
RUBBER CRUMB PURCHASE OPTION AGREEMENT
----------
Rubber Crumb Purchase Option Agreement, made this 5th day of March 1996,
between:
Ocean Venture III, Inc.
1497 Lakewood Road
Toms River, N.J. 08755
Tel: (908) 244-1716
Fax: (908) 914-0373
(the "Operator")
and
Tirex America Inc.
3767 Thimens, Suite 207
Ville St. Laurent
Quebec, Canada H4R 1W4
(the "Manufacturer")
Whereas, the Manufacturer and the Operator are parties to a certain
equipment lease and purchase agreement, of even date herewith (the "Equipment
Lease and Purchase Agreement"), between the Manufacturer and the Operator
respecting the sale by the Manufacturer and the Purchase by the Operator of the
"Nonproprietary Equipment" and the operating lease, between the Manufacturer, as
lessor, and the Operator, as lessee, respecting the "Proprietary Equipment", as
those terms are defined in the said Equipment Lease and Purchase Agreement.
Whereas, in consideration for the premises and the mutual promises made
therein, the Operator has agreed, pursuant to the Equipment Lease and Purchase
Agreement, to enter into this Option Agreement with the Manufacturer pursuant to
which the Operator hereby grants to the Manufacturer the option to purchase up
to forty percent (40%) of the rubber crumb yielded by
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the disintegration of scrap tires in the TCS-1 System which is the subject of
the said Equipment Lease and Purchase Agreement (the "Subject TCS-1 System").
Now, Therefore, it is agreed as follows:
1. Definitions
1.2 "Manufacturer" shall mean Tirex America Inc. and its successors and
assigns.
1.3 "Operator" shall mean Ocean Venture III, Inc. and its successors and
assigns.
1.4 All other Capitalized terms used herein and not otherwise defined shall
have the respective meanings attributed thereto in the Equipment Lease and
Purchase Agreement.
2. Grant of Option
The Operator hereby grants to the Manufacturer an option (the "Option") to
purchase up to forty percent (40%) of the rubber crumb yielded by the
disintegration of scrap tires in the Subject TCS-1 System (the "Rubber Crumb
Output").
3. Term of Option
The term of the Option shall be coextensive with the life of the Subject
TCS-1 System and shall commence as of the Acceptance Date.
4. Conditions of Option
The Manufacturer's rights to purchase the Rubber Crumb Output pursuant to
this Option shall be subject to fulfillment of the following condition:
(a) the Manufacturer shall furnish to the Operator, in writing, within
ninety days of the Acceptance Date and every six months thereafter,
the Manufacturer's anticipated purchase projections (the "Six-Month
Projected Purchase Order") specifying the grades, types, and
quantities of Rubber Crumb Output which the Manufacturer commits to
purchase within the six-month period following the date of such
Projected Purchase Order;
the price specified in the Projected Purchase Order will be negotiated
every six months for a period of six months.
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5. Inspection of Books
Upon written request, the Manufacturer or his designated agent may examine
the books and records of the Operator insofar as they relate to this Option
Agreement. Such examination shall take place at the offices of the Operator at
______________________________________.
6. Assignment
6.1 This Option Agreement may not be assigned by the Operator except as
part of the assignment of the Equipment Lease and Purchase Agreement, which may
only be assigned pursuant to the express written consent of the Manufacturer,
and any such assignment shall not relieve the Operator of its obligations
hereunder unless expressly waived in writing by the Manufacturer.
6.2 This Option Agreement may be transferred, assigned, pledged, or
hypothecated by the Manufacture as part of the sale of its business or
otherwise.
7. Notices
All notices required or permitted to be given hereunder shall be mailed by
certified mail, or delivered by hand or by recognized overnight courier to the
party to whom such notice is required or permitted to be given hereunder at the
address set forth above for such party, in all cases with written proof of
receipt required. Any such notice shall be deemed to have been given when
received by the party to whom notice is given, as evidenced by written and dated
receipt of the receiving party. Either party may change the address to which
notice to it is to be addressed, by written notice to the other party, as
provided herein.
8. Binding Effect.
8.1 This Option Agreement shall bind and inure to the benefit of the
parties hereto and their respective legal representatives, successors and
assigns, provided, however, that this Option Agreement cannot be assigned by the
Operator except in accordance with Section 6.1 hereof. Nothing herein expressed
or implied is intended or shall be construed to confer upon or to give any
person, firm or corporation other than the parties hereto and their respective
legal representatives, successors and assigns any rights or benefits under or by
reason of this Option Agreement.
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8.2 All the right, title, and interest of the Manufacturer under this
Option Agreement may be enforced by the Manufacturer, its successors, and
assigns. This Option Agreement shall continue in full force and effect
notwithstanding the death, incapacity, or dissolution of the Operator or the
increase, decrease, or change in the personnel of or members of the Operator,
and shall be binding upon the Operator and the Operator's estate, legal
representatives, heirs, and successors.
9. Further Assurances
At any time, and from time to time, after the execution of this Agreement,
each party will execute such additional instruments and take such action as may
be reasonably requested by the other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the intent and purposes
of this Agreement.
10. Waiver
Any failure on the part of any party hereto to comply with any of its
obligations, agreements or conditions hereunder may be waived in writing by the
party to whom such compliance is owed.
11. Brokers
Neither party has employed any brokers or finders with regard to this
Agreement, unless otherwise described in writing to all parties hereto.
12. Headings
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
13. Governing Law
This Agreement shall be governed by the laws of the State of Delaware.
14. Entire Agreement
This Agreement and the premises and mutual promises in the Equipment Lease
and Purchase Agreement constitute the entire agreement of the parties covering
everything agreed
246
<PAGE>
upon or understood with respect to the Option. There are no oral promises,
conditions, representations, understandings, interpretations or terms of any
kind as conditions or inducements to the execution hereof.
15. Severability
If any part of this Agreement is deemed to be unenforceable the balance of
this Agreement shall remain in full force and effect.
16. Publicity
All notices to third parties and all other publicity concerning the
transactions contemplated by this Agreement shall be subject to the prior
approval of counsel to the Manufacturer.
17. Counterparts
This Agreement may be executed in any number of counterparts and by each
party on a separate counterpart, each of which when so executed and delivered
shall be an original, but all of which together shall constitute one Agreement.
In Witness Whereof, the parties hereto have caused this Option Agreement to
be executed the day and year first above written.
TIREX AMERICA INC.
By /s/ Terence C. Byrne
--------------------------------
Terence C. Byrne, President
OCEAN VENTURE III INC.,
By /s/ Louis Sanzaro
--------------------------------
Louis Sanzaro, President
247
<PAGE>
(Exhibit to Equipment Lease and Purchase Agreement with Ocean Venture III, Inc.)
Tirex America Inc.
----------
ROYALTY AGREEMENT
----------
Royalty Agreement, made this 5 day of March 1997, between:
Ocean Venture III, Inc.
1497 Lakewood Road
Toms River, N.J. 08755
Tel: (908) 244-1716
Fax: (908) 914-0373
(the "Operator")
and
Tirex America Inc.
3767 Thimens, Suite 207
Ville St. Laurent
Quebec, Canada H4R 1W4
(the "Manufacturer")
Whereas, the Manufacturer and the Operator are parties to a certain
equipment lease and purchase agreement, of even date herewith (the "Equipment
Lease and Purchase Agreement"), between the Manufacturer and the Operator
respecting the sale by the Manufacturer and the Purchase by the Operator of the
AProprietary Front-End System@, the "Nonproprietary Equipment"(collectively, the
APurchased Equipment@) and the operating lease, between the Manufacturer, as
lessor, and the Operator, as lessee, respecting the "Leased Proprietary
Equipment", as those terms are defined in the said Equipment Lease and Purchase
Agreement.
Whereas, in consideration for the premises and the mutual promises made
therein, the Operator has agreed, pursuant to the Equipment Lease and Purchase
Agreement, to enter into this Royalty Agreement with the Manufacturer whereby
the Operator will pay to the Manufacturer certain royalties calculated upon the
gross proceeds from all sales of rubber crumb, fiber and steel
248
<PAGE>
from scrap tires disintegrated by the TCS-1 System which is the subject of the
said Equipment Lease and Purchase Agreement (the "Subject TCS-1 System"). Now,
Therefore, it is agreed as follows:
1. Definitions
1.2 "Manufacturer" shall mean Tirex America Inc. and its successors and
assigns.
1.3 "Operator" shall mean Ocean Venture III, Inc. and its successors and
assigns.
1.4 All other Capitalized terms used herein and not otherwise defined shall
have the respective meanings attributed thereto in the Equipment Lease and
Purchase Agreement.
2. Royalty Fee
2.1 The Operator shall pay to the Manufacturer, not more than fifteen (15)
days after the end of each month, a royalty fee equal to three percent (3%) of
the gross proceeds from all sales of rubber crumb, fiber, and steel from scrap
tires disintegrated by the Subject TCS-1 System (the "Royalty Fee").
2.2 For purposes of this Royalty Agreement, the term "gross proceeds" shall
mean all revenues from the sale of rubber crumb, fiber and steel from scrap
tires disintegrated by the Subject TCS-1 System.
3. Payment Periods
Royalty Fees shall be reported and paid by the Operator to the Manufacturer
every month from the Acceptance Date throughout the life of the Subject TCS-1
System.
4. Royalty Reports
The Operator shall prepare royalty reports ("Royalty Reports"), to be
delivered by the Operator to the Manufacturer, together with the Royalty Fee due
thereunder, covering the immediately preceding "Reporting Periods", in the
following manner:
The initial Reporting Period shall be the Reporting Period in which
the Acceptance Date falls. For example, if the Acceptance Date is
September 15, 1997, the initial Reporting Period is the two-week
period which commenced on September 15, 1997
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<PAGE>
and ended on September 30, 1997, and the Royalty Report and
Royalty Fee for such AReporting Period@ is due on October 15,
1997.
(b) Each Royalty Report shall disclose the gross revenues from all sales of
steel, fiber, and rubber crumb produced by the operation of the
Subject TCS-1 System and the amount of the Royalty Fee calculated upon
the gross proceeds therefrom.
5. Inspection of Books
Upon written request, the Manufacturer or his designated agent may examine
the books and records of the Operator insofar as they relate to this Royalty
Agreement. Such examination shall take place at the offices of the Operator at
______________________________________________.
6. Assignment
6.1 This Royalty Agreement may not be assigned by the Operator except as
part of the assignment of the Equipment Lease and Purchase Agreement, which may
only be assigned pursuant to the express written consent of the Manufacturer,
and any such assignment shall not relieve the Operator of its liabilities
hereunder unless expressly waived in writing by the Manufacturer.
6.2 This Royalty Agreement may be transferred, assigned, pledged, or
hypothecated by the Manufacture as part of the sale of its business or
otherwise.
7. Notices
All notices required or permitted to be given hereunder shall be mailed by
certified mail, or delivered by hand or by recognized overnight courier to the
party to whom such notice is required or permitted to be given hereunder at the
address set forth above for such party, in all cases with written proof of
receipt required. Any such notice shall be deemed to have been given when
received by the party to whom notice is given, as evidenced by written and dated
receipt of the receiving party. Either party may change the address to which
notice to it is to be addressed, by written notice to the other party, as
provided herein.
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<PAGE>
8. Binding Effect.
8.1 This Royalty Agreement shall bind and inure to the benefit of the
parties hereto and their respective legal representatives, successors and
assigns, provided, however, that this Royalty Agreement cannot be assigned by
the Operator except in accordance with Section 6.1 hereof. Nothing herein
expressed or implied is intended or shall be construed to confer upon or to give
any person, firm or corporation other than the parties hereto and their
respective legal representatives, successors and assigns any rights or benefits
under or by reason of this Royalty Agreement.
8.2 All the right, title, and interest of the Manufacturer under this
Royalty Agreement may be enforced by the Manufacturer, its successors, and
assigns. This Royalty Agreement shall continue in full force and effect
notwithstanding the death, incapacity, or dissolution of the Operator or the
increase, decrease, or change in the personnel of or members of the Operator,
and shall be binding upon the Operator and the Operator's estate, legal
representatives, heirs, and successors.
9. Further Assurances
At any time, and from time to time, after the execution of this Agreement,
each party will execute such additional instruments and take such action as may
be reasonably requested by the other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the intent and purposes
of this Agreement.
10. Waiver
Any failure on the part of any party hereto to comply with any of its
obligations, agreements or conditions hereunder may be waived in writing by the
party to whom such compliance is owed.
11. Brokers
Neither party has employed any brokers or finders with regard to this
Agreement, unless otherwise described in writing to all parties hereto.
251
<PAGE>
12. Headings
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
13. Governing Law
This Agreement shall be governed by the laws of the State of Delaware.
14. Entire Agreement
This Agreement and the premises and mutual promises in the Equipment Lease
and Purchase Agreement constitute the entire agreement of the parties covering
everything agreed upon or understood with respect to the Royalty Fees. There are
no oral promises, conditions, representations, understandings, interpretations
or terms of any kind as conditions or inducements to the execution hereof.
15. Severability
If any part of this Agreement is deemed to be unenforceable the balance of
this Agreement shall remain in full force and effect.
16. Publicity
All notices to third parties and all other publicity concerning the
transactions contemplated by this Agreement shall be subject to the prior
approval of counsel to the Manufacturer.
17. Counterparts
This Agreement may be executed in any number of counterparts and by each
party on a separate counterpart, each of which when so executed and delivered
shall be an original, but all of which together shall constitute one Agreement.
252
<PAGE>
In Witness Whereof, the parties hereto have caused this Royalty Agreement to be
executed the day and year first above written.
TIREX AMERICA INC.
By /s/ Terence C. Byrne
--------------------------------
Terence C. Byrne, President
OCEAN VENTURE III INC.,
By /s/ Louis Sanzaro
--------------------------------
Louis Sanzaro, President
253
EXHIBIT 10(mmmm)
254
<PAGE>
----------
TIREX AMERICA INC.
----------
EQUIPMENT LEASE AND PURCHASE AGREEMENT
----------
Equipment Lease and Purchase Agreement, made this 8th day of May 1997, among
Recycletron Inc.
770, rue Mill
Montreal, Quebec
H3C 1Y3
Tel: (514) 937-9565
Fax: (514) 933-1575
(the "Operator")
and
Tirex America Inc.
740 St. Maurice, Suite 201
Montreal, Quebec H3C 1L5
Tel: (514) 878-0727; Fax: (514) 878-9847
(the "Manufacturer")
1. DEFINITIONS
1.1 "Acceptance Date" shall mean the first day following the completion of
the Test Period.
Delivery Date shall mean end of second quarter 1998 or such other date as
the parties hereto shall mutually agree.
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<PAGE>
1.3 "Leased Proprietary Equipment" shall mean all of the following
constituent, integral parts of the TCS-1 System and all substitutions,
replacements, and improvements, and all repair and renewal parts installed
therein, as specified in the plans and specifications therefor, attached as
Schedule 1.3 hereto:
(a) the disintegration system including but not limited to all grinders
contained therein, and
(b) the separation systems, including but not limited to
(i) a magnetic separator;
(ii) a fiber/crumb separator;
(iii)fiber collector
(iv) crumb rubber sizing system; and all integrated conveyance and
exit belts, chutes, and other components
1.4 "Maintenance Agreement" shall mean the maintenance agreement of even
date herewith between the Manufacturer and the Operator respecting the
maintenance of the TCS-1 System.
1.5 "Manufacturer" shall mean Tirex America Inc. and Tirex-Canada ( 3143619
Canada, Inc.), and all other corporations, partnerships, or other entities, now
or in the future controlled by, under common control with, or in control of,
Tirex America Inc., jointly and severally.
1.6 "Non Proprietary Equipment" shall mean all of the following
constituent, integral parts of the TCS-1 System:
All bailing systems contained in the TCS-1 System, including all
associated ancillary equipment and conveyance and exit belts,
chutes and/or other components combined or integrated therewith,
as specified in the pertinent plans and specifications therefore.
freezing chambers and cyrogenic systems and all substitutions,
replacements, and improvements, and all repair and renewal parts
installed therein, as specified in the plans and specifications
therefore, attached as Schedule 1.6 ( b ) .
1.7 "Operator" shall mean Recycletron, Inc. and all other corporations,
partnerships, or other entities, now or in the future controlled by, under
common control with, or in control of, Recycletron, Inc. jointly and severally.
1.8 "Proprietary Front-End System" shall mean the manufacturer's
proprietary front-end tire preparation system, all substitutions, replacements,
and improvements, and all repair and renewal parts installed therein, as
specified in the plans and specifications therefor, attached as Schedule 1.8
hereto.
256
<PAGE>
1.9 "Purchased Equipment" shall mean the Proprietary Front-End System and
the Non Proprietary Equipment (as those terms are defined in Sections 1.8 and
1.6 , collectively).
1.10 "Site" shall mean the Operator's premises at (to be determined by the
Operator).
1.11 "TCS-1 System" shall mean the Manufacturer's proprietary cryogenic
tire disintegration system, patent pending, consisting of the Proprietary
Front-End System, the Non Proprietary Equipment and the Leased Proprietary
Equipment, as specified in the plans and specifications attached as Schedule
1.3, 1.6 (b), and 1.8 hereto and all substitutions, replacements, and
improvements, and all repair and renewal parts installed therein.
1.12 "Test Period" shall mean a three (3) day period which shall commence
within ten (10) business days after completion of the installation of the TCS-1
System, during which Test Period, the TCS-1 System shall be operated continually
for up to 12 hours per day exclusive of any time devoted to adjustments and
acclamation.
2. RECITALS
Whereas:
2.1 The Manufacturer has invented, built, and patented (patent pending),
and is the sole and exclusive owner, directly or indirectly, through one or more
subsidiaries, of all right title and interest in the TCS-1 System.
2.2 Recycletron Inc. is a corporation organized for the purpose of
commercially exploiting, directly or indirectly, through one or more
subsidiaries, the TCS-1 System by purchasing the Purchased Equipment, leasing
the Leased Proprietary Equipment, and operating the TCS-1 System.
3. AGREEMENT FOR PURCHASE AND SALE OF PROPRIETARY FRONT-END AND NON PROPRIETARY
EQUIPMENT
3.1 Purchase and Sale
The Operator agrees to purchase, and the Manufacturer agrees to sell, the
Proprietary Front-End System and the Non Proprietary Equipment, as defined in
Sections 1.6 and 1.8, above (collectively, the "Purchased Agreement" ), above,
in accordance with the terms and conditions
257
<PAGE>
of this Agreement. The Operator may at its election take title to the Purchased
Equipment in a wholly owned subsidiary corporation to be formed by it for such
purpose. Such election by the Operator shall nowise modify, diminish, or
otherwise affect the Operator's liability hereunder to the Manufacturer. The
purchase and payment for the Purchased Equipment by the Operator, and the sale,
assignment, transfer, and delivery thereof by the Manufacturer, shall take place
subject to the fulfillment of the conditions hereinafter provided.
3.2 Purchase Price
The purchase price for the Purchased Equipment (the "Purchase Price"),
installed and set in operation pursuant to Section 7 and 8 hereof, shall be the
sum of two million United States dollars (US $2,000,000), FOB Montreal, which
shall be deemed allocated as follows:
(a) Freezing Chamber and
Cryogenic Systems US $1,325,000
(b) Front End Tire
Preparation and
Bailing Systems 675,000
-------------
Total US $2,000,000
3.3 Payment Terms
3.3.1 In the absence of arrangements for lease or letter of credit
financing, satisfactory to the Manufacturer, the Purchase Price for the
Purchased Equipment shall be paid as follows:
(a) US $25,000 upon execution of this Agreement;
(b) US $100,000 6 months prior to the anticipated Delivery Date.
(c) US $125,000 3 months prior to the anticipated Delivery Date.
(d) US $1,850,000 on the Acceptance Date.
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<PAGE>
4. AGREEMENT FOR OPERATING LEASE OF LEASED PROPRIETARY EQUIPMENT
4.1 Agreement to Lease Equipment
The Manufacturer, as lessor, and the Operator, as lessee, hereby enter into
an operating lease (the "Lease") for the Leased Proprietary Equipment, as
defined in Section 1.3 above, subject to the following terms and conditions:
4.2 Term of the Lease
4.2.1 The term of the Lease shall be sixty (60) months commencing on the
Acceptance date.
4.2.2 At the expiration of the full original term hereof, if this Lease has
remained in effect and the Operator has duly performed all its obligations
thereunder during the entire such term, then the Operator shall have the option
to either:
(a) Obtain a new lease agreement in the form then being generally offered
by the Operator to the trade with renewal terms, as agreed by the
parties;
(b) Continue to use the same equipment installed hereunder and thereby
extend the term of this Lease at a reduced rental rate of US $6,250
per month for a period of one five years; or
Request that the Manufacturer exercise its right of first refusal to
repurchase the Purchased Equipment pursuant to Section 13.1 of this Agreement,
in which event the Manufacturer shall have thirty (30) days to either: (i)
notify the Operator of its intent to repurchase the Purchased Equipment and,
within sixty (60) days of such notice, effectuate such repurchase and thereupon
enter upon the premises where the said TCS-1 System is located and remove the
entire TCS-1 System from the Operator's premises at the Manufacturer's expense,
or (ii) notify the Operator that it does not intend to repurchase the Purchased
Equipment and, within thirty (30) days of such notice, enter upon the premises
where the TCS-1 System is located, take possession of the Leased Proprietary
Equipment without previous demand or notice and without legal process, retrieve
the Leased Proprietary Equipment from the TCS-1 System and remove the Leased
Proprietary Equipment from the Operator's premises at the Manufacturer's
expense.
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<PAGE>
4.3 Rent Payments
4.3.1 The Operator shall pay to the Manufacturer monthly rental payments
(the "Rent Payments") for the Leased Proprietary Equipment at the rate of twelve
thousand, five hundred United States dollars (US $12,500) per month, payable in
advance, as follows:
(a) the Rent Payment for the first 30-day period (the "Set-Off Period")
following the Acceptance Date shall be paid by way of a set-off in the
amount of US $12,500 against the deposit heretofore paid by the
Operator;
(b) the Rent Payment for the period (the "Partial-Month Period") which
commences on the first day following the Set-Off Period and ends on
the last day of the calendar month in which such Partial-Month Period
falls, will be payable in cash on the first day of such Partial-Month
Period, on a pro rata basis.
(c) Normal monthly Rent Payments of US $12,500 will commence and be
payable on the first day of the first full calendar month following
the Partial-Month Period.
EXAMPLE:
Acceptance Date: September 15th
Set-Off Period: September 16th through October 15th.
Partial-Month Period: October 15th through October 31st, with
Rent Payment in the amount of $6,250 due and
payable on October 15th.
Commencement of Regular November 1st, with normal monthly Rent Payment
Monthly Rental Payments of $12,500 due and payable on such
date.
4.3.2 In the event of that payment of any Rent Payment is made by the
Operator more than ten (10) days after the date when such payment shall have
been due, the Operator shall pay a late charge of one and a half percent (1.5 %)
of the entire amount of such Rent Payment for every month in which such
delinquency occurs or continues.
260
<PAGE>
5. TITLE TO EQUIPMENT
5.1 Title to Purchased Equipment
5.1.1 Title to the Purchased Equipment shall pass to the Operator upon
payment in full of the balance of the Purchase Price, due on the Acceptance
Date.
5.1.2 No rights to any plans or designs respecting the TCS-1 System shall
pass to the Operator and the Operator shall not copy, reproduce, design, or
build, or cause, assist, or suffer to be copied, reproduced, designed, or built
by any other person, firm, or corporation any equipment in any way similar to,
or based upon, the design or structure of the TCS-1 System.
5.2 Title to Leased Proprietary Equipment
5.2.1 The Leased Proprietary Equipment shall at all times remain the sole
and exclusive property of the Manufacturer (which reserves the right to assign
or encumber the Leased Proprietary Equipment) and the Operator shall have no
right, title, or interest to the Leased Proprietary Equipment but only the right
to use such Equipment under this Lease. The Leased Proprietary Equipment shall
not be transferred or sublet by the Operator to any other person, firm or
corporation, the Operator shall not permit any other person, firm, or
corporation to use the Leased Proprietary Equipment, and this agreement may not
be assigned by the Operator either by its own act or by operation of law.
5.2.2 The Leased Proprietary Equipment shall remain personal property and
shall not be deemed otherwise by reason of becoming attached to the premises.
5.2.3 The Manufacturer shall have the right at any time or from time to
time to modify the Leased Proprietary Equipment in a manner which will not
lessen the utility of the Leased Proprietary Equipment;
5.2.4 The Operator shall not enter into, remove, tamper with, or breach the
security of, the Leased Proprietary Equipment. The Operator shall not copy,
reproduce, design, or build, or cause, assist, or suffer to be copied,
reproduced, designed, or built by any other person, firm, or corporation any
equipment in any way similar to, or based upon, the design or structure of the
Leased Proprietary Equipment, or of any part thereof. The Operator shall not
permit any Leased Proprietary Equipment to be abused, not permit the removal of
any descriptions, instructions, warnings plate or markings, or other writings of
any kind whatsoever put on the Leased Proprietary Equipment by the Manufacturer,
nor attach anything to or remove anything from the Leased Proprietary Equipment.
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<PAGE>
5.2.5 In accordance with the terms of the Maintenance Agreement, the
Operator will not allow any repairs to the TCS-1 or replacement of parts to be
done by any person or persons except technicians authorized by the Manufacturer.
5.2.6 The Operator agrees that, in consideration of the Manufacturer
entering into this Lease, it will not move the TCS-1 System, of which the Leased
Proprietary Equipment forms a part, to any location outside of the state in
which the Site is located or outside of a fifty (50) mile radius of the Site,
without the prior written consent of the Manufacturer.
6. SITE PREPARATION
6.1 Site Plan Specifications
Not less than three (3) months prior to the anticipated Delivery Date, the
Manufacturer will furnish to the Operator "Site Plan Specifications" respecting
the electrical, ventilation, water supply and disposal, and any other
specifications required at the site for the installation and operation of the
TCS-1 System.
6.2 Preparation of Site
6.2.1 Prior to the Delivery and installation of the TCS-1 System, the
Operator shall make, at its own expense, all alterations to and changes in its
premises and equipment required to bring the site into complete conformance with
the above referenced Site Plan Specifications, with respect to which the
Operator shall obtain all necessary permissions and inspections, and which shall
include but not be limited to making any required structural changes and the
installation of:
(a) electrical equipment and power lines up to the electrical inputs or
control boxes attached to the TCS-1 System, as designated on the Site
Plan Specifications;
(b) water supply sources and equipment up to the water inflow points
designated on the Site Plan Specifications;
(c) water drainage and disposal sites and equipment from the water outflow
points designated on the Site Plan Specifications;
(d) air ventilation sources and equipment as designated on the Site Plan
Specifications
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<PAGE>
6.3 Notice to Inspect
6.3.1 The Operator shall, not later than one month prior to the anticipated
Delivery Date, give written notice to the Manufacturer (the "Notice to Inspect")
that: (i ) preparation of the site for the installation and operation of the
TCS-1 has been completed in accordance with the Site Plan Specifications and
(ii) all applicable governmental regulations have been complied with and all
required permits, licenses, and standards have been obtained or met (together
with copies of all documentary evidence thereof) and request that the
Manufacturer inspect the site in order to confirm the foregoing.
6.4 Manufacturer's Right to Inspect Site
6.4.1 The Manufacturer shall have the right, at any time within two weeks
of its receipt of the Notice to Inspect, to inspect the site and notify the
Operator in writing (the "Notice of Approval") that the Site is in conformance
with the Site Plan Specifications and that all legal requirements have been met.
6.4.2 In the event that, after inspecting the Site, the Manufacturer
determines that the Site is not in conformance with the Site Plan Specifications
or that any legal requirements have not been met, then the Manufacturer shall
have the right to require that the Operator make any and all changes or
additions required to bring the Site into such conformance, at the sole expense
of the Operator prior to the Delivery Date and to reschedule the Delivery Date
after all such changes or additions are completed and/or all legal requirements
are complied with. In such event, the Operator shall, upon completion of the
required changes or additions, give written notice to the Manufacturer ("Notice
to Re-inspect") that such changes or additions have been made in accordance with
the Manufacturer's instructions or governmental regulations and that the Site is
in complete conformance with the Site Plan Specifications and all applicable
regulations. The Manufacturer shall have the right, within two weeks of its
receipt of such Notice to reinspect the Site. Such procedures may be repeated,
and the Manufacturer shall have no obligation to deliver the TCS-1 System, until
the Manufacturer confirms upon inspection that the Site is in conformance with
the Site Plan Specifications, all governmental regulations are complied with,
and the Delivery Date is rescheduled in accordance with this Paragraph 6.4.2.
7. DELIVERY AND INSTALLATION
7.1 Delivery
7.1.1 Unless the Delivery Date is rescheduled in accordance with the
provisions of paragraph 6.4.2 above, the Manufacturer shall deliver the TCS-1
System to the site not later
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than 30 days after the Manufacturer determines that the Site is in conformance
with the Site Plan Specifications and that all legal requirements have been met,
in accordance with Section 6.4, above.
7.1.2 Delivery shall be made F.O.B. Montreal, Canada. The equipment
comprising the TCS-1 System shall be placed in suitably protected containers the
nature of which shall be determined by the Manufacturer. The Operator shall pay
all costs of transportation and delivery of the TCS-1 System from the
Manufacturer's plant in Montreal to the Site.
7.1.3 In the event that delivery of the TCS-1 System, or any part thereof,
for a period not exceeding 30 days, shall be prevented by causes beyond the
control of the Seller, including but not limited to acts of God, labor troubles,
failure of essential means of transportation, or changes in policy with respect
to exports or otherwise by the government of the jurisdiction in which the
Operator is located, the Delivery Date shall be rescheduled after all of such
causes have been eliminated. In the event, however, that such nondelivery
continues after such extended period, the Operator and the Manufacturer shall
each have the right to cancel this agreement by written notice, and in such case
there shall be no obligation or liability on the part of either party with
respect to such undelivered equipment.
7.2 Installation
7.2.1 Within ten business (10)days of the delivery of the TCS-1 System to
the Site, the Manufacturer shall, at its own expense, install the TCS-1 System
at the Site.
7.2.2 Upon installation, the TCS-1 System shall be in complete working
order and shall consist of the Non Proprietary Equipment and the Leased
Proprietary Equipment, as specified in the plans and specifications set forth in
Schedules 1.3,1.6 (b), and 1.8 hereto.
8. EQUIPMENT TESTING AND OPERATOR'S ACCEPTANCE
8.1 Notice of Availability for Testing
Upon completion of the installation of the TCS-1 System at the Site, the
Manufacturer shall give the Operator written notice that the TCS-1 System is
available for testing operations.
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8.2 Test Period
8.2.1 Immediately upon giving notice to the Operator that the TCS-1 System
is available for testing operations, the Manufacturer shall, within ten business
days, at its own expense, provide a technical representative to supervise the
operation of the TCS-1 for a period of three (3) days (the "Test Period").
During the Test Period, the TCS-1 System shall operate in accordance with the
specifications set forth in Schedule 8.2 hereto, continually for up to 12 hours
per day.
8.2.2 All power, fuel, light, water, oil, or other necessary supplies and
all necessary personnel (other than the engineering technician furnished by the
Manufacturer) for the successful operation of the TCS-1 System, shall be
provided by the Operator.
8.2.3 The Manufacturer shall furnish to the Operator all data regarding the
TCS-1 System in order to enable the Operator to operate such System and, in
addition to the training to be provided pursuant to the Maintenance Agreement,
the Manufacturer shall, during the Test Period, instruct at least two (2) of the
Operator's employees with respect to the operation, and operating maintenance of
the TCS-1 System, and use reasonable care in training such employee, provided
that if in the Manufacturer's sole opinion any employee is not adequately
qualified, the Operator shall designate another of its employees to receive such
instruction.
8.3 Acceptance
8.3.1 Unless the TCS-1, or any part of it, fails to operate in accordance
with the specifications set forth in Schedule 8.2 hereto, the Manufacturer's
offer to sell the Front-End System and the Non Proprietary Equipment,
collectively the "Purchased Equipment" and to lease the Leased Proprietary
Equipment to the Operator shall automatically be deemed to have been accepted by
the Operator as of the Acceptance Date, which shall occur on the first day
following the completion of the Test Period and the Operator shall have no right
to revoke such acceptance for any reason.
8.3.2 If the TCS-1, or any part of it, fails to operate in accordance with
the specifications set forth in Schedule 8.2 hereto, the Manufacturer shall have
Ninety (90) days in which to cure the problems responsible for such failure.
Costs of all parts and labor required to bring the TCS-1 into full working
condition shall be borne by the Manufacture unless the failure to operate in
accordance with the specifications set forth in Schedule 8.2. shall have been
caused by any act or failure to act on the part of the Operator or its
personnel, including but not limited to the failure of the Operator to have
brought the Site into conformance with the Site Plan Specifications.
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8.3.3 Upon written notice to the Operator that the problems which caused
the TCS-1 System to fail to operate as required during the Test Period have been
cured, the Manufacturer shall, at the request of the Operator, commence a second
Test Period for up to three (3) days, in which case the acceptance criteria of
Paragraph 8.2.1 shall pertain to such second Test Period (or any subsequent Test
Period) with the same force and effect as to the initial Test Period.
9. RISK OF LOSS
9.1 The risk of loss, injury, or destruction of the Leased Proprietary
Equipment from any cause whatsoever, except negligence or willful destruction by
the Operator shall be borne by the Manufacturer during the term of the Lease
therefor provided hereunder.
9.2 The risk of loss, injury, or destruction of the NonLeased Proprietary
Equipment from any cause whatsoever, except negligence or willful destruction by
the Operator shall be borne by the Manufacturer only until title passes to the
Operator.
9.3 Any loss, injury, or destruction to the TCS-1, or any part of it, after
title to the Non Proprietary Equipment passes to the Operator, shall not serve
in any manner to release the Operator from the obligation to pay the Rent
Payments provided for Section 4.3, above.
10. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE MANUFACTURER
The Manufacturer hereby represents, warrants, and covenants to the
Operator, as follows:
10.1 Corporate Status
Tirex America Inc. is (i) duly organized corporation, validly existing and
in good standing under the laws of the State of Delaware; (ii) has full power to
own all of its properties and carry on its business; and (iii) is qualified to
do business as a foreign entity in each of the jurisdictions in which it
operates, if any, unless the character of the properties owned by it or the
nature of the business transacted by it, does not make qualification necessary
in any other jurisdiction or jurisdictions.
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10.2 Corporate Action
Prior to the date hereof, the board of directors of the Manufacturer has
duly adopted resolutions approving the execution and delivery to the
Manufacturer of this Agreement and authorizing and consenting to each and every
one of the terms, warranties, representations, covenants and conditions herein
contained.
10.3 Patents
10.3.1 The Manufacturer has applied for a patent in the United States and
Canada for the Disintegration System forming part of the Leased Proprietary
Equipment. The Manufacturer is the sole owner of such patent application and,
upon the granting of a patent in respect thereof, the Manufacturer shall be the
sole owner of such patent and of all rights thereunder.
10.3.2 The Manufacturer shall defend, to the best of its ability and at its
own expense, all actions, suits, or proceedings instituted against the Operator
insofar as the same are based on any claims that the said Leased Proprietary
Equipment, or any part thereof, constitutes an infringement of any patent of the
United States or Canada and shall indemnify the Operator against all damages,
costs, and expenses which the Operator may incur as a result of any action which
may be brought or threatened against the Operator with respect to the equipment
covered by such patent, provided that:
(a) The Manufacturer shall have the right at any time or from time to time
to modify the TCS-1 System in a manner which will not lessen the
utility thereof;
(b) The Operator gives the Manufacturer immediate notice in writing of the
institution of the action, suit, or proceeding and permits the
Manufacturer, through its counsel, to defend same, and gives the
Manufacturer all information, assistance, and authority to enable the
Manufacturer to do; and
(c) The Operator has made no change of any kind in the TCS-1 System
without obtaining the prior written permission of the Manufacturer.
10.3.3 When information is brought to the attention of the Manufacturer or
the Operator that others are unlawfully infringing on the patents covering the
machine, the Manufacturer shall prosecute diligently any infringer at the
Manufacturer's own expense.
10.4 Warranties
Subject to any default on the part of the Operator under the Maintenance
Agreement, the Manufacturer warrants that the TCS-1 will conform to the
descriptions contained in Schedules 1.3, 1.6 (b), and 1.8. The Manufacturer
further warrants the TCS-1 System against defects in
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workmanship and materials or failure to perform in accordance with the
specifications set forth in Schedule 8.2 for one year after the Acceptance Date.
No other representations or warranties have been made by the Manufacturer or
relied upon by the Buyer. If any defects in the Manufacturer's work or materials
are discovered within one year of delivery the Operator shall give notice within
seven (7) days of such discovery. THIS WARRANTY IS EXPRESSLY IN LIEU OF ANY AND
ALL OTHER WARRANTIES.
11. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE OPERATOR
The Operator hereby represents, warrants, and covenants to the
Manufacturer, as follows:
11.1 Corporate / Legal Status
Recycletron, Inc.is (i) duly incorporated under the laws of Canada,
organized Corporation , validly existing and in good standing under the laws of
the province of Canada; (ii) has full power to own all of its properties and
carry on its business; and (iii) is qualified to do business as a foreign entity
in each of the jurisdictions in which it operates, if any, unless the character
of the properties owned by it or the nature of the business transacted by it,
does not make qualification necessary in any other jurisdiction or
jurisdictions.
11.2 Financial Condition of the Operator
The books and records of the Operator are complete and accurate and fairly
present the financial condition and the results of operations of the Operator as
of the date hereof. There are no material liabilities, either fixed or
contingent, not reflected in such books and records other than contracts or
obligations in the ordinary and usual course of business; and no such contracts
or obligations in the usual course of business constitute liens or other
liabilities which, if disclosed, would alter substantially the financial
condition of the Operator as reflected in such books and records.
11.3 Defaults and Conflicts
There are no defaults on the part of the Operator under any contract,
lease, mortgage, pledge, credit agreement, title retention agreement, security
agreement, lien, encumbrance or any other commitment, contract, agreement or
undertaking to which the Operator is a party. The execution of this Agreement
will not violate or breach any material agreement, contract, or commitment to
which the Operator is a party.
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11.4 Corporate Action
Prior to the date hereof, the boards of directors of the Operator has duly
adopted resolutions approving the execution and delivery to the Manufacturer of
this Agreement and authorizing and consenting to each and every one of the
terms, warranties, representations, covenants and conditions herein contained.
11.5 Insurance and Damage to Equipment
11.5.1 The Operator, at its own cost and expense, shall insure the Leased
Proprietary Equipment against burglary, theft, fire, and vandalism in the amount
of $______ and obtain public liability insurance with minimum limits of $_____
/$_____ for bodily injury and $______ for property damage in such form and with
such insurance companies as shall be satisfactory to the Manufacturer. All
insurance policies shall name both the Operator and the Manufacturer as insureds
and copies of the policies and the receipts for the payment of premiums shall be
furnished to the Manufacturer. Each damage policy shall provide for payment of
all losses directly to the Manufacturer. Each liability policy shall provide
that all losses be paid on behalf of the Operator and the Manufacturer, as their
respective interests appear.
In the event that the Operator shall fail to comply with the provisions of
Paragraph 11.5.1, above, then the Operator shall pay to the Manufacturer an
adequate premium in advance per annum to enable the Manufacturer to insure the
Leased Proprietary Equipment and all such insurance policies shall be held in
the custody of the Manufacturer.
11.5.3 In the event that all or any part of the TCSs-1 System is damaged,
due to any cause whatsoever, to the extent that the TCS-1 System is not useable,
notwithstanding that the Manufacturer may have been partially or fully
compensated for the Leased Proprietary Equipment forming part of such damaged
TCS-1 System by way of insurance or otherwise, the Manufacturer shall
immediately have possession of the said Leased Proprietary Equipment and the
Manufacturer may enter upon the premises where the TCS-1 System is located,
remove the Leased Proprietary Equipment from the damaged TCS-1 System and take
possession of the said Leased Proprietary Equipment without previous demand or
notice and without legal process, and remove it from the Operator's premises at
the Manufacturer's expense.
11.6 Access
The Operator shall insure that the Manufacturer, and its agents and
employees, shall at all times have free access to the Operator's premises for
the purpose of inspecting the Leased Proprietary Equipment and observing its use
and operation, and making alterations, improvements, or additions thereto; and
the Operator shall afford all reasonable facilities therefor,
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and shall allow the Manufacturer to make such reasonable alterations,
improvements, or additions as the Manufacturer shall deem necessary, at the
expense of the Manufacturer.
11.7 Taxes
The Operator shall pay all taxes, assessments, penalties, and fees which
may be levied or assessed on or with respect to the installation of the TCS-1
System and, at all times during the term of the Lease of the Leased Proprietary
Equipment, the Operator shall pay all taxes and assessments which may be levied
upon or in respect of the TCS-1 System or its operation, and shall pay any other
liability of any character which may be imposed or incurred as an incident to
the physical possession or operation of such System.
11.8 Compliance with Applicable Law
The Operator shall provide, at its own expense, all requisite permits and
licenses necessary for the installation and operation of the TCS-1 System at the
Site and shall exercise its best efforts to maintain its compliance with all
applicable federal, state, and local laws, statutes, rules, and regulations and,
in the event of any non-compliance which renders impossible the operation of the
Site as a tire recycling facility, the Operator shall exercise its best efforts
to cure such non-compliance promptly.
11.9 Subordination
Not less than three (3) months prior to the anticipated Delivery Date, the
Operator shall procure from every owner, landlord, mortgagee, or other secured
party having any interest in the real property on which the TCS-1 System is to
be installed or in the Operator's place of business or the equipment therein,
and deliver to the Manufacturer, a written consent to such installation and a
writing to the effect that the lien of any such mortgage or other interest is
subordinate to the rights of the Manufacturer with respect to the Leased
Proprietary Equipment.
11.10 Ancillary Agreements
11.10.1 The Operator will, simultaneously with the execution of this
Agreement, and in consideration of the premises and the mutual promises and
agreements made herein, enter into the following agreements with the
Manufacturer or such person, corporation, firm, partnership, or other entity as
the Manufacturer shall appoint in its stead:
(a) The Royalty Agreement, of even date herewith, between the Manufacturer
and the Operator providing for the Operator to pay to the Manufacturer
a royalty of two
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percent (2%) of the gross proceeds from the sale by the Operator of
rubber crumb fiber and steel from scrap tires disintegrated by the
Operator through the utilization of the TCS-1 System, a copy of which
Royalty Agreement is attached as Schedule 11.10 (a) hereto; and
(b) The Maintenance Agreement, of even date herewith, between the Operator
and the Manufacturer, respecting the maintenance of the TCS-1 System,
a copy of which Maintenance Agreement is attached as Schedule 11.10(b)
hereto; and
(c) The Crumb Purchase Agreement, of even date herewith, between the
Operator and the Manufacturer, or such person, corporation, firm,
partnership, or other entity to whom the Manufacturer, at its sole
option, may assign such Crumb Purchase Agreement, pursuant to which
the Operator shall agree to sell up to forty percent (40%) of the
rubber crumb produced by the TCS-1 System, a copy of which Crumb
Purchase Agreement is attached as schedule 11.10.1 (C)
12. DEFAULTS
12.1 Default by Manufacturer
12.1.1 Each of the following events shall be deemed to constitute breach of
this Agreement and, unless cured within ninety (90) days, shall constitute a
default hereunder by the Manufacturer:
(a) If at any time prior to the delivery of the TCS-1 System to the Site:
(i) The Manufacturer makes an assignment for the benefit of
creditors;
(ii) A voluntary or involuntary petition is filed by or against the
Manufacturer under any law having for its purpose and
adjudication of the Manufacturer a bankrupt or the extension of
the time of payment of, adjustment of, or other arrangement
affecting the liabilities of the Manufacturer, or the
reorganization of the Manufacturer and such petition is not
discharged or dismissed within one hundred twenty (120) days
after such petition is filed;
(iii)A Receiver is appointed for the property of the Manufacturer and
is not discharged or dismissed within one hundred twenty (120)
days after such appointment;
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or
(iv) Any distress, execution, or attachment is levied upon the
Manufacturer's property to the extent that the Manufacturer is
not able to fulfill its obligations to deliver the TCS-1 within
ninety (90) of the anticipated Deliver Date.
(b) The Manufacturer fails to deliver the TCS-1 System in accordance with
the terms and provisions of Section 7, above, within ninety (90) days
of the Delivery Date unless prior thereto, the Operator has failed to
meet the payment provisions set forth above in Section 3.3 of this
Agreement;
(c) The TCS-1 System fails to operate for a full Test (or re-test) Period,
in accordance with Section 8.2 hereof, as specified Schedule 8.2
hereto , within ninety (90) days from the date the TCS-1 System is
actually delivered to the Site.
12.2 Default by Operator
Each of the following events shall be deemed to constitute breach of this
Agreement and, unless cured within ninety (90) days, shall constitute a default
hereunder by the Operator:
(a) The Operator fails to make any payment required to be made pursuant to
Sections 3.3 or 4.3 of this Agreement or any payment required to be
made by the Operator under the Maintenance Agreement and such failure
to make payment shall have continued for a period of ten (10) days
after written notice from the Manufacturer;
(b) The Operator refuses to accept or allow the Manufacturer to install or
test the TCS-1 System in accordance with Sections 7.2, 8.2, and 8.3 of
this Agreement, notwithstanding that such System has been: (i)
delivered to the Operator's Site on a timely basis or (ii) delivered
to the Site and has performed in accordance with the specifications
set forth in Schedule 8.2 hereof for the prescribed Test Period;
(c) The Operator makes an assignment for the benefit of creditors;
(d) A voluntary or involuntary petition is filed by or against the
Operator under any law having for its purpose and adjudication of the
Operator a bankrupt or the extension of the time of payment of,
adjustment of, or other arrangement affecting the liabilities of the
Operator, or the reorganization of the Operator and such petition is
not discharged or dismissed within one hundred twenty (120) days after
such petition is filed;
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(d) A Receiver is appointed for the property of the Operator;
(e) Any distress, execution, or attachment is levied upon the machines or
the Operator's property; or
(f) The Operator fails to faithfully and fully comply with the terms and
provisions of Section 5.2 of this Agreement, with any such failure
deemed to be an irremediable material breach of this Agreement
immediately upon its occurrence.
(g) The Operator fails to faithfully and fully perform each of its
obligations under the Maintenance Agreement and fails to cure such
breach within the time period specified therein with respect to such
failure.
12.3 Remedies Available to the Operator upon Default by Manufacturer
If the Manufacture shall be in default pursuant to Paragraphs 12.1.1 (a),
(b), or (c) of this Agreement, unless such default shall have been caused by any
act or failure to act on the part of the Operator or its personnel, including
but not limited to the failure of the Operator to have brought the Site into
conformance with the Site Plan Specifications, the Operator shall have the right
to rescind this agreement by serving written notice ("Notice of Rescission")
upon the Manufacturer. In such event, the Manufacturer shall, at its own
expense, remove the TCS-1 System not later than one hundred and twenty (120)
days following its receipt of such Notice of Rescission and all monies
theretofore paid by the Operator to the Manufacturer pursuant to Section 4.3,
above, shall be returned by the Manufacturer to the Operator
12.4 Remedies Available to the Manufacturer upon Default by the Operator
12.4.1 The Operator acknowledges and agrees that its breach of any
provision contained in Section 5.2 of this Agreement will cause irreparable harm
to the Manufacturer. The Operator therefore agrees that, if it is alleged by the
Manufacturer that the Operator or any of the Operator's affiliates, agents,
employees, or associates has breached, or is attempting or threatening to
breach, any provision contained hereinabove in the said Section 5.2, then the
Manufacturer shall have the right to obtain from any court or arbitrator having
jurisdiction, such equitable relief as may be appropriate, including a decree
enjoining the Operator from any further such breach of such provisions, and
enjoining the Operator from engaging in the tire recycling business, either
directly or indirectly through or in association with any other person, firm,
corporation, or organization during the term of this Agreement.
12.4.2 In the event of any default by the Operator under this Agreement,
the Manufacturer may at its option, at any time thereafter terminate this
Agreement by written notice
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("Notice of Termination"), given in Accordance with Section 16 hereof. such
termination may be made effective, at the option of the Manufacturer,
simultaneously with or at any time after the happening of any such default.
12.4.3 Upon any termination of this Agreement prior to payment in full of
the entire Purchase Price of US $2,000,000 for Purchased Equipment, in
accordance with the terms of Section 3.3 of this Agreement, the Manufacturer
shall immediately have possession of the entire TCS-1 System, and the
Manufacturer may enter upon the premises where the said TCS-1 System is located,
take possession of it without previous demand or notice and without legal
process, and remove it from the Operator's premises at the Operator's expense.
12.4.4 Upon any termination of this Agreement after payment in full of the
entire Purchase Price of US $ 2,000,000 for the Purchased Equipment has been
made by the Operator, the Manufacturer shall immediately have possession of the
Leased Proprietary Equipment and the Manufacturer may enter upon the premises
where the TCS-1 System is located, remove the Leased Proprietary Equipment from
the said TCS-1 System and take possession of the Leased Proprietary Equipment
without previous demand or notice and without legal process, and remove it from
the Operator's premises at the Operator's expense.
12.4.5 The Operator acknowledges and agrees that any refusal on its part to
permit the Manufacturer to enter its premises and remove either the TCS-1 System
or the Leased Proprietary Equipment in accordance with Paragraph 12.4.3 or
12.4.4 of this Agreement will cause irreparable harm to the Manufacturer. The
Operator therefore agrees that in the event of any such refusal on its part, the
Manufacturer shall have the right to obtain from any court or arbitrator having
jurisdiction, such equitable relief as may be appropriate, including a decree
enjoining the Operator from any further such refusal of entry and removal.
12.4.6 In the event of any default by the Operator prior to the Acceptance
Date, the Manufacturer shall be entitled to damages including but not limited to
retention of the full deposit paid by the Operator and all costs of delivering
and removing and re-delivering the TCS-1 System.
12.4.7 In the event of any default by the Operator after the Acceptance
Date or pursuant to Paragraph 12.2(b) of this Agreement, the Manufacturer shall
be entitled to damages including but not limited to retention of the full
deposit paid by the Operator, all costs of delivering and removing and
re-delivering the TCS-1 System, and damages for the Operator's failure to
perform for the full term of the Lease provided in Section 4.2 of this
Agreement, including but not limited to immediate payment of the balance of all
Rent Payments due under the full term of the Lease,
12.4.8 In the event of any default on the part of the Operator pursuant to
Paragraphs 12.2(a) or 12.2(b) of this Agreement, the Manufacturer shall have the
right to allow the Operator,
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for a period of sixty (60) days, to obtain a buyer for the TCS-1 System,
satisfactory to the Manufacture, provided however that, unless specifically
waived in writing by the Manufacturer, the Operator shall continue liable under
this Agreement lease for the full term of the Lease provided for in Section 4.2
of this Agreement.
12.4.9 In the event of any default on the part of the Operator, the
Manufacturer shall not be deemed to have waived any of its rights hereunder by
reason of its failure to assert its rights or its failure to take cognizance of
such breach.
12.4.10 The foregoing remedies provided herein for the benefit of the
Manufacturer shall not be exclusive but in addition to any other remedies the
Manufacturer may have by virtue of the breach by the Operator, in law or in
equity, from any court or arbitration proceeding having jurisdiction over such
matter.
13. OPERATOR'S SALE OF NONLEASED PROPRIETARY EQUIPMENT
13.1 Manufacturer's Right to Retrieve Leased Proprietary Equipment Prior to Sale
In the event that, during or after the term of the Lease provided in
Section 4.2 of this Agreement, the Operator wishes to divest itself of the TCS-1
System, pursuant to the discontinuance of its business, or otherwise, the
Operator will give to the Manufacturer written notice to that effect and the
Manufacturer shall have all rights of entry and removal provided above in
Paragraphs 12.4.4 and 12.4.5 of this Agreement, provided however that in
addition to such rights, if such event shall occur during the term of the said
Lease, the Manufacturer shall also have the rights provided to it in Paragraph
12.4.7 of this Agreement.
13.2 Manufacturer's Right of First Refusal
In the event that, during or after the term of the Lease provided in
Section 4.2 of this Agreement, the Operator wishes to divest itself of the TCS-1
System, pursuant to the discontinuance of its business, or otherwise, the
Operator will give to the Manufacturer written notice to that effect and the
Manufacturer will have a right of first refusal to repurchase the TCS-1 System,
at its fair market value, within a sixty (60) day period following the
Manufacturer's receipt of such notice;
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14. ASSIGNMENT
The Operator shall not transfer, deliver, sublease, or encumber the Leased
Proprietary Equipment to any person, corporation, or firm, and the Lease
provided in Section 4.2 of this Agreement may not be assigned by the Operator
except with the Manufacturer's express prior written consent.
15. FAILURE OF PERFORMANCE
Delays in or failure of performance occasioned by war, fire, flood,
embargo, car shortage, accident, explosion, expropriation of plant or product by
federal or state authority, or other like cause beyond the control of the
Manufacturer, or Act of God, or by strike, lockout, or other labor trouble, or
inability to obtain sufficient labor interfering with the production or
transportation of the TCS-1 System, or any part thereof, or any replacement
therefor, whether because of governmental action affecting the Manufacturer or
its suppliers, or by any action or proceeding at law or in equity, or otherwise,
shall not subject the Manufacturer to any liability.
16. NOTICES
All notices required or permitted to be given hereunder shall be mailed by
certified mail, or delivered by hand or by recognized overnight courier to the
party to whom such notice is required or permitted to be given hereunder at the
address set forth above for such party, in all cases with written proof of
receipt required. Any such notice shall be deemed to have been given when
received by the party to whom notice is given, as evidenced by written and dated
receipt of the receiving party. Either party may change the address to which
notice to it is to be addressed, by written notice to the other party, as
provided herein.
17. CONDITIONS PRECEDENT TO MANUFACTURER'S OBLIGATION
The obligations of the Manufacturer hereunder are subject to fulfillment,
prior to the Deliver Date, of the following conditions:
17.1 Truth of Representation
The representations and warranties by or on behalf of Operator contained in
this Agreement or in any document delivered to the Manufacturer pursuant to the
provisions hereof shall be true in all material respects at and as of the
Delivery Date as though such representations and warranties were made at and as
of such time.
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17.2 Compliance with Covenants
The Operator shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with by or prior to the Delivery Date.
17.3 Collateral Agreements
Simultaneously with the execution of this Agreement, the Operator will:
(a) enter into the following agreements with the Manufacturer or any joint
venture to which the Manufacturer is a party:
(i) the Maintenance Agreement, attached as Schedule 11.10(b) to this
Agreement;
(ii) the Royalty Agreement, attached as Schedule 11.10(a) to this
Agreement; and
(iii)the Rubber Crumb Purchase Agreement, attached as Schedule
11.10(c) to this Agreement.
(b) furnish the Manufacturer with a copy of the resolutions of the board
of directors of the Operator authorizing the Operator to purchase the
NonLeased Proprietary Equipment and lease the Leased Proprietary
Equipment pursuant to the terms and conditions of this Agreement;
17.4 Financing Arrangements
The Operator will deliver to the Manufacturer, not less than one hundred
(100) days prior to the anticipated Delivery Date, to confirm the Delivery Date,
an irrevocable commitment for lease or letter of credit financing, which
commitment shall be:
(a) for the full amount of the Purchase Price of the Nonproprietary
Equipment then outstanding;
(b) subject only to the conditions that the TCS-1 will consist of
Equipment specified in, and will operate in conformance with,
Schedules 1.3, 1.6 (b), and 1.8, and respectively.
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18. ARBITRATION
All controversies arising out of or relating to this Agreement, or any
modification thereof, shall be settled by arbitration in the
__________________________________ in accordance with the Arbitration Rules then
obtaining of the ____________________________________.
19. BINDING EFFECT.
19.1 This agreement shall bind and inure to the benefit of the parties
hereto and their respective legal representatives, successors and assigns,
provided, however, that this Agreement cannot be assigned by the Operator except
in accordance with Section 14 of this Agreement. Nothing herein expressed or
implied is intended or shall be construed to confer upon or to give any person,
firm or corporation other than the parties hereto and their respective legal
representatives, successors and assigns any rights or benefits under or by
reason of this Agreement.
19.2 All the right, title, and interest of the Manufacturer under the Lease
may be enforced by the Manufacturer, its successors, and assigns. The Lease
shall continue in full force and effect notwithstanding the death, incapacity,
or dissolution of the Operator or the increase, decrease, or change in the
personnel of or members of the Operator, and shall be binding upon the Operator
and the Operator's estate, legal representatives, heirs, and successors.
20. GENERAL
20.1 Further Assurances
At any time, and from time to time, after the execution of this Agreement,
each party will execute such additional instruments and take such action as may
be reasonably requested by the other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the intent and purposes
of this Agreement.
20.2 Waiver
Any failure on the part of any party hereto to comply with any of its
obligations, agreements or conditions hereunder may be waived in writing by the
party to whom such compliance is owed.
278
<PAGE>
20.3 Brokers
Neither party has employed any brokers or finders with regard to this
Agreement, unless otherwise described in writing to all parties hereto.
20.4 Headings
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
20.5 Governing Law
This Agreement shall be governed by the laws of the State of Delaware.
20.6 Entire Agreement
This Agreement is the entire agreement of the parties covering everything
agreed upon or understood in the transaction. There are no oral promises,
conditions, representations, understandings, interpretations or terms of any
kind as conditions or inducements to the execution hereof.
20.7 Severability
If any part of this Agreement is deemed to be unenforceable the balance of
this Agreement shall remain in full force and effect.
20.8 Publicity
All notices to third parties and all other publicity concerning the
transactions contemplated by this Agreement shall be subject to the prior
approval of counsel to the Manufacturer.
20.9 Counterparts
This Agreement may be executed in any number of counterparts and by each
party on a separate counterpart, each of which when so executed and delivered
shall be an original, but all of which together shall constitute one Agreement.
279
<PAGE>
In Witness Whereof, the parties hereto have caused this Amendment to be
executed the day and year first above written.
whatsoever.
TIREX AMERICA INC.
By /s/ Terence C. Byrne
------------------------------
Terence C. Byrne, President
RECYCLETRON INC.
By /s/ David Bishop
------------------------------
David Bishop, President
280
<PAGE>
(Exhibit to Equipment Lease and Purchase Agreement with Recyclatron Inc.)
----------
TIREX AMERICA INC.
----------
Rubber Crumb Purchase Option Agreement, made this 8th day of July 1997,
between:
Recycletron Inc.
770, rue Mill
Montreal, Quebec
H3C 1Y3
Tel: (514) 937-9565
Fax: (514) 933-1575
(the "Operator")
and
Tirex America Inc.
740 St. Maurice, Suite 201
Montreal, Quebec H3C 1L5
Tel: (514) 878-0727;
Fax: (514) 878-9847
(the "Manufacturer")
Whereas, the Manufacturer and the Operator are parties to a certain equipment
lease and purchase agreement, of even date herewith (the "Equipment Lease and
Purchase Agreement"), between the Manufacturer and the Operator respecting the
sale by the Manufacturer and the Purchase by the Operator of the "Nonproprietary
Equipment" and the operating lease, between the Manufacturer, as lessor, and the
Operator, as lessee, respecting the "Proprietary Equipment", as those terms are
defined in the said Equipment Lease and Purchase Agreement.
Whereas, in consideration for the premises and the mutual promises made
therein, the Operator has agreed, pursuant to the Equipment Lease and Purchase
Agreement, to enter into this
281
<PAGE>
Option Agreement with the Manufacturer pursuant to which the Operator hereby
grants to the Manufacturer the option to purchase up to forty percent (40%) of
the rubber crumb yielded by the disintegration of scrap tires in the TCS-1
System which is the subject of the said Equipment Lease and Purchase Agreement
(the "Subject TCS-1 System").
Now, Therefore, it is agreed as follows:
1. Definitions
1.2 "Manufacturer" shall mean Tirex America Inc. and Tirex-Canada ( 3143619
Canada, Inc.), and all other corporations, partnerships, or other entities, now
or in the future controlled by, under common control with, or in control of,
Tirex America Inc., jointly and severally.
1.3 "Operator" shall mean Recycletron Inc. and its successors and assigns.
1.4 All other Capitalized terms used herein and not otherwise defined shall
have the respective meanings attributed thereto in the Equipment Lease and
Purchase Agreement.
2. Grant of Option
The Operator hereby grants to the Manufacturer an option (the "Option") to
purchase up to forty percent (40%) of the rubber crumb yielded by the
disintegration of scrap tires in the Subject TCS-1 System (the "Rubber Crumb
Output").
3. Term of Option
The term of the Option shall be coextensive with the term of the Equipment
Lease and Purchase Agreement.
4. Conditions of Option
The Manufacturer's rights to purchase the Rubber Crumb Output pursuant to
this Option shall be subject to fulfillment of the following condition:
(a) the Manufacturer shall furnish to the Operator, in writing, within
ninety days of the Acceptance Date and every six months thereafter,
the Manufacturer's
282
<PAGE>
anticipated purchase projections (the "Six-Month Projected Purchase
Order") specifying the grades, types, and quantities of Rubber Crumb
Output which the Manufacturer commits to purchase within the six-month
period following the date of such Projected Purchase Order;
the price specified in the Projected Purchase Order will be negotiated
every six months for a period of six months.
5. Inspection of Books
Upon written request, the Manufacturer or his designated agent may examine
the books and records of the Operator insofar as they relate to this Option
Agreement. Such examination shall take place at the offices of the Operator ( to
be determined by the Operator).
6. Assignment
6.1 This Option Agreement may not be assigned by the Operator except as
part of the assignment of the Equipment Lease and Purchase Agreement, which may
only be assigned pursuant to the express written consent of the Manufacturer,
and any such assignment shall not relieve the Operator of its obligations
hereunder unless expressly waived in writing by the Manufacturer.
6.2 This Option Agreement may be transferred, assigned, pledged, or
hypothecated by the Manufacture as part of the sale of its business or
otherwise.
7. Notices
All notices required or permitted to be given hereunder shall be mailed by
certified mail, or delivered by hand or by recognized overnight courier to the
party to whom such notice is required or permitted to be given hereunder at the
address set forth above for such party, in all cases with written proof of
receipt required. Any such notice shall be deemed to have been given when
received by the party to whom notice is given, as evidenced by written and dated
receipt of the receiving party. Either party may change the address to which
notice to it is to be addressed, by written notice to the other party, as
provided herein.
283
<PAGE>
8. Binding Effect.
8.1 This Option Agreement shall bind and inure to the benefit of the
parties hereto and their respective legal representatives, successors and
assigns, provided, however, that this Option Agreement cannot be assigned by the
Operator except in accordance with Section 6.1 hereof. Nothing herein expressed
or implied is intended or shall be construed to confer upon or to give any
person, firm or corporation other than the parties hereto and their respective
legal representatives, successors and assigns any rights or benefits under or by
reason of this Option Agreement.
8.2 All the right, title, and interest of the Manufacturer under this
Option Agreement may be enforced by the Manufacturer, its successors, and
assigns. This Option Agreement shall continue in full force and effect
notwithstanding the death, incapacity, or dissolution of the Operator or the
increase, decrease, or change in the personnel of or members of the Operator,
and shall be binding upon the Operator and the Operator's estate, legal
representatives, heirs, and successors.
9. Further Assurances
At any time, and from time to time, after the execution of this Agreement,
each party will execute such additional instruments and take such action as may
be reasonably requested by the other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the intent and purposes
of this Agreement.
10. Waiver
Any failure on the part of any party hereto to comply with any of its
obligations, agreements or conditions hereunder may be waived in writing by the
party to whom such compliance is owed.
11. Brokers
Neither party has employed any brokers or finders with regard to this
Agreement, unless otherwise described in writing to all parties hereto.
12. Headings
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
284
<PAGE>
13. Governing Law
This Agreement shall be governed by the laws of the State of Delaware.
Entire Agreement
This Agreement and the premises and mutual promises in the Equipment Lease
and Purchase Agreement constitute the entire agreement of the parties covering
everything agreed upon or understood with respect to the Option. There are no
oral promises, conditions, representations, understandings, interpretations or
terms of any kind as conditions or inducements to the execution hereof.
15. Severability
If any part of this Agreement is deemed to be unenforceable the balance of
this Agreement shall remain in full force and effect.
16. Publicity
All notices to third parties and all other publicity concerning the
transactions contemplated by this Agreement shall be subject to the prior
approval of counsel to the Manufacturer.
17. Counterparts
This Agreement may be executed in any number of counterparts and by each
party on a separate counterpart, each of which when so executed and delivered
shall be an original, but all of which together shall constitute one Agreement.
285
<PAGE>
In Witness Whereof, the parties hereto have caused this Option Agreement to
be executed the day and year first above written. whatsoever.
TIREX AMERICA INC.
By /s/ Terence C. Byrne
--------------------------------
Terence C. Byrne, President
RECYCLETRON INC.
By /s/ David Bishop
--------------------------------
David Bishop, President
286
<PAGE>
(Exhibit to Equipment Lease and Purchase Agreement with Recyclatron Inc.)
TIREX AMERICA INC.
----------
Royalty Agreement, made this 8th day of July ,1997 between:
Recycletron Inc.
770, rue Mill
Montreal, PQ
H3C 1Y3
Tel: (514) 937-9565
Fax: (514) 933-1575
(the "Operator")
and
Tirex America Inc.
740 St. Maurice, Suite 201
Montreal, Quebec H3C 1L5
Tel: (514) 878-0727; Fax: (514) 878-9847
(the "Manufacturer")
Whereas, the Manufacturer and the Operator are parties to a certain
equipment lease and purchase agreement, of even date herewith (the "Equipment
Lease and Purchase Agreement"), between the Manufacturer and the Operator
respecting the sale by the Manufacturer and the Purchase by the Operator of the
"Proprietary Front-End System", the "Nonproprietary Equipment"(collectively, the
"Purchased Equipment") and the operating lease, between the Manufacturer, as
lessor, and the Operator, as lessee, respecting the "Leased Proprietary
Equipment", as those terms are defined in the said Equipment Lease and Purchase
Agreement.
Whereas, in consideration for the premises and the mutual promises made
therein, the Operator has agreed, pursuant to the Equipment Lease and Purchase
Agreement, to enter into this Royalty Agreement with the Manufacturer whereby
the Operator will pay to the Manufacturer certain royalties calculated upon the
gross proceeds from all sales of rubber crumb, fiber and steel from scrap tires
disintegrated by the TCS-1 System which is the subject of the said Equipment
Lease and Purchase Agreement (the "Subject TCS-1 System").
287
<PAGE>
Now, Therefore, it is agreed as follows:
1. Definitions
1.2 "Manufacturer" shall mean Tirex Americ Inc. and Tirex-Canada ( 3143619
Canada, Inc.), and all other corporations, partnerships, or other entities, now
or in the future controlled by, under common control with, or in control of,
Tirex America Inc., jointly and severally.
1.3 "Operator" shall mean Recycletron Inc. and its successors and assigns.
1.4 All other Capitalized terms used herein and not otherwise defined shall
have the respective meanings attributed thereto in the Equipment Lease and
Purchase Agreement.
2. Royalty Fee
2.1 The Operator shall pay to the Manufacturer, not more than fifteen (15)
days after the end of each month, a royalty fee equal to two percent (2%) of the
gross proceeds from all sales of rubber crumb, fiber, and steel from scrap tires
disintegrated by the Subject TCS-1 System (the "Royalty Fee").
2.2 For purposes of this Royalty Agreement, the term "gross proceeds" shall
mean all revenues from the sale of rubber crumb, fiber and steel from scrap
tires disintegrated by the Subject TCS-1 System.
3. Payment Periods
Royalty Fees shall be reported and paid by the Operator to the Manufacturer
every month from the Acceptance Date for a period which is coextensive with the
term of the Equipment Lease and Purchase Agreement.
4. Royalty Reports
The Operator shall prepare royalty reports ("Royalty Reports"), to be
delivered by the Operator to the Manufacturer, together with the Royalty Fee due
thereunder, covering the immediately preceding "Reporting Periods", in the
following manner:
The initial Reporting Period shall be the Reporting Period in which the
Acceptance Date falls. For example, if the Acceptance Date is
September 15, 1997, the initial
288
<PAGE>
Reporting Period is the two-week period which commenced on September
15, 1997 and ended on September 30, 1997, and the Royalty Report and
Royalty Fee for such "Reporting Period" is due on October 15, 1997.
(b) Each Royalty Report shall disclose the gross revenues from all sales
of steel, fiber, and rubber crumb produced by the operation of the
Subject TCS-1 System and the amount of the Royalty Fee calculated upon
the gross proceeds therefrom.
5. Inspection of Books
Upon written request, the Manufacturer or his designated agent may examine
the books and records of the Operator insofar as they relate to this Royalty
Agreement. Such examination shall take place at the offices of the Operator at
(To be determined by the Operator)
6. Assignment
6.1 This Royalty Agreement may not be assigned by the Operator except as
part of the assignment of the Equipment Lease and Purchase Agreement, which may
only be assigned pursuant to the express written consent of the Manufacturer,
and any such assignment shall not relieve the Operator of its liabilities
hereunder unless expressly waived in writing by the Manufacturer.
6.2 This Royalty Agreement may be transferred, assigned, pledged, or
hypothecated by the Manufacture as part of the sale of its business or
otherwise.
7. Notices
All notices required or permitted to be given hereunder shall be mailed by
certified mail, or delivered by hand or by recognized overnight courier to the
party to whom such notice is required or permitted to be given hereunder at the
address set forth above for such party, in all cases with written proof of
receipt required. Any such notice shall be deemed to have been given when
received by the party to whom notice is given, as evidenced by written and dated
receipt of the receiving party. Either party may change the address to which
notice to it is to be addressed, by written notice to the other party, as
provided herein.
289
<PAGE>
8. Binding Effect.
8.1 This Royalty Agreement shall bind and inure to the benefit of the
parties hereto and their respective legal representatives, successors and
assigns, provided, however, that this Royalty Agreement cannot be assigned by
the Operator except in accordance with Section 6.1 hereof. Nothing herein
expressed or implied is intended or shall be construed to confer upon or to give
any person, firm or corporation other than the parties hereto and their
respective legal representatives, successors and assigns any rights or benefits
under or by reason of this Royalty Agreement.
8.2 All the right, title, and interest of the Manufacturer under this
Royalty Agreement may be enforced by the Manufacturer, its successors, and
assigns. This Royalty Agreement shall continue in full force and effect
notwithstanding the death, incapacity, or dissolution of the Operator or the
increase, decrease, or change in the personnel of or members of the Operator,
and shall be binding upon the Operator and the Operator's estate, legal
representatives, heirs, and successors.
9. Further Assurances
At any time, and from time to time, after the execution of this Agreement,
each party will execute such additional instruments and take such action as may
be reasonably requested by the other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the intent and purposes
of this Agreement.
10. Waiver
Any failure on the part of any party hereto to comply with any of its
obligations, agreements or conditions hereunder may be waived in writing by the
party to whom such compliance is owed.
11. Brokers
Neither party has employed any brokers or finders with regard to this
Agreement, unless otherwise described in writing to all parties hereto.
290
<PAGE>
12. Headings
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
13. Governing Law
This Agreement shall be governed by the laws of the State of Delaware.
14. Entire Agreement
This Agreement and the premises and mutual promises in the Equipment Lease
and Purchase Agreement constitute the entire agreement of the parties covering
everything agreed upon or understood with respect to the Royalty Fees. There are
no oral promises, conditions, representations, understandings, interpretations
or terms of any kind as conditions or inducements to the execution hereof.
15. Severability
If any part of this Agreement is deemed to be unenforceable the balance of
this Agreement shall remain in full force and effect.
16. Publicity
All notices to third parties and all other publicity concerning the
transactions contemplated by this Agreement shall be subject to the prior
approval of counsel to the Manufacturer.
17. Counterparts
This Agreement may be executed in any number of counterparts and by each
party on a separate counterpart, each of which when so executed and delivered
shall be an original, but all of which together shall constitute one Agreement.
291
<PAGE>
In Witness Whereof, the parties hereto have caused this Royalty Agreement to be
executed the day and year first above written. whatsoever.
TIREX AMERICA INC. RECYCLETRON INC.
By /s/ Terence C. Byrne By /s/ David Bishop
--------------------------- -----------------------
Terence C. Byrne, President David Bishop, President
292
EXHBIT 21
293
<PAGE>
Subsidiaries of the Company
The Company has only one subsidiary, Canadian Corporation, "3143619 Canada
Inc.", which does business, and is referred to in this Report, as Tirex Canada
Inc.
294
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 155,037
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 681,791
<PP&E> 19,954
<DEPRECIATION> 5,160
<TOTAL-ASSETS> 1,555,620
<CURRENT-LIABILITIES> 1,695,350
<BONDS> 0
0
0
<COMMON> 37,450
<OTHER-SE> (177,180)
<TOTAL-LIABILITY-AND-EQUITY> 1,555,620
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (1,351,449)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,531
<INCOME-PRETAX> (1,359,980)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,359,980)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,359,980)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
