As filed with the Securities and Exchange Commission on May 21, 1999
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
THE TIREX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 3282985
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
740 St. Maurice, Suite 201
Montreal, Quebec H3C 1L5
(Address of Principal Executive Offices) (Zip Code)
EMPLOYMENT AGREEMENTS
BETWEEN REGISTRANT AND:
MICHAEL D.A. ASH, ALAN CROSSLEY, FRANCES KATZ LEVINE,
LOUIS SANZARO, TERENCE C. BYRNE AND SCOTT RAPFOGEL
(Full title of the Plan)
Frances Katz Levine
621 Clove Road
Staten Island, NY 10310
(Name and address, including zip code of agent for service)
(718) 981-8485
(Telephone number, including area code, of agent for service)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=========================================================================================================
Proposed Maximum Proposed Maximum Amount of
Title of Securities Amount to be Offering Price Aggregate Offeri Registration
to be Registered Registered per Share* Price* Fee
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, Par Value,
$.001 Per Share, Issued
Pursuant to Employment
Agreement With
Michael D.A. Ash 700,000 $.1375 $ 96,250 $29.17
Alan Crossley 649,576 $.1375 $ 89,317 $27.07
Frances Katz Levine 874,287 $.1375 $120,214 $36.43
Louis Sanzaro 874,287 $.1375 $120,214 $36.43
Terence C. Byrne 91,873 $.1375 $ 12,633 $ 3.83
Scott Rapfogel 350,000 $.1375 $ 48,125 $14.58
--------- --------- ------
TOTAL 3,540,023 $486,753 $ 148
</TABLE>
* Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) on the basis of the average of the low
bid and ask prices of the Common Stock of the Registrant as traded in the
over-the-counter market and reported in the Electronic Bulletin Board of the
National Association of Securities Dealers on May 17, 1999.
<PAGE>
Cross Reference Sheet Showing Location in Reoffer Prospectus of
Information Required by Items of Part I of Form S-3 Included Herein
Under Cover of Form S-8, Pursuant to Rule 404(a)
Form S-3 Item No. and Heading Heading in Prospectus
----------------------------- ---------------------
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.. Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus..................... AVAILABLE INFORMATION;
REPORTS TO SHAREHOLDERS;
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE;
TABLE OF CONTENTS
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges Outside Front Cover Page;
THE COMPANY; RISK FACTORS
4. Use of Proceeds.............................. Not Applicable
5. Determination of Offering Price.............. Outside Front Cover Page;
PLAN OF DISTRIBUTION
6. Dilution..................................... Not Applicable
7. Selling Security Holders..................... SELLING SHAREHOLDERS
8. Plan of Distribution......................... Outside Front Cover Page;
PLAN OF DISTRIBUTION
9. Description of Securities to be Registered DESCRIPTION OF SECURITIES
10. Interests of Named Experts and Counsel EXPERTS; LEGAL OPINIONS
11. Material Changes............................. Not Applicable
12. Incorporation of Certain Information
by Reference............................. INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
13. Disclosure of Commission Position
on Indemnification For Securities
Act Liabilities ......................... INDEMNIFICATION
ii
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R E O F F E R
P R O S P E C T U S
- --------------------------------------------------------------------------------
3,540,023 Shares
--------
THE TIREX CORPORATION
--------
Common Stock
$.001 Par Value
----------
The shares of common stock offered hereby (the "Shares") are being sold by
Michael D.A. Ash, Alan Crossley, Frances Katz Levine, Louis Sanzaro, Terence C.
Byrne and Scott Rapfogel shareholders and employees of The Tirex Corporation
(the "Company"). Messrs. Ash, Crossley, Sanzaro, Byrne and Rapfogel, and Ms.
Levine are hereinafter referred to both singly and collectively as the "Selling
Shareholders". The Company will not receive any of the proceeds from the sale of
the common stock. The common stock is traded in the over-the-counter market, as
reported in the Over-The-Counter Electronic Bulletin Board of the National
Association of Securities Dealers ("Bulletin Board"). On May 17, 1999, the high
ask and low bid prices of the Company's common stock, as quoted on the Bulletin
Board, were $ .15 and $ .125 per share, respectively. The Selling Shareholders
propose to offer their Shares for sale in the over-the-counter market through
customary brokerage channels at the then-current market price. See "Plan of
Distribution".
==========
THIS OFFERING INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" SECTION
BEGINNING ON PAGE 10
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
==========
The date of this Prospectus is May 21, 1999
1
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AVAILABLE INFORMATION
The Company is subject to the information requirements of Section 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at 1100 L Street, N.W. Room 6101, Washington, D.C.
20005; 26 Federal Plaza, Room 1100, New York, New York 10007; 10960 Wilshire
Boulevard, Suite 1710, Los Angeles, California 90024; and 219 South Dearborn
Street, Room 1228, Chicago, Illinois 60604; and copies of such material can be
obtained from the Public Reference Section of the Commission at 500 North
Capital Street, N.W., Washington, D.C. 20549 at prescribed rates.
REPORTS TO SHAREHOLDERS
The Company will furnish to its shareholders, upon request, annual reports
containing audited financial statements together with an opinion with respect
thereto by its independent certified public accountants.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
Company's annual report on Form 10-KSB for its fiscal year ended June 30, 1998,
filed pursuant to Section 15(d) of the Exchange Act, the Company's quarterly
reports on Forms 10-QSB for the fiscal quarters ended September 30, 1998,
December 31, 1998 and March 31, 1999 filed pursuant to Section 15(d) of the
Exchange Act, the Company's Current Reports on Form 8-K dated May 27, 1998,
September 14, 1998, March 17, 1999, and May 4, 1999 filed on August 3, 1998,
September 18, 1998, March 23, 1999, and May 18, 1999 respectively, and all other
reports, if any, filed by the Company pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year ended June 30, 1998.
All reports and definitive proxy or information statements filed pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering of the Shares
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modified or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain without charge,
upon request, a copy of any of the documents incorporated by reference herein,
except for the exhibits to such documents. Requests should be directed to
Terence C. Byrne, The Tirex Corporation, 740 St. Maurice, Suite 201, Montreal,
Quebec Canada, H3C 1L5.
2
<PAGE>
TABLE OF CONTENTS
Page
----
Available Information......................................................2
Reports to Shareholders....................................................2
Incorporation of Certain Documents
by Reference............................................................2
The Company................................................................5
Risk Factors
1. Development Stage Company - No Assurance
as to Future Profitable Operations...............................10
2. Need for Substantial Additional
Capital..........................................................11
3. History of Losses and Accumulated Deficit..........................12
4. Going Concern Assumption...........................................12
5. No Guarantee of Product
Acceptance in Market.............................................13
6. Dilutive and Other Adverse Effects
of Presently Outstanding Debentures, Warrants and
Options..........................................................13
7. Additional Dilution from Issuance of Shares for Services...........15
8. Possible Depressive Effect on Price of Securities
of Future Sales of Common Stock..................................16
9. Possible Voting Control by Management and Corporate Counsel;
Possible Depressive Effect on Market Prices......................16
10. Proposed Reverse Split;
Possible Negative Effect on Values of Securities ...............17
11. Dependence on Major Customers......................................18
3
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12. Uncertainty of Product and
Technology Development:
Technological Factors............................................19
13. International Sales and Operations.................................19
14. Protection of Tirex Proprietary
Technology and Potential Infringement...........................19
15. Limited Public Market.............................................20
16. Applicability of "Penny Stock Rules"
to Broker-Dealer Sales of
Company Common Stock...........................................21
17. Management's Lack of Industry Experience..........................22
18. Dependence on Key Personnel.......................................22
19. Regulatory and Environmental Considerations.......................22
20. Technological Changes.............................................24
21. Competition.......................................................24
22. No Dividends and None Anticipated.................................25
23. Possible Adverse Effects of Authorization and
Issuance of Preferred Stock.....................................25
24. Prior Notice Required for Shareholder Actions.....................25
25. Adverse Effects of Proposals to be Presented at
Annual Shareholders Meetings; Anti-Takeover Provisions,
Limitations on Shareholders Voting Rights and Stock
Bonuses to Management...........................................25
Selling Shareholders....................................................29
Plan of Distribution....................................................32
Description of Securities...............................................32
Experts.................................................................33
Legal Opinions..........................................................33
Indemnification.........................................................34
4
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THE COMPANY
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 and to "Tirex
America Inc." on March 10, 1993. On July 11, 1997, 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
Canadian subsidiaries, The Tirex Corporation Canada Inc. and Tirex Canada R&D,
Inc. (which, until June 3, 1998, was known and did business as "Tirex Canada
Inc."), is engaged in the early stages of two business segments, consisting of:
(i) manufacturing, selling, and leasing its patented cryogenic tire
disintegration plant (the "TCS-1 Plant"), which it has designed and developed;
and (ii) operating a TCS-1 Plant and manufacturing molded rubber products out of
the recycled rubber crumb produced thereby. The Company's long range business
plan in this segment encompasses owning and operating, directly or indirectly,
on exclusive or joint venture bases, several product manufacturing plants which
utilize TCS-1 Plants in their operations. The Company's initial product
manufacturing operations in this latter segment are being conducted pursuant to
an agreement (the "IM2/Tirex Agreement") with IM2 Merchandising and
Manufacturing, Inc. ("IM2"), in Quebec. Pursuant to the IM2/Tirex Agreement, the
Company acts as IM2's exclusive supplier of rubber welcome mats and related
products molded out of rubber crumb.
On June 1, 1998, the Company formed a wholly-owned subsidiary, The Tirex
Corporation Canada Inc. ("TCCI") and on June 3, 1998, the corporate name of
3143619 Canada Inc. (aka Tirex Canada Inc.) was changed to Tirex Canada R & D
Inc. (hereinafter referred to as "Tirex R&D"). These changes were effected in
connection with the transfer all business activities, except those which
constitute research and development activities exclusively, from Tirex R&D to
TCCI. On April 22, 1998, the Company also formed another wholly owned Canadian
subsidiary, Tirex Advanced Products Quebec, Inc. This subsidiary is presently
dormant, however, the Company may, in the future, transact finished product
manufacturing activities through this corporation. In addition, in connection
with the merger with RPM Incorporated, discussed below, the Company formed a
wholly owned subsidiary under the laws of the State of Delaware, named Tirex
Acquisition Corp. This corporation is currently dormant and, as at the date
hereof, the Company has no plans to activate it. The Company's principal
executive offices are located at 740 St. Maurice, Suite 201, Montreal, Quebec
H3C 1L5, Canada, its telephone number is (514) 878-0727 and its Internet address
is [email protected].
Material Financing Activities
The Type A Private Placement
Between November 5, 1997 and May 11, 1998, the Company offered to sell
(the "Type A Private Placement") through H.J. Meyers & Co., Inc., as placement
agent (the "Placement Agent"), 28 Units, (the "Type A Units") at a price of
$25,000 per Unit, each Type A Unit consisting of one 10% Convertible
Subordinated Debenture in the principal amount of $25,000 (the "Type A
Debentures") and 100,000 warrants (the "Type A Warrants") to purchase a like
number of shares of the Common Stock of the Company (the "Type A Warrant
Shares"). The Type A Private Placement was terminated by the Company and the
Placement Agent on May 11,
5
<PAGE>
1998 following the sale on April 9, 1998 of twenty Type A Units to two
purchasers, yielding gross proceeds of $500,000 and net proceeds of $433,500
after payment of the Placement Agent's $10% commission, 3% nonaccountable
expense allowance, and an escrow agent's fee of $1,500. The Type A Private
Placement was effected in reliance upon the availability of an exemption from
the registration provisions of the Securities Act by virtue of compliance with
the provisions of Section 4(2) of the Securities Act and Rule 506 of Regulation
D thereof ("Rule 506"). The Type A Units were offered and sold to a limited
number of sophisticated investors who understood and are economically capable of
accepting the risks associated with a speculative investment, including the
complete loss of such investment, and who are "Accredited Investors" within the
meaning prescribed by Regulation D and Rule 501 of the Securities Act.
The 2,000,000 outstanding Type A Warrants are exercisable at a price of
$.001 per share. At any time until they are repaid, the principal amount of the
Type A Debentures and all interest due thereon is convertible into common stock
at a conversion ratio equal to 63% of the closing bid price of the Company's
common stock, as traded in the over-the-counter ("OTC") market and quoted in the
OTC Electronic Bulletin Board of the NASD, on the trading date immediately
preceding the Company's receipt of a notice of conversion from a holder of the
Type A Debentures. Unless the Company's Registration Statement on Form SB-2 (SEC
File No. 333- 53255) is declared effective prior to June 11, 1999, the
conversion rate will decrease on a monthly basis at a rate of 1.5% per month,
until such date, when it will stabilize at 61.5% of the Market Price. (See "The
Company - Registration Statement"). There is no minimum conversion price. The
Type A Debentures, as amended, are due and payable on December 31, 1999 (the
"Maturity Date") and are redeemable upon the request of a holder at any time
after the Maturity Date at 125% of the principal amount plus all accrued, unpaid
interest on the principal amount. As of April 23, 1999, an aggregate of $40,000
of the principal amount of the Type A Debentures has been converted into an
aggregate of 594,012 shares of common stock.
As of April 23, 1999, the resale of the 2,000,000 shares issuable pursuant
to the exercise of the Type A Warrants and the resale of the shares issuable
pursuant to the conversion of an aggregate principal amount of $460,000 of the
Type A Debentures were intended to be registered by way of inclusion in the
Company's Registration Statement on Form SB-2, which has yet to be declared
effective. Following the effective date of the Registration Statement on Form
SB-2 or upon the availability of an exemption from the registration provisions
of the Securities Act of 1933, as amended, the shares underlying the Type A
Warrants and Type A Debentures, to the extent that they are acquired from the
Company, may be offered and resold by the holders thereof, from time to time, as
market conditions permit in transactions in the over-the-counter market, in
negotiated transactions, or a combination of such methods of sale, at fixed
prices which may be changed, at market prices prevailing at the time of sale, at
prices relating to prevailing market prices or at negotiated prices.
Merger with RPM Incorporated and The Type B Private Placement
On January 7, 1998, The Company issued a total of 3,305,000 shares of its
common stock to thirty-six persons, none of whom had any affiliation with the
Company. These issuances were made pursuant to the terms of a merger agreement
by and among the Company, the Company's wholly-owned subsidiary Tirex
Acquisition Corp. ("TAC"), and RPM Incorporated ("RPM") respecting the merger of
RPM with and into TAC (the "RPM Merger"). The RPM Merger Agreement was effective
on January 7, 1998, concurrent with the closing of a private placement
6
<PAGE>
of RPM's securities (the "RPM Private Placement"), in which RPM had offered to
sell, on a best efforts 30 Units-or-none basis, up to 85 units of its securities
(the "RPM Units"), each such RPM Unit consisting of one 10% Convertible
Subordinated Debenture in the principal amount of $10,000 (the "RPM Debentures")
and 10,000 shares of the Common Stock of RPM. The closing took place upon the
sale of 30.5 RPM Units. All of the net proceeds from the RPM Private Placement
($276,085) remained in RPM when it was merged into TAC, which was the surviving
entity. Such proceeds thereby inured to the benefit of the Company. In
effectuation of the RPM Merger, the Company:
(i) exchanged one share of its common stock ("Merger Shares") for
every issued and outstanding share of RPM common stock (which
included 305,000 shares sold in the RPM Private Placement and
3,000,000 shares which had been issued and outstanding prior
to the commencement of the RPM Merger); and
(ii) assumed RPM's liabilities and obligations under 30.5 RPM
Debentures in the aggregate principal amount of $305,000 which
RPM had theretofore sold in the RPM Private Placement;
After the Merger, the Company commenced the "Type B Private
Placement", in which it offered and sold the same type of securities, as were
sold in the RPM Private Placements, i.e., the securities offered in the Type B
Private Placement consisted of "Type B Units" each consisting of 10,000 shares
of the Company's common stock and one convertible Subordinated Debenture of the
Company in the principal amount of $10,000 (the "Type B Debenture"). The number
of Type B Units offered (54.5) was equal to the number of RPM Units remaining
unsold as at the time of the Merger.
Prior to the Merger, RPM and Tirex were completely separate entities.
However, the RPM Private Placement, the merger, the exchange of RPM common stock
for Tirex Common Stock, and the subsequent Type B Private Placement by Tirex
were at all times contemplated as interdependent transactions and described in
the RPM Private Placement Memorandum as such. Thus the contemplated post-merger
Type B Private Placement was viewed as being a "continuance" of the RPM Private
Placement. The Type B Private Placement differed from the RPM Private Placement
only insofar as: (i) in the RPM Private Placement, RPM offered and sold shares
of RPM common stock, which were to be exchanged for Tirex Common Stock in the
Merger, while in the post-merger Type B Private Placement, the Company offered
and sold shares of Tirex Common Stock; and (ii) in the RPM Private Placement,
RPM offered and sold RPM debentures, which were to be assumed by Tirex in the
Merger, while in the Type B Private Placement, the Company offered and sold
Tirex Type B Debentures. Except for the above, the terms of the securities
included in the Type B Units were identical to those included in the RPM Units
Between January 23, 1998 and May 11, 1998, the Company sold 23 Type B
Units, consisting in the aggregate of 230,000 shares of its common stock and
twenty-three 10% convertible Debentures, each in the principal amount of
$10,000, to 21 private investors, who had no affiliation with the Company.
All of the Type B Debentures and the RPM Debentures, which had been
assumed by the Company (referred to collectively, hereinafter as the "Type B
Debentures"), provide for: (i) the registration of the shares (the "Type B
Conversion Shares") issuable upon the conversion of the
7
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Type B Debentures; and (ii) restrictions on the transfer of the Type B
Conversion Shares until the first to occur of: (a) six months from the effective
date of the Registration Statement, or (b) one year from the date of the
issuance of the Type B Debenture. The Type B Debentures are convertible at a
ratio of one share for every $0.20 of the principal amount of the Debenture plus
interest earned thereon from the date of issuance.1 The Type B Debentures are
redeemable by the Company, at the option of the holder thereof, at face value
plus all earned interest from the date of issuance on the first to occur of: (i)
two years from the issue date or (ii) the completion and closing of a public
offering of its securities by the Company.
The resales of shares of the Company's common stock issuable pursuant to
the conversion of the Type B Debentures, other than the Previously Converted
Shares, are being registered by way of inclusion in the Registration Statement
on Form SB-2.
Pre-Placement RPM Shares
3,000,000 shares (the "Pre-Placement RPM Shares") of the 3,305,000 shares
of RPM Common Stock for which the Company issued Merger Shares, constituted all
of the shares of RPM Common Stock which were issued and outstanding prior to the
commencement of the RPM Private Placement. These shares were exchanged for
3,000,000 Merger Shares in consideration of RPM's waiver of certain consulting
fees in the amount of $4,000 per month, accrued prior and subsequent to the
Merger pursuant to the terms of a certain five-year consulting agreement, dated
June 9, 1997, among RPM, the Company, and Dr. Eugene Stricker and Mr. Mark
Schindler who were, prior to the Merger, RPM's principal shareholders, officers,
and directors (the "RPM Consulting Agreement"). Pursuant to the RPM Consulting
Agreement, Dr. Stricker and Mr. Schindler rendered, and continue to render,
consulting services to the Company concerning matters in connection with the
operation of the business, equipment financing, corporate acquisitions, mergers
and other business combinations, as well as management, corporate planning,
marketing, organization and related matters. None of the RPM Shareholders had
any affiliation of any kind with the Company prior to or after the Merger
(except insofar as they have become shareholders of the Company as a result of
the said Merger). Based upon information provided by the recipients (the RPM
Shareholders") of the above described 3,305,000 shares of Common Stock and
advice from the principals of RPM and the opinion of RPM's counsel, all
3,000,000 of the Pre-Placement RPM Shares were acquired by the RPM Shareholders
prior to March 31, 1997; all of the RPM Shareholders are "accredited investors"
as that term is defined in Rule 501(a) of the Securities Act; all 3,305,000 of
the shares of RPM common stock (including the Pre-Placement RPM Shares as well
as the RPM Shares sold in the RPM Private Placement) which were exchanged for
Merger Shares were acquired in transactions which were exempt from the
registration requirements of Section 5 of the Securities Act available under
Rule 506 of Regulation D thereof, which would not be integrated, as such term is
defined in Section 502(a) of Regulation D under the Securities Act, with the
distribution of the Merger Shares to
- ----------
1 As of April 23, 1999, (i) the holder of two Type B Debentures, in
the aggregate principal amount of $100,000 converted all of the
principal plus the $12,247 in interest due on such Type B Debentures
through the date of conversion into 561,235 shares of common stock;
and (ii) the holder of one Type B Debenture in the principal amount
of $5,000 converted all of the principal, but none of the interest,
due on such Type B Debenture into 25,000 shares of common stock
(collectively the "Previously Converted Shares").
8
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the RPM Shareholders, so as to render unavailable, for such distribution, the
exemption from the registration provisions of the Securities Act under Rule 506
of Regulation D.
Sales made in the RPM Private Placement and the Type B Private Placement
and the exchange of shares in the Merger were effected in compliance with Rule
506 to a limited number of sophisticated investors who understood and were
economically capable of accepting the risks associated with a speculative
investment, including the complete loss of such investment, and who were
"Accredited Investors" within the meaning prescribed by Regulation D and Rule
501 of the Securities Act.
The Type C Private Placement
On May 11, 1998, the Company completed a private placement (the "Type C
Private Placement") made directly by the Company, with all offers and sales made
by officers of the Company, of a total of 11,760,000 shares of the Company's
Common Stock (the "Type C Shares") at a price of $.10 per share, yielding
proceeds of $1,176,000, without deducting nominal incidental expenses incurred
in connection with the offering. As was the case with the Type A and Type B
Private Placements, the Type C Private Placement was effected in compliance with
Rule 506 and the Type C Shares were offered and sold only to a limited number of
sophisticated investors who understood and were economically capable of
accepting the risks associated with a speculative investment, including the
complete loss of such investment, and who were "Accredited Investors" within the
meaning prescribed by Regulation D and Rule 501 of the Securities Act.
The 11,760,000 Type C Shares which were sold are being registered for
re-sale to the public by the holders thereof by way of their inclusion in the
Registration Statement on Form SB- 2.
Registration Statement
On May 21, 1998, the Company filed a Registration Statement on Form SB-2
(Registration No. 333-53255) with the Securities and Exchange Commission, for
the registration of the resale of certain presently outstanding shares of the
Company's common stock and an undetermined number of shares issuable upon the
conversion or exercise of certain presently outstanding debentures, options, and
warrants. None of the shares included in the Registration Statement are being
offered for sale by the Company and the Company will receive no proceeds from
the resales of any of the shares included therein.
As of April 23, 1999, the shares of common stock to be registered pursuant
to the Registration Statement on Form SB-2 include: (i) 11,952,857 presently
outstanding shares of the Company's common stock which are being offered by 58
selling shareholders including 11,760,000 shares issued to 57 persons in the
Type C Private Placement described under "Material Financing Activities" and
192,857 shares issued in November 1998 to one individual; (ii) shares underlying
an option issued to CG Tire Inc. ("CGT") on April 24, 1997, for the purchase,
prior to April 23, 2000, of the number of shares which would constitute upon
their issuance, on a fully diluted basis, up to ten percent (10%) of the issued
and outstanding common
9
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stock of the Company at an exercise price equal to fifty percent (50%) of the
average of the final bid and ask prices for the Company's common stock during
the ten business days preceding the date of exercise; (iii) 2,000,000 shares
issuable upon the exercise of the Type A Warrants issued in the Type A Private
Placement described under "Material Financing Activities"; (iv) 2,000,000 shares
issuable upon the exercise of currently outstanding common stock purchase
warrants (the "SCT Warrants") to purchase 666,666 shares of the Company's common
stock at an exercise price of $.25 per share, 666,666 shares of the Company's
common stock at an exercise price of $.40 per share, and 666,666 shares at an
exercise price of $.50 per share; (iv) shares issuable upon the conversion of
the Type A Debentures, issued in the Type A Private Placement described under
"Material Financing Activities", in the aggregate principal amount of $460,000
at a conversion rate equal to a maximum of 64.5% and a minimum of 61.5% of the
closing bid price of the Company's common stock on the trading date immediately
prior to the date upon which the Company receives a notice of conversion (see
the discussion, above, in this section, under the subcaption "The Type A Private
Placement"; and (v) 2,150,000 shares issuable upon the conversion of the Type B
Debentures, issued under the Type B Private Placement described under "Material
Financing Activities" in the aggregate principal amount of $430,000. (At the
option of the holders of the Type A and Type B Debentures, all unpaid interest
accrued on the Debentures, through the date of conversion, may also be converted
into shares of the Company's common stock).
The Company is presently preparing to file an amendment to such Registration
Statement and expects to do so as promptly as practicable.
RISK FACTORS
The Shares offered hereby are speculative and involve a high degree of
risk. The Shares should not be purchased by investors who cannot afford the loss
of their entire investment. Prospective investors should carefully consider all
of the information contained in this Prospectus before deciding whether to
purchase Shares and, in particular, the factors set forth below.
Information contained in this Prospectus contains "forward-looking
statements" which can be identified by the use of forward-looking terminology
such as "believes", "expects", "may", "should" or "anticipates" or the negative
thereof or other variations thereon or comparable terminology or by discussions
of strategy. No assurance can be given that the future results covered by the
forward-looking statements will be achieved. The following Risk Factors include,
among other things, cautionary statements with respect to certain
forward-looking statements, including statements of certain risks and
uncertainties that could cause actual results to vary materially from the future
results referred to in such forward-looking statements.
1. Development Stage Company: No Assurance as to Future Profitable
Operations. Because it is in the development stage and has had no significant
operations to date, the Company cannot predict with any certainty the future
success or failure of its operations. The Company's business, is subject to all
of the risks inherent in the establishment of new businesses and there is no
assurance that the Company will generate net income or successfully expand its
operations
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in the future. Moreover, as a new enterprise, it is likely to remain subject to
risks and occurrences which management is unable to predict with any degree of
certainty, and for which it is unable to fully prepare. The likelihood of the
success of the Company must be considered in light of the problems, expenses,
difficulties, complications and delays frequently encountered in connection with
the formation of a new business and the competitive environment in which the
Company will operate. Because of the Company's very limited business history,
there is little evidence for investors to analyze in order to make an informed
judgment as to the merits of an investment in the Company. Any such investment
should therefore be considered a high risk investment in an unseasoned start-up
company with the possibility of the loss of the entire investment.
2. Need For Substantial Additional Capital. The Company has recently
completed the development of the TCS-1 Plant. It has sold certain parts of the
first of such Plants (while retaining ownership of other parts and operating
rights over the entire Plant). The Company has also entered into sublease
arrangements for the parts of the Plant which it sold. We have taken orders and,
in some cases, received refundable deposits on such orders, for a total of
another fourteen Plants. The Company has not yet begun commercial manufacture of
TCS-1 Plants for sale because none of the persons, who have placed orders for
such Plants, have yet obtained the required financing to effect their purchases.
Operations in our second business segment, which involves operating the first
complete TCS-1 Plant and manufacturing molded rubber welcome mats out of the
recycled rubber crumb derived therefrom, commenced in March of 1999 and as at
the end of April had yielded only limited revenues. Therefore the Company
remains in need of substantial financing from sources other than operations in
order to cover its overhead, complete the establishment of its rubber molding
plant and maintain and expand its operations. To date, we have been able to meet
our outside financing requirements, as described below.
During the period between January 7, and May 11, 1998, the Company
completed and closed certain financing activities which yielded aggregate net
proceeds to the Company in the amount of $2,063,795 (see Risk Factor No. 6
"Dilutive and Other Adverse Effects of Presently Outstanding Debentures,
Warrants, and Options"). From July 1, 1998 through March 31, 1999, the Company
has also received approximately $1,506,000 from various other sources (other
than operations) including: (i) sale and lease back financing on inventory and
equipment owned by the Company; (ii) Canadian research and development tax
credit refunds; (iii) loans from officers and directors; (iv) refunds of all of
the 15% sales tax paid by the Company on all goods, and services purchased in
connection with the Company's manufacturing activities. The foregoing have
provided adequate funding to accomplish the following: (i) cover all of the
Company's costs related to the first production model of the TCS-1 Plant (the
"Production Model"), including previously unanticipated modifications identified
during testing; (ii) proceed with renovations of the Company's new manufacturing
and assembly facility which have brought it into full compliance with all
applicable provincial and municipal regulations except for the purchase and
installation of a sprinkler system which will cost approximately $100,000 and
for which the Company expects to be able to obtain sale and lease back
financing; (iii) cover the Company's overhead costs and expenses; and (iv) cover
the initial costs of establishing and commencing operations in the Company's
second business segment involving the operation of a TCS-1 Plant and the
production of molded rubber products, including capital investments in molding
and flocking equipment.
The Company expects that these same funding sources, together with
anticipated cash flow from rubber mat molding operations, which were started in
April 1999, vendor financing, and
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conventional asset based debt financing against receivables and inventory will
continue to provide sufficient capital to cover overhead and maintain and expand
molding operations. The Company is also ready to begin full scale, commercial
manufacture of TCS-1 Plants. Its present plans do not require that the Company
obtain any outside financing to do so, but instead require only partial
prepayments from the purchasers of such Plants. The Company will not manufacture
any TCS-1 Plants for purchasers unless and until it receives the prepayments
necessary to fund such manufacture. Therefore, any failure or delay, on the part
of the persons who have placed orders with the Company for TCS-1 Plants, to
obtain the required financing to effect such purchases, will be directly
reflected in a commensurate delay or failure, on the Company's part, to begin
TCS-1 Plant manufacturing operations.
Absent adequate revenues from operations during the phase-in period of
commercial operations, the Company will remain dependent on the outside sources
described above to meet its requirements and to continue operating. While the
Company believes it will be successful in continuing to obtain sufficient
financing from such sources, there can be no assurance with any certainty that
this will, in fact, be the case and the failure to do so would have a material
adverse effect on the Company's ability to continue to operate. The Company's
more long term future capital requirements will depend upon numerous factors,
including the amount of revenues generated from operations, the cost of the
Company's sales and marketing activities and the progress of the Company's
research and development activities, none of which can be predicted with
certainty. Receipt of any projected revenues is entirely dependent upon the
TCS-1's continuing to meet performance standards under long-term, commercial
operating conditions, the Company's ability to successfully market finished
products made from recycled rubber crumb (including but not limited to the
welcome mats we are presently producing), and the ability of prospective
purchasers of TCS-1 Plants to obtain financing to effect their projected
purchases.
While management does not believe that it will be the case, prospective
investors in the Company should note that if all of the above described internal
and external sources for financing should fail to be sufficient, the Company
could be required to reduce its operations, seek an acquisition partner or sell
securities on terms that may be highly dilutive or otherwise disadvantageous.
3. History of Losses and Accumulated Deficit. The Company has experienced
operating losses in each fiscal period since its formation in 1987, including
the period since the 1993 inception of its tire recycling business plan. As at
June 30, 1998, the Company had a deficit accumulated since formation in the
aggregate approximate amount of $10,051,483, approximately $8,994,127 of which
was accumulated since the 1993 inception of the Company's present business plan.
The Company expects to incur additional operating losses through at least the
end of the fiscal year ending June 30, 1999 and possibly thereafter (see, above,
Risk Factor No. 1 "Development Stage Company: No Assurance as to Future
Profitable Operations"). Since its inception, the Company has generated
extremely limited revenues from operations.
4. Going Concern Assumption. The Company's independent auditors' report on
the Company's financial statements for the years ended June 30, 1997 and 1998,
contains an explanatory paragraph indicating that: (i) the Company is still in
the development stage; (ii) it cannot be determined at this time that the
Company's tire disintegration technology will be developed to a productive
stage; and (iii) the Company's uncertainty as to its productivity and
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its ability to raise sufficient capital raise substantial doubt about its
ability to continue as a going concern. In addition, the Company had an
accumulated deficit of $10,051,483 as at June 30, 1998. The Company will require
substantial additional funds in the future, and there can be no assurance that
any independent auditors' report on the Company's future financial statements
will not include a similar explanatory paragraph if the Company is unable to
raise sufficient funds or generate sufficient cash from operations to cover the
cost of its operations. The existence of the explanatory paragraph may
materially adversely affect the Company's relationship with prospective
customers and suppliers, and therefore could have a material adverse effect on
the Company's business, financial condition and results of operations.
5. No Guarantee of Product Acceptance in Market. The first production
model of the TCS-1 Plant was completed in May of 1998 and, since March 1999, the
Company has been operating it on a commercial basis. Because of its extremely
limited operating history, there can be no assurance that the TCS-1 Plant will
be accepted in the market for tire disintegration equipment. Moreover, the
Company's market research has focused on the potential demand for the TCS-1
Plant, and the rubber crumb it is designed to produce, to the exclusion of other
types of tire disintegration equipment. While the Company has received orders on
approximately fourteen TCS-1 Plants, to date, none of its potential customers
have obtained financing to effect purchases pursuant to such orders. While the
Company believes that all orders included in its backlog may eventually result
in purchases, it is not able to estimate with any assurance the potential demand
for the TCS-1 Plant. There can be no assurance that sufficient market
penetration can be achieved so that projected production levels of the TCS-1
Plant will be absorbed by the market.
6. Dilutive and Other Adverse Effects of Presently Outstanding Debentures,
Warrants, and Options. As of April 22, 1999, there were outstanding options and
warrants pursuant to which the Company is obligated to sell common stock, as
follows:
(a) 2,000,000 common stock purchase warrants (the "Type A Warrants") to
purchase a like number of shares of the Company's common stock at an
exercise price of $.001 per share, the resale of all of which shares
are included in the Company's Registration Statement on Form SB-2
(see "The Company - Registration Statement").
(b) 10% convertible Type A Debentures in the aggregate principal amount
of $460,000, with principal and interest convertible, in whole or in
part, into shares of the Company's common stock at a conversion
ratio equal to a percentage ranging between 64.5% and 61.5% of the
closing bid price of the Company's common stock on the trading date
immediately preceding the date of the Company's receipt of a notice
of conversion from a holder of the Type A Debentures. Accordingly,
if, on April 26, 1999, all of the principal amount, but none of the
interest, due on the Type A Debentures had been converted into
common stock (based on the closing bid price of the common stock as
at April 23, 1999), a total of 7,131,783 shares of common stock
would have been issued in respect of such conversion. The resale of
all of these shares are included in the Company's Registration
Statement on Form SB-2 (see "The Company -
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Registration Statement"). To the extent that the interest portion of
the Debenture is not converted, all accrued interest will be payable
in cash.
(c) 10% convertible Type B Debentures in the aggregate principal amount
of $430,000, with principal and interest convertible, in whole or in
part, into shares of the Company's common stock at a conversion
ratio of one share for every $.20 of principal amount and interest
earned thereon from the date of issuance. If the principal amount of
all of the Type B Debentures, but not the interest, were converted,
the aggregate number of shares issuable would be 2,150,000, the
resale of all which shares are included in the Company's
Registration Statement on Form SB-2 (see "The Company - Registration
Statement"). To the extent that the interest portion of the Type B
Debenture is not converted, all accrued interest will be payable in
cash.
(d) an option to purchase 235,294 shares, held by Lenford Robins, an
unaffiliated consultant, exercisable at a price of $.17 per share.
Mr. Robins is an expert in all types of equipment financing through
sale and leaseback arrangements, and otherwise, and has provided,
and continues to provide, consulting services to the Company with
respect to locating, structuring, and arranging such financing for
purchasers and potential purchasers of TCS-1 Plants. From the Summer
of 1996 through the Spring of 1997, Mr. Robins provided substantial
consulting services in connection with sale and leaseback financing
for Ocean's Tire Recycling & Processing Co., Inc. ("Oceans Tire").
(e) options to purchase, on or before June 30, 1999, an aggregate of
250,000 shares, at an exercise price of $.28 per share. The above
described options are held among three individuals, including Sharon
Sanzaro (the spouse of Louis Sanzaro, an officer and director of the
Company), who hold such options as designees or assignees of
Ocean/Venture III, Inc., a company controlled by Mr. Sanzaro. These
options were granted in consideration of the agreement of
Ocean/Venture III, Inc. given on June 30, 1996 to extend the
maturity date of certain indebtedness which the Company owed to
Ocean/Venture III, Inc. for a period of 120 days from such date.
(f) an option, held by a director of the Company, to purchase 20,000
shares of convertible preferred stock at a price of $10 per share
(the "Preferred Option"). If purchased, such preferred stock will be
convertible into shares of the Company's common stock at a
conversion ratio equal to the number of shares of common stock
purchasable for the purchase price of each preferred share ($10) at
30% of the average market price of the Company's common stock during
the five trading days immediately prior to the date of conversion
provided, however, that 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
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share, will be increased to such number as is convertible to
2,000,000. If the shares of convertible preferred stock had been
converted into shares of the Company's common stock as at April 26,
1999, a total of 5,333,333 shares would have been issued in respect
of such conversion.
(g) the CGT Option to purchase a number of shares equal, on a fully
diluted basis, to 10% of the total issued and outstanding common
stock of the Company, at an exercise price equal to $.1195 per share
with respect to 969,365 shares and at an exercise price with respect
to the balance of the shares equal to fifty percent (50%) of the
average of the final bid and ask prices of the common stock of the
Company, as quoted in the OTC Bulletin Board during the ten business
days preceding the exercise date. If all of the other presently
outstanding debentures, options, and warrants were exercised, as
described above, the total number of shares of common stock of the
Company issued and outstanding would be 106,296,410, prior to the
exercise of the CGT Option, in which case, the number of shares
subject to the CGT Option would be 11,810,712, the resale of all of
which shares are included in the Company's Registration Statement on
Form SB-2 (see "The Company - Registration Statement").
(h) 2,000,000 common stock purchase warrants (the "SCT Warrants") to
purchase a like number of shares of the Company's common stock at an
exercise price of $.25 per share for the first 666,666 shares, $.40
per share for the second 666,666 shares, and at $.50 per share for
the remaining 666,666 shares. The resale of all of these shares are
included in the Company's Registration Statement on Form SB- 2 (see
"The Company - Registration Statement").
The holders of the convertible debentures, the warrants, and the
outstanding options have an opportunity to profit from a rise in the market
price of the common stock, if such rise should occur, with a resulting dilution
in the interests of the other shareholders. Moreover, if the above described
debentures, warrants, and options (the "Convertible Securities") are converted
or exercised, most of the shares of common stock issued upon such exercise or
conversion (the "Underlying Shares") will be available for immediate sale into
the public market, commencing on the effective date of the Company's
Registration Statement for Form SB-2. The sale or availability for sale of
substantial amounts of common stock in the public market could adversely affect
the prevailing market price of the Company's common stock and could impair the
Company's ability to raise additional capital through the sale of its equity
securities. In addition, even if the Convertible Securities are not converted or
exercised, the terms on which the Company may obtain additional financing may be
adversely affected by the existence of such securities. For example, the holders
of the Convertible Securities could convert or exercise them at a time when the
Company is attempting to obtain additional capital through a new offering of
securities which have terms more favorable (to the Company) than those provided
by the then outstanding Convertible Securities.
7. Additional Dilution from Issuance of Shares for Services. To date, the
Company has had very limited revenues from operations. Accordingly, the bulk of
its cash assets have been, and may continue to be, utilized to cover the
expenses associated with the development of its business and products. Given the
foregoing, the Company regularly pays certain of its financial
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obligations by issuing restricted shares of its common stock, at a discount, in
lieu of cash. The discounts at which such shares were issued was generally, but
not always, set at 50% of the average market price of the stock, as traded in
the over-the-counter market and quoted in the OTC Bulletin Board. Such discounts
were either negotiated at arms length with third parties or determined
arbitrarily by the Company, in which cases they bore no relationship to the
Company's assets, earnings, book value or other such criteria of value. Such
issuances have, and may continue to, result in substantial dilution to the
Company's existing shareholders.
From January of 1995 through April 22, 1999, the Company has issued a
total of 39,129,410 shares, constituting approximately 44.8% of the issued and
outstanding shares of the Company in lieu of cash compensation and expense
reimbursement due under employment and consulting agreements with its executive
officers, employees, and corporate counsel and in additional compensation by way
of directors shares and stock bonuses. In addition, during that period, the
Company issued 13,410,946 shares, constituting approximately 15.38% of the
issued and outstanding common stock of the Company to affiliated and
non-affiliated consultants and subcontractors for consulting services of various
types. For as long as the Company has insufficient cash resources to meet its
obligations to its officers, counsel, and outside vendors, the Company will, to
the extent possible, continue to issue shares of its common stock at negotiated
or arbitrary discounts. In addition, the Company intends to submit to its
shareholders, proposals to adopt three stock option plans for the benefit of its
employees (See Risk Factor No. 9 "Possible Voting Control by Management and
Corporate Counsel" and Risk Factor No. 27 "Adverse Effects of Proposals to Be
Presented at Annual Shareholders Meeting: Anti-Takeover Provisions, Limitations
on Shareholders Voting Rights, and Stock Bonuses to Management").
8. Possible Depressive Effect on Price of Securities of Future Sales of
Common Stock. The resale of 11,952,857 of the 87,196,000 common shares of the
Company, issued and outstanding as of April 22, 1999, has been included in the
Company's Registration Statement on Form SB-2 (See "The Company - Registration
Statement"). All 11,952,857 shares will be freely tradeable commencing on the
effective date of such Registration Statement. The resale of an estimated
25,092,495 shares issuable upon the exercise or conversion of certain presently
outstanding options, warrants, and debentures have also been included in such
Registration Statement and will be freely tradeable upon the later of: (i) the
effective date of the Registration Statement; or (ii) their issuance. The sale
or other disposition of much of the other currently outstanding shares of common
stock is restricted by the Securities Act. Unless such sales are registered,
these shares may only be sold in compliance with Rule 144 promulgated under the
Securities Act or some other exemption from registration thereunder. Rule 144
provides, among other matters, that if certain information concerning the
operating and financial affairs of the Company is publicly available, persons
who have held restricted securities for a period of one year may thereafter sell
in each subsequent three month period up to that number of such shares equal to
one percent of the Company's total issued and outstanding common stock. The sale
or availability for sale of substantial amounts of common stock in the public
market after the offering being made by such Registration Statement could
adversely affect the prevailing market price for the Company's common stock and
could impair the Company's ability to raise additional capital through the sale
of its equity securities.
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9. Possible Voting Control by Management and Corporate Counsel:
Possible Depressive Effect on Market Prices. As of April 22, 1999, the Company's
officers and directors were the beneficial owners of an aggregate of 31,590,872
shares, constituting approximately 36.23% of the Company's outstanding common
stock. The Company intends to hold an annual meeting of its shareholders prior
to the end of the current calendar year. (See Risk Factor No. 27 "Adverse
Effects of Proposals to Be Presented at Annual Shareholders Meeting:
Anti-Takeover Provisions, Limitations on Shareholders Voting Rights, and Stock
Bonuses to Management"). In addition to the proposals discussed in Risk Factor
No. 27, the Board of Directors has proposed that the shareholders approve the
adoption of three stock option plans. If adopted, two of these plans will be for
the benefit of all of the Company's employees, but management and key employees
are expected to be the principal beneficiaries thereof. The third of these
proposed plans, is intended to be specifically for the purpose of awarding
options for the purchase of shares of common stock at a nominal exercise price
of $.001 per share, to key employees and members of management in respect of
certain specified performance achievements attained or to be attained by the
Company due to their efforts.
The other two stock option plans to be presented to the Shareholders,
consist of a statutory and a non-statutory plan. Key management and other
employees will also be eligible to receive option grants under each of such
plans. The exercise price of options granted under the statutory plan must be
not less than 100% of the market price on the day the option is granted unless
the grantee owns 10% or more of the total issued and outstanding common stock of
the Company, in which case the exercise price must be not less than 110% of the
market price on the day the option is granted. The non-statutory plan to be
proposed to the shareholders calls for an exercise price of not less than 50% of
the market price on the date the option is granted.
The concentration of ownership by the Company's officers and directors
may, along with other "anti-takeover" measures which the Board of Directors
plans to submit to the shareholders, discourage potential acquirors from seeking
control of the Company through the purchase of Common Stock, and this
possibility could have a depressive effect on the price of the Company's
Securities. (See "Risk Factor No. 25 "Adverse Effects of Proposals to Be
Presented at Annual Shareholders Meeting: Anti-Takeover Provisions, Limitations
on Shareholders Voting Rights, and Stock Bonuses to Management")
10. Proposed Reverse Split: Possible Negative Effect on Value of
Securities. As of April 22, 1999 there were 87,196,000 shares of the Company's
common stock issued and outstanding. While the Company considers that it would
be highly unlikely if all of the currently outstanding options and warrants were
to be exercised and all of the currently outstanding debentures were to be
converted with respect to the principal amount of such debentures, there could
be up to 118,107,122 shares of common stock issued and outstanding. On August
13, 1997, the Company received a Letter of Intent from H.J. Meyers, Inc. (the
"Meyers Letter of Intent"), a broker-dealer registered with the National
Association of Securities Dealers, Inc., for the underwriting of a proposed
public offering. On or about September 16, 1998, however, H. J. Meyers abruptly
ceased doing business. The Company intends to endeavor to effect a public
offering of its securities and is presently in negotiations with another
potential underwriter. The Meyers Letter of Intent had required that the Company
have not more than ten million (10,000,000) shares of common stock issued and
outstanding prior to the proposed public offering. The Company believes that any
potential underwriter for a public offering of the Company's securities will
require that the Company effect a reverse split to reduce the number of shares
of its common
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stock issued and outstanding because the total number of shares of common stock
currently outstanding is disproportionately large in relation to the Company's
level of sales, net income and net worth. Additionally, the Company's common
stock has had a low market value per share in recent months, which may, the
Company believes, tend to reduce stockbroker and investor interest in the
Company. Further, the Company believes that the current per share price of the
Company's common stock may limit the effective marketability of the Company's
common stock because of the reluctance of many brokerage firms and institutional
investors to recommend lower-priced stocks to their clients or to hold them in
their own portfolios. In light of the above, the Company intends to call a
meeting of its shareholders and to submit to them a proposal to reverse split
the number of shares of common stock issued and outstanding at a ratio of one
post-split share for every seven pre-split shares, or at some other, possibly
higher, ratio, as the board of directors shall agree is in the best interests of
the Company and its shareholders. Based upon the number of shares issued and
outstanding as of April 22, 1999, and assuming that the Reverse Split is
approved by the shareholders and effected at a one-for-seven ratio, there will
be a decrease in the number of outstanding shares of common stock of the Company
to approximately 12,456,571 shares. Because of standard anti-dilution clauses or
market price sensitive exercise or conversion prices contained in all presently
outstanding convertible debentures, warrants, and options, such reverse split
would also affect the number of shares of common stock issuable upon conversion
or exercise of such debentures, warrants, or options. Negotiations with
potential underwriters may result in a different reverse-split ratio or even a
second reverse split.
The Company believes that a decrease in the number of shares of common
stock outstanding may increase the trading price and marketability of such
shares. However, the market price of the Company's common stock should also be
expected to reflect Company performance and other factors, some of which may be
unrelated to the number of shares outstanding. Accordingly, there can be no
assurance that the market price of the Common Stock after the Reverse Split will
actually increase in an amount proportionate to the decrease in the number of
outstanding shares. The Reverse Split may leave stockholders with one or more
"odd lots" of the Company's stock, i.e. stock holdings in amounts of less than
100 shares. These shares may be more difficult to sell, or require a greater
commission per share to sell, than shares in lots of 100.
Upon the effectiveness of the Reverse Split, if it is approved by the
Shareholders, the presently issued certificates shall be deemed to represent the
number of shares equal to the number of pre-split shares originally represented
by such certificate divided by the ratio of the reverse split, and rounded up to
the next full number. EXAMPLE: if the reverse split is effected at a
one-for-seven ratio, a certificate which originally represented 294,005
pre-split shares would be deemed to represent 294,005 divided by seven
(42,000.7), rounded up to the next full number, i.e., 42,001 shares. Thus no
fractional shares of common stock will result from the reverse split (see "Risk
Factor No. 6, Dilutive and Other Adverse Effects of Presently Outstanding
Debentures, Warrants and Options").
11. Dependence on Major Customers. To date the Company has received orders
for fifteen TCS-1 Plants, eight of which were ordered by Ocean/Ventures III,
Inc.("O/V III") of Toms River, New Jersey ("O/V III") and parts of one of which
have been purchased by Oceans Tire Recycling & Processing Co., Inc. ("Oceans
Tire"), a company under common control with O/V III. The eight Plants ordered by
O/V III constitute approximately fifty-six percent (56%) of the Company's
present backlog. The Company has also received orders for four TCS-1 Plants from
ENERCON America Distribution Limited ("Enercon") of Westerville, Ohio. The
Enercon
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orders constitute approximately twenty-eight percent (28%) of the Company's
present backlog. The loss of either of these two customers would have a major
adverse effect on the Company. Both O/V III and Oceans Tire are controlled by
Louis V. Sanzaro, an officer and director of the Company.
Completion and consummation of all currently outstanding orders for TCS-1
Plants, are entirely dependent on each customer's obtaining lease or other
financing for the purchased portions of the Plant as well as all required
permits and licenses to operate a Plant. In this regard, the Company notes that
Enercon initially placed orders for two plants in August 1998. Enercon has
assured the Company on numerous occasions that it expects to receive financing
to effect these purchases, but to date no such financing has been obtained by
Enercon. The Company is unable to state when, if ever, Enercon will receive its
funding and be in a position to effect its projected purchases of a total of
four TCS-1 Plants.
12. Uncertainty of Product and Technology Development: Technological
Factors. The Company has completed and is presently operating the first
production model of the TCS-1 Plant. The Company's success will depend upon the
TCS-1 Plant's continuing to meet targeted performance and cost objectives on a
long term, commercial basis. Such an outcome will be subject to the risks
inherent in the development of a new product, technology, and business. There
can be no assurance that under commercial usage conditions, the TCS-1 Plant will
satisfactorily perform the functions for which it has been designed and
constructed, that it will meet applicable price or performance objectives, or
that unanticipated technical or other problems will not occur which would result
in increased costs or material delays in establishing the Company's business at
a profitable level. There can be no assurance that, despite the successful
operation of the TCS-1 Plant during the current, initial operational period, we
will not encounter problems which could result in loss or delay in market
acceptance of the TCS-1 Plant.
13. International Sales and Operations. The Company plans to market the
TCS-1 Plant in Europe and India during the 1999 calendar year, and in other
areas throughout the world as opportunities arise. There can however, be no
assurances that the TCS-1 Plant will be successfully marketed or that any
anticipated international sales of TCS-1 Plants will take place. In addition,
the Company will seek joint ventures with purchasers of TCS-1 Plants for the
purpose of engaging in the business of operating tire recycling businesses
equipped with TCS-1 Plants. To the extent that the Company engages in
international sales and/or operations, it will be subject to various risks
associated therewith, including but not limited to changes in tariff rates, lack
of reliability and availability of qualified labor, and instability of political
climate or economic environment. In addition, the value of any capital equipment
owned by such joint ventures and any operating lease or equipment purchase
financing payments received by the Company, may, under certain conditions, be
valued or paid in non-U.S. currencies, all of which will be subject to
independent fluctuating exchange rates with the U.S. dollar which may have an
adverse affect on the Company's revenues or asset values in terms of the U.S.
dollar.
14. Protection of Tirex Proprietary Technology and Potential Infringement.
The success of the Company's proposed business depends in part upon its ability
to protect its proprietary technology and the TCS-1 Plant which utilizes such
technology. On April 7, 1998, the Company was issued a United States patent on
its Cryogenic Tire Disintegration Process and Apparatus (Patent No. 5,735,471).
This patent will expire on December 18, 2016. In November 1998, the
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Company filed this patent with the Canadian Patent Office. The Company is
presently unable to state how long the Canadian review will take. While the
Company expects a Canadian patent to be granted, it is unable to give any
assurance that this will in fact be the case. Prior to obtaining its patent, 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 Plant. Except where the terms of their employment agreements would make it
redundant or, in the sole discretion of management, it is determined that
because of the non-technical nature of their duties, such agreements are not
necessary or appropriate, the Company has, and will continue to, enter into
confidentiality and invention assignment agreements with all employees and
consultants which limit access to, and disclosure or use of, the Company's
proprietary 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. Moreover, there can be no assurance that the
Company will have the resources to defend its Patent by bringing patent
infringement or other proprietary rights actions.
15. Limited Public Market: Company Not Eligible for Inclusion on NASDAQ.
To date there has been only a limited and sporadic public market for the
Company's common stock. There can be no assurance that an active and reliable
public market will develop or, if developed, that such market will be sustained.
Purchasers of shares of common stock of the Company may, therefore, have
difficulty in reselling such shares. As a result, investors may find it
impossible to liquidate their investment in the Company should they desire to do
so. The Company's common stock is currently traded in the over-the-counter
market and quoted on the OTC Bulletin Board. The Company intends to apply to
have its common stock approved for quotation on the Nasdaq SmallCap Market at
such time, in the future, that it meets the requirements for inclusion. As at
the date hereof, however, the Company is not eligible for inclusion in NASDAQ or
for listing on any national stock exchange. All companies applying and
authorized for NASDAQ are required to have not less than $4,000,000 in net
tangible assets, a public float with a market value of not less than five
million dollars, and a minimum bid of price of $4.00 per share. At the present
time, the Company is unable to state when, if ever, it will meet the Nasdaq
application standards. Unless the Company is able to increase its net worth and
market valuation substantially, either through the accumulation of surplus out
of earned income or successful capital raising financing activities, it will
never be able to meet the eligibility requirements of NASDAQ. In addition, it is
likely that the Company, which, as of April 22, 1999, had 87,196,000 shares of
common stock issued and outstanding, will have to effect a reverse split of its
issued and outstanding stock, in order to meet the minimum bid price requirement
(see, also, Risk Factor No. 6 "Dilutive and Other Adverse Effects of Debentures
and Warrants and Presently Outstanding Option"). Moreover, even if the Company
meets the minimum requirements to apply for inclusion in The Nasdaq SmallCap
Market, there can be no assurance, that approval will be received or, if
received, that the Company will meet the requirements for continued listing on
the Nasdaq SmallCap Market. Further, Nasdaq reserves the right to withdraw or
terminate a listing on the Nasdaq SmallCap Market at any time and for any reason
in its discretion. If the Company is unable to obtain or to maintain a listing
on the Nasdaq SmallCap Market, quotations, if any, for "bid" and "asked" prices
of the common stock would be available only on the OTC Bulletin Board where the
common stock is currently quoted or in the "pink sheets" published by the
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National Quotation Bureau, Inc. This can result in an investor's finding it more
difficult to dispose of or to obtain accurate quotations of prices for the
common stock than would be the case if the common stock were quoted on the
Nasdaq SmallCap Market. Irrespective of whether or not the common stock is
included in the Nasdaq SmallCap system, there is no assurance that the public
market for the common stock will become more active or liquid in the future. In
that regard, prospective purchasers should consider that this offering is being
made without the underwriting arrangements typically found in a public offering
of securities. Such arrangements generally provide for the issuer of the
securities to sell the securities to an underwriter which, in turn, sells the
securities to its customers and other members of the public at a fixed offering
price, with the result that the underwriter has a continuing interest in the
market for such securities following the offering. In order to qualify for
listing on a national stock exchange, similar minimum criteria respecting, among
other things, the Company's net worth and/or income from operation must be met.
Accordingly, market transactions in the Company's common stock are subject
to the "Penny Stock Rules" of the Securities and Exchange Act of 1934, which are
discussed in more detail, below, under "Risk Factor No. 16. Applicability of
Penny Stock Rules to Broker-Dealer Sales of Company Common Stock". These rules
could make it difficult to trade the common stock of the Company because
compliance with them can delay and/or preclude certain trading transactions.
This could have an adverse effect on the ability of an investor to sell any
shares of the Company's common stock.
16. Applicability of "Penny Stock Rules" to Broker-Dealer Sales of Company
Common Stock. As discussed above, at the present time, the Company's common
stock is not listed on The Nasdaq SmallCap Stock Market or on any stock
exchange. Although dealer prices for the Company's common stock are listed on
the OTC Bulletin Board, trading has been sporadic and limited since such
quotations first appeared on April 4, 1994.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
special disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a "penny stock". Commission regulations generally
define a penny stock to be an equity security that has a market price of less
than $5.00 per share and is not listed on The Nasdaq SmallCap Stock Market or a
major stock exchange. These regulations subject all broker-dealer transactions
involving such securities to the special "Penny Stock Rules" set forth in Rule
15g-9 of the Securities Exchange Act of 1934 (the "34 Act"). It may be necessary
for the Selling Shareholders and the Underlying Share Selling Shareholders to
utilize the services of broker-dealers who are members of the NASD. The current
market price of the Company's Common Stock is substantially less than $5 per
share and such stock can, for at least for the foreseeable future, be expected
to continue to trade in the over-the-counter market at a per share market price
of substantially less than $5. Accordingly, any broker-dealer sales of the
shares being registered hereunder, as well as any subsequent market transactions
in the Company's common stock, will be subject to the Penny Stock Rules. These
Rules affect the ability of broker-dealers to sell the Company's securities and
also may affect the ability of purchasers in this offering to sell their shares
in the secondary market, if such a market should ever develop.
The Penny Stock Rules also impose special sales practice requirements on
broker-dealers who sell such securities to persons other than their established
customers or "Accredited Investors." Among other things, the Penny Stock Rules
require that a broker-dealer make a
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special suitability determination respecting the purchaser and receive the
purchaser's written agreement to the transaction prior to the sale. In addition,
the Penny Stock Rules require that a broker-dealer deliver, prior to any
transaction, a disclosure schedule prepared in accordance with the requirements
of the Commission relating to the penny stock market. Disclosure also has to be
made about commissions payable to both the broker-dealer and the registered
representative and the current quotations for the securities. Finally, monthly
statements have to be sent to any holder of such penny stocks disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks. Accordingly, for so long as the Penny Stock
Rules are applicable to the Company's common stock, it may be difficult to trade
such stock because compliance with such Rules can delay and/or preclude certain
trading transactions. This could have an adverse effect on the liquidity and/or
price of the Company's common stock.
17. Management's Lack of Industry Experience. Although Management has
significant general business and engineering experience, potential investors
should be aware that, prior to their association with the Company, no member of
management has been directly involved in administering a tire disintegration,
recycling, tire disintegration equipment manufacturing, or molded rubber
products business, except for Mr. Sanzaro, who has more than twenty years of
experience in the recycling business (excluding tires).
18. Dependence on Key Personnel. The Company believes that its success
depends to a significant extent on the efforts and abilities of certain of its
senior management, in particular those of Terence C. Byrne, Chairman of the
Board of Directors and Chief Executive Officer; Louis Sanzaro, President and
Chief Operating Officer, and Louis V. Muro, Vice President in charge of
engineering. The loss of any of these persons could have a material adverse
affect on the Company's business, prospects, operating results, and financial
condition. The Company has entered into employment agreements with Messrs.
Byrne, Sanzaro, and Muro. The Company does not presently have key man life
insurance policies and does not intend to obtain any unless required to do so
under future financing arrangements. There can be no assurance that such
policies will be available to the Company on commercially reasonable terms, if
at all. Additionally, the ability of the Company to realize its business plan
could be jeopardized if any of its senior management becomes incapable of
fulfilling his obligations to the Company and a capable successor is not found
on a timely basis. There can however be no assurance that, in such event, the
Company will be able to locate and retain a capable successor to any member of
its senior management.
19. Regulatory and Environmental Considerations. The Company does not
expect that its equipment manufacturing operations will be subject to any
unusual or burdensome governmental regulations. However, the Company is
presently operating the First Production Model of the TCS Plant, which is
installed at its Montreal facility. The TCS-1 Plant is a "closed loop" system
which does not use any chemicals, solvents, gases or other substances which
could result in emissions of any kind and, to the best of the Company's
knowledge, does not result in the emission of air pollution, the disposal of
combustion residues, the storage of hazardous substances (as is the case with
other tire recycling processes such as pyrolysis), or the production of any
significant amounts of solid waste which would have to be landfilled. However,
the operation of a TCS-1 Plant involves, to varying degrees and for varying
periods of time, the
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storage of scrap tires which, with their size, volume and composition, can pose
serious environmental problems. While the Company does not believe that such
storage will normally involve quantities of tires so large or storage periods so
extensive as to constitute the "stockpiling" of scrap tires, it should be noted
that stockpiling, should it occur, could constitute a particularly serious
environmental problem. Among the numerous problems relating to scrap tires is
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. The Company, and, if any TCS-1 Plants
are sold by the Company, other operators of TCS-1 Plants, will therefore 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. Establishing and operating a TCS-1 Plant for tire
recycling will require numerous permits and compliance with environmental and
other government regulations, on the part of the Company's customers, both in
the United States and Canada and in most other foreign countries. The process of
obtaining required regulatory approvals may be lengthy and expensive for both
the Company and for its TCS-1 Plant 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.
Compliance with applicable environmental and other laws and regulations
governing the business of the Company, and of all TCS-1 Plant Operators, may
impose financial burdens that could adversely affect the business, financial
condition, prospects, and results of operations, of the Company. Such adverse
affects could include, but may not be limited to, the burden of compliance with
laws and regulations governing the installation and/or operation of TCS-1 Plants
discouraging potential customers from purchasing a TCS-1 Plant. 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 Plant and make such by-products less profitable or even impossible
to sell at an economically feasible price level.
The Company believes that existing government regulations, while
extensive, will not result in the disability of either the Company or its TCS-1
Plant customers to operate profitably and in compliance with such regulations.
However, 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 new
procedures for compliance, or prevent the Company or its TCS-1 customers from
obtaining, or affect the timing of, regulatory approvals. Actions by federal,
state, and local governments concerning environmental or other matters could
result in regulations that could therefore increase the cost of producing the
recyclable rubber, steel, and fiber which are the by-products from the operation
of the TCS-1 Plant and make such by-products less profitable or even impossible
to sell at an economically
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feasible price level, which could result in the Company's or its TCS-1
customers' businesses being less profitable, or unprofitable, to operate.
Continually changing government compliance standards and technology, could also
affect the Company's future capital expenditure requirements relating to
environmental compliance. Likewise, the burden of compliance with laws and
regulations governing the installation and/or operation of TCS-1 Plants could
discourage potential customers from purchasing a TCS-1 Plant which would
adversely affect the Company's business, prospects, results, and financial
condition. As a result, the business of the Company could be directly and
indirectly affected by government regulations.
20. Technological Changes. To date, the market for tire disintegration
equipment has not, to the best of management's knowledge, been characterized by
rapid changes in technology. However, there can be no assurance that new
products or technologies, presently unknown to the Company, will not, at any
time in the future and without warning, render the Company's tire disintegration
technology less competitive or even obsolete. Moreover, the technology upon
which the Company's tire disintegration system is based, could be susceptible to
being analyzed and reconstructed by an existing or potential competitor.
Although the Company has been issued a United States patent respecting its
proprietary disintegration system, the Company may not have the financial
resources to successfully defend such patent, were it is to become necessary, by
bringing patent infringement suits against parties that have substantially
greater resources than are available to the Company. The Company must continue
to create innovative new products reflecting technological changes in design,
engineering, and development, not only of new tire disintegration machinery, but
of products, and machinery capable of producing products, which incorporate and
recycle the rubber, steel, and/or fiber by-products which will be produced by
the operation of the TCS-1 Plant. Failure to do so, could prevent to Company
from gaining and maintaining a significant market for its products. This may
require a continuing high level of product development, innovation, and
expenditures. To the extent that the Company does not respond adequately to such
technological advances, its products may become obsolete and its growth and
profitability may be adversely affected.
21. Competition. With respect to our equipment manufacturing segment,
although management believes that the TCS-1 Plant has distinct advantages over
other existing tire disintegration methods, the Company will face competition
from other equipment manufacturers, virtually all of whom will be larger than
the Company, and will have substantially more assets and resources than the
Company. Management intends to meet such competition by developing technological
innovations which will keep the TCS-1 Plant more economical and efficient than
other tire disintegration methods although no assurance can be given that this
will prove to be the case.
With respect to our molded rubber products segment, the market for such
products is highly competitive. However, competition with respect to molded
products made from recycled rubber is comparatively moderate. The Company will
attempt to compete in certain markets for products presently made from both new
and recycled rubber. It intends to do so on the basis of quality and price. We
believe that, especially within the markets for products made from recycled
rubber, our ability to vertically integrate production, by using recycled rubber
crumb produced by our TCS-1 Plant, will give us a competitive advantage. With
respect to competition against manufacturers of new rubber, all of whom are
larger than the Company and have substantially more assets and resources than
the Company, competitive efforts will focus on
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research and development of new methods for utilizing at least a portion of more
economical and ecologically beneficial recycled rubber, where new rubber is now
used.
22. No Dividends and None Anticipated. The Company has not paid any cash
dividends, nor does it contemplate or anticipate paying any dividends upon its
Common Stock in the foreseeable future.
23. Possible Adverse Effects of Authorization and Issuance of Preferred
Stock. The Company's amended Certificate of Incorporation authorizes the
issuance of 5,000,000 shares of "Class A Stock". Twenty thousand of such shares
are reserved for issuance as preferred stock under an outstanding option
therefor. The Board of Directors has the power to issue the balance of the Class
A Stock in such series and classes and with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
The issuance of any series of preferred stock having rights superior to those of
the common stock may result in a decrease in the value or market price of the
common stock and could be used by the Board of Directors as a means to prevent a
change in control of the Company. Such preferred stock issuances could make the
possible takeover of the Company, or the removal of management of the Company,
more difficult. The issuance of such preferred stock could discourage hostile
bids for control of the Company in which shareholders could receive premiums for
their Common stock or warrants, could adversely affect the voting and other
rights of the holders of the common stock, or could depress the market price of
the common stock. Also, the voting power and percentage of stock ownership of
the shareholders of the Company's outstanding capital stock can be substantially
diluted by such preferred stock issuance. See also, Risk Factor No. 27 "Adverse
Effects of Proposals to Be Presented at Annual Shareholders Meeting:
Anti-Takeover Provisions, Limitations on Shareholders Voting Rights, and Stock
Bonuses to Management".
24. Prior Notice Not Required For Shareholder Actions. None of the
Company's securities is registered under Section 12 of the Securities Exchange
Act of 1934, as amended (the "34 Act"). As a result, the Company is not subject
to the Proxy Rules of Section 14 of the 34 Act. The Company is thus able to take
shareholder actions in conformance with Section 228 of the Delaware General
Corporation Act, which permits it to take any action which is required to, or
may, be taken at an annual or special meeting of the shareholders, without prior
notice and without a vote of the shareholders. Instead of such vote, the written
consent or consents in writing, setting forth the action so taken, can be signed
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted on such action.
The only notice which shareholders other than those who consented to such
action, are entitled to, is required to be given promptly after the action has
been taken.
25. Adverse Effects of Proposals to Be Presented at Annual Shareholders
Meeting: AntiTakeover Provisions, Limitations on Shareholders Voting Rights, and
Stock Bonuses to Management. The Company intends to hold an annual meeting of
its shareholders prior to the end of the current calendar year. This will be the
first meeting of the Shareholders ever called by the Company. The Board of
Directors has proposed that the Company's Certificate of Incorporation should be
amended and restated to contain provisions that may make it more difficult to
acquire control of the Company by means of tender offer, over-the-counter
purchases,
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a proxy fight, or otherwise. If adopted by the required vote of the Company's
shareholders, the amendments will include: (i) the addition of a "fair price"
provision to the Certificate of Incorporation that regulates business
combinations with any person or group beneficially owning fifteen percent (15%)
or more of the Company's common stock, including a voting requirement of
seventy-five percent (75%) of the voting power of all outstanding voting shares
of the Company (excluding shares held by such fifteen percent (15%) stockholder
or group of stockholders) for a business combination, unless the business
combination is approved by a majority of the members of the Board of Directors
who have held office since prior to the date of the 1999 annual meeting (the
"Continuing Directors") or satisfies certain minimum price and procedural
requirements; (ii) the addition to the Certificate of Incorporation of a
provision granting authority to the Board of Directors to adopt one or more
shareholder rights plans, rights agreements, or other forms of "poison pills" in
the future without further shareholder approval, (iii) the addition to the
Certificate of Incorporation of a provision classifying the Board of Directors
into three classes; (iv) the addition to the Certificate of Incorporation of a
seventy-five percent (75%) voting requirement for any stockholder action to be
taken by written consent; (v) an amendment to the Certificate of Incorporation
requiring the affirmative vote of the holders of seventy-five percent (75%) of
the outstanding voting stock to amend, alter and repeal the By-laws and to allow
the Board of Directors to amend, alter or repeal the By-laws without stockholder
consent; (vi) the addition to the Certificate of Incorporation of a provision
electing to be governed by the provisions of Section 203 of the Delaware General
Corporation Law which, under certain circumstances, imposes restrictions on
proposed business combinations between a company and an interested stockholder
of such company; (vii) the addition of a seventy-five percent (75%) voting
requirement in order to amend, alter or repeal the foregoing proposed amendments
to the Certificate of Incorporation; (viii) an amendment to the By-laws
eliminating the ability of stockholders to call a special meeting; and (ix) the
addition to the By-laws of a provision requiring that stockholders submit
director nominations and other business to be considered at meetings of
stockholders at least 90 days in advance of any such meeting of stockholders.
The proposed amendments are not being submitted to the shareholders in response
to any effort, of which the Company is aware, to accumulate the Company's common
stock or to obtain control of the Company.
The proposed amendments, individually and collectively, may have the
effect of making more difficult and discouraging a merger, tender offer or proxy
fight, even if such transaction or occurrence may be favorable to the interests
of some or all of the Company's stockholders. The proposed amendments also may
delay the assumption of control by a holder of a large block of the Company's
common stock and the removal of incumbent management, even if such removal might
be beneficial to some or all of the stockholders. Furthermore, the proposed
amendments may have the effects of deterring or frustrating certain types of
future takeover attempts that may not be approved by the incumbent Board of
Directors, but that the holders of a majority of the shares of Company's common
stock may deem to be in their best interests or in which some or all of the
stockholders may receive a substantial premium over prevailing market prices for
their stock.
By having the effect of discouraging takeover attempts, the proposed
amendments also could have the incidental effect of inhibiting certain changes
in management (some or all of the members of which might be replaced in the
course of a change of control) and also the temporary fluctuations in the market
price of the Company's common stock that could result from actual or rumored
takeover attempts. Moreover, tender offers or other non-open market acquisitions
of stock are usually made at prices above the prevailing market price of a
company's stock. In
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addition, acquisitions of stock in the open market by persons attempting to
acquire control may cause the market price of the stock to reach levels that are
higher than might otherwise be the case. Approval of the some or all of the
proposed amendments may deter such purchases, particularly purchases for less
than all of the Company's shares, and therefore may deprive holders of the
Company's common stock of an opportunity to sell their shares at a temporarily
higher market price.
Purchasers of the shares being registered hereunder should note that such
amendments, if adopted, will result in there being special requirements for
supermajority shareholder approval of any subsequent business combination and
the possibility that after an acquiror (for purposes of this discussion, an
"Interested Shareholder") purchases a certain percentage of the Company's common
stock, it will be forced to pay a higher price to other Company shareholders in
such a business combination. This would likely would make it more costly for a
third party to acquire control of the Company. Thus, the proposed amendments may
decrease the likelihood of a tender offer for less than all of the shares of the
common stock of the Company, which may adversely affect stockholders who desire
to participate in such a tender offer. In certain cases, the proposed fair price
amendment's minimum price provisions, while providing objective pricing
criteria, could be arbitrary and not indicative of value. In addition, an
Interested Stockholder may be unable, as a practical matter, to comply with all
of the procedural requirements. In these circumstances, unless an Interested
Stockholder were able to obtain special stockholder approval of a proposed
Business Combination, it would be forced either to negotiate with the Board of
Directors on terms acceptable to the Board or to abandon the proposed business
combination. The proposed amendments also would give veto power to minority
stockholders with respect to a proposed Business Combination that is opposed by
a majority of Continuing Directors but that is desired by a majority of the
Company's stockholders unless the minimum pricing and procedural requirements
were met. If members of the Company's current management and principal
shareholders were to maintain their current stock ownership, they would have the
ability to block the requisite vote. In addition, the proposed amendments may
tend to insulate incumbent directors against the possibility of removal in the
event of a takeover attempt because only the Continuing Directors would have the
authority to reduce to a simple majority or eliminate the special stockholder
vote required for a particular Business Combination.
While some of the proposed amendments would directly affect the
possibility of the Company's being the subject of a tender offer or a hostile
takeover, others will directly limit the ability of minority shareholders to
participate in Company affairs. The classified Board of Directors provisions,
will divide the Board of Directors into three classes of directors serving
staggered two-year terms, with two directors to be elected at each annual
meeting of shareholders. This will extend the time required to change the
composition of the Board of Directors. The provision requiring shareholders to
give 90 days advance notice to the Company of any nomination for election to the
Board of Directors, or other business to be brought at any shareholders' meeting
will make it more difficult for shareholders to nominate candidates to the Board
of Directors who are not supported by management. This provision will make it
more difficult to implement shareholder proposals even if a majority of
shareholders are in support thereof. Each of these provisions may also have the
effect of deterring hostile take-overs or delaying changes in control or
management of the Company. In addition, the indemnification provisions of the
Company's Certificate of Incorporation and Bylaws may represent a conflict of
interest between management and the shareholders since officers and directors
may be indemnified prior to any judicial determinations as to their conduct.
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Under Delaware law, each of the proposed amendments to the Certificate of
Incorporation and By-laws described above requires the affirmative vote of the
holders of a majority of the Company's outstanding shares of common stock. All
of the proposals are permitted by law. If stockholders approve any or all of the
proposed amendments, the Company will file a Restated Certificate of
Incorporation that reflects the proposed amendments with the Secretary of State
of the State of Delaware. Each of the proposed amendments adopted by the
Company's stockholders will become effective regardless of whether any of the
other proposed amendments to be acted upon at the Meeting is adopted.
In addition to the proposed amendments to the Certificate of Incorporation
and By-laws, the present Certificate of Incorporation authorizes the Board of
Directors to issue shares of Class A Stock having such rights, preferences and
privileges as designated by the Board of Directors without stockholder approval.
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SELLING SHAREHOLDERS
All of the shares of common stock (the "Shares") being offered hereunder
by the Selling Shareholders were acquired by them, pursuant to the terms of
their respective employment agreements, dated as of February 26, 1999 (the "Ash
Employment Agreement), July 1, 1997 (the "Crossley Employment Agreement"),
December 22, 1996 (as amended May 1, 1997) (the "Levine Employment Agreement"),
July 23, 1998 (the "Sanzaro Employment Agreement"), January 18, 1995 (as amended
May 30, 1996) (the "Byrne Employment Agreement) and June 22, 1998 (the "Rapfogel
Employment Agreement"). All of the Shares being offered by Messrs. Crossley,
Sanzaro and Byrne, and Ms. Levine were acquired by them in partial satisfaction
of salary payments and unreimbursed cash expenditures owed to them under their
respective Employment Agreements. All of the shares being offered by Mr. Ash
were acquired by Mr. Ash as a signing bonus under the Ash Employment Agreement.
All of the shares being offered by Mr. Rapfogel were acquired by Mr. Rapfogel as
a performance bonus under the Rapfogel Employment Agreement. The Ash Employment
Agreement, Crossley Employment Agreement, Levine Employment Agreement, Sanzaro
Employment Agreement, Byrne Employment Agreement and Rapfogel Employment
Agreement are each individually negotiated written compensation agreements
pursuant to which the Selling Shareholders render bona fide services not in
connection with the offer or sale of securities in a capital raising
transaction. Each of such agreements constitutes an Employee Benefit Plan, as
defined in Rule 405 of the Securities Act of 1933. The Ash Employment Agreement,
Crossley Employment Agreement, Levine Employment Agreement, Sanzaro Employment
Agreement, Byrne Employment Agreement, and Rapfogel Employment Agreement may
sometimes be referred to hereinafter, both singly and collectively, as the
"Plan". For purposes of this Reoffer Prospectus, all of the Shares being
registered hereunder are "restricted shares" insofar as they were issued to
affiliates or employees of the Registrant under an employee benefit plan
pursuant to a Securities Act exemption prior to their inclusion in a
registration statement on Form S-8, of which this Reoffer Prospectus is a part.
The table which follows identifies: (i) the Selling Shareholders; (ii) the
Plan pursuant to which the Shares being offered hereby have been acquired; (iii)
the nature of all positions, offices or other material relationships which the
Selling Shareholders have had with the Company within the past three years; (iv)
the number of shares of common stock owned by the Selling Shareholders prior to
the offering; (v) the number of shares of common stock to be offered for the
account of each of the Selling Shareholders; (vi) the number of shares of common
stock to be owned by the Selling Shareholders after the completion of the
offering, and (vii) the percentage of the Company's common stock to be owned by
the Selling Shareholders after completion of the offering.
29
<PAGE>
<TABLE>
<CAPTION>
Percentage
Number of Number of of Shares
Positions Shares Owned Number of Shares Owned Owned After
Selling Shareholder Compensation Agreement With Prior to Shares After the the
(Name of Plan) Company Offering Offered Offering Offering (5)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael D.A. Ash Employment Agreement dated as of Secretary,
February 26, 1999 Treasurer, Chief
Financial Officer 1,239,145(1) 700,000 539,145 (6)
Alan Crossley Employment Agreement dated July 1, Director of
1997 European Market
Development and a
former director 649,576 649,576 0 0
Frances Katz Levine Employment Agreement dated U.S. Corporate and
December 22, 1996 (as amended May Securities Counsel
1, 1997) and a former officer
and director 5,308,807(2) 874,287 4,434,520 5.7%
Louis Sanzaro Employment Agreement dated President, Director
July 23, 1998 and a former
consultant 5,259,633 874,287 4,385,346 5.6%
Terence C. Byrne Employment Agreement dated Chairman, CEO
January 18, 1995 (as amended May and former
30, 1996) President 14,424,236(3)(4) 91,873 14,332,363 18.3%
Scott Rapfogel Employment Agreement dated Assistant U.S.
June 22, 1998 Corporate and
Securities Counsel 646,296 350,000 296,296 (6)
====================================================================================================================================
</TABLE>
(Notes to This Table Appear on The Following Page)
30
<PAGE>
(1) Includes 300,000 shares held by Loryta Investments Ltd., a
corporation owned by the Loryta Trust, the beneficiaries of which
are Mr. Ash's wife and two children.
(2) Includes 3,223,835 shares held of record by Ms. Levine's spouse,
Robert Levine.
(3) Includes: (i) 1,415,443 shares held of record by Mr. Byrne as of May
20, 1999; (ii) 69,883 shares held of record by Mr. Byrne's wife,
Darla Sapone Byrne, as of May 20, 1999, over which shares Mr. Byrne
has voting power pursuant to an irrevocable proxy granted to him on
September 27, 1996; and (iii) 12,938,910 shares held of record by
Bartholomew International Investments, Ltd., as of May 20, 1999,
which is owned by the Bartholomew Trust, which holds such shares for
the benefit of Mr. Byrne, his spouse and Mr. Byrne's two sons.
(4) Does not include 4,331,092 shares owned as at May 20, 1999 by The
NAIS Corporation over which shares Mr. Byrne has voting power
pursuant to an irrevocable proxy.
(5) Based upon 78,428,779 shares issued and outstanding on May 10, 1999.
(6) Less than 1%.
31
<PAGE>
PLAN OF DISTRIBUTION
Except for Messrs. Byrne and Rapfogel, none of the Selling Shareholders
have offered or sold any shares of the Company's Common Stock pursuant to a
registration statement on Form S-8 within the three-month period preceding the
date hereof. On March 24, 1999 the Company filed Registration Statements on Form
S-8 on behalf of Messrs. Byrne (Registration No. 333- 74941) and Rapfogel
(Registration No. 333-74939) providing for the sale of up to 782, 414 shares by
Mr. Byrne and up to 181,353 shares by Mr. Rapfogel (the "Prior Shares"). These
Registration Statements are still effective. As of May 17, 1999 Mr. Byrne had
sold 757,000 of these shares and Mr. Rapfogel had sold 35,057 of these shares.
For each Selling Shareholder, the number of shares offered hereunder by them,
together with, the Prior Shares where applicable, sold, or to be sold by them
represents less than one percent of the total number of shares of the Company's
common stock presently issued and outstanding. The Selling Shareholders may sell
all or part of the shares, from time to time, in the over-the-counter market, or
in such other public market for the Company's common stock as may develop, at
market prices then pertaining. In connection therewith the Selling Shareholders
may utilize the services of broker-dealers, none of whom will act as
underwriters with respect to sales of the Shares. The names of any such
brokers-dealers, who have not yet been identified, will be set forth in a
supplement to this Reoffer Prospectus, to the extent required.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of one hundred twenty
million shares (120,000,000), par value $.001 per share, of which one hundred
fifteen million (115,000,000) shares are designated Common Stock par value $.001
per share, and five million (5,000,000) shares are designated Class A Stock, par
value $.001 per share. As at May 10, 1999 there were eighty seven million, four
hundred twenty eight thousand, seven hundred seventy nine (87,428,779) shares of
Common Stock issued and outstanding. The Class A Stock may be issued from time
to time, in one or more classes, or one or more series within any class thereof,
in any manner permitted by law, as determined from time to time by the Company's
board of directors, and stated in the resolution or resolutions providing for
the issuance of such shares adopted by the Company's board of directors pursuant
to authority vested in it in the Company's Certificate of Incorporation, each
class or series to be appropriately designated, prior to the issuance of any
shares thereof, by some distinguishing letter, number designation or title. All
shares of stock in such classes or series may be issued for such consideration
and have such voting powers, full or limited, or no voting powers, and shall
have such designations, preferences and relative, participating, optional, or
other special rights, and qualifications, limitations or restrictions thereof,
permitted by law, as shall be stated and expressed in the resolution or
resolutions, providing for the issuance of such shares adopted by the Company's
board of directors pursuant to authority vested in the Company's Certificate of
Incorporation. The number of shares of stock of any class or series within any
class, so set forth in such resolution or resolutions may be increased (but not
above the total number of authorized shares) or decreased (but not below the
32
<PAGE>
number of shares thereof then outstanding) by further resolution or resolutions
adopted by the Company's board of directors pursuant to authority vested in it
in the Company's Certificate of Incorporation.
The Company's Board of Directors may determine the times when, the terms
under which and the consideration for which the Company shall issue, dispose of
or receive subscriptions for its shares, including treasury shares, or acquire
its own shares. The consideration for the issuance of the shares shall be paid
in full before their issuance and shall not be less than the par value per
share. Upon payment of such consideration, such shares shall be deemed to be
fully paid and nonassessable by the Company.
The holders of shares of Common Stock are entitled to dividends when and
as declared by the Board of Directors from funds legally available therefore
and, upon liquidation, are entitled to share pro rata in any distribution to
shareholders. Holders of the Common Stock have one non-cumulative vote for each
share hold. There are no pre-emptive, conversion or redemption privileges, nor
sinking fund provisions, with respect to the Common Stock.
Stockholders are entitled to one vote of each share of Common Stock held
of record on matters submitted to a vote of stockholders. The Common Stock does
not have cumulative voting rights. As a result, the holders of more than 50% of
the shares of Common Stock voting for the election of directors can elect all of
the directors if they choose to do so, and, in such event, the holders of the
remaining shares of Common Stock will not be able to elect any person or persons
to the board of directors of the Company.
EXPERTS
The financial statements and schedules of the Company and its subsidiaries
included in the Company's Annual Report on Form 10-KSB, for the fiscal year
ended June 30, 1998, which is incorporated herein by reference, have been
examined by Pinkham & Pinkham, P.C., Certified Public Accountants, and such
financial statements and reports are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing.
LEGAL OPINIONS
The legality of the Shares offered hereby has been passed upon for the
Company by its corporate and securities counsel. Frances Katz Levine serves as
corporate and securities counsel to the Company and Scott Rapfogel serves as
assistant corporate and securities counsel to the Company. As at May 10, 1999
Ms. Levine and her husband, Robert Levine, were the record and beneficial owners
of approximately 6.1% of the Company's issued and outstanding common stock and
Scott Rapfogel was the record and beneficial owner of less than 1% of the
Company's issued and outstanding common stock.
33
<PAGE>
INDEMNIFICATION
The Company's certificate of incorporation provides for indemnification to
the fullest extent permitted by Section 145 of the Delaware General Corporation
Law ("Section 145"). Pursuant thereto, the Company indemnifies its officers,
directors, employees and agents to the fullest extent permitted for losses and
expenses incurred by them in connection with actions in which they are involved
by reason of their having been directors, officers, employees, or agents of the
Company. Section 145 permits a corporation to indemnify any person who is or has
been a director, officer, employee, or agent of the corporation or who is or has
been serving as a director, officer, employee or agent of another corporation,
organization, or enterprise at the request of the corporation, against all
liability and expenses (including but not limited to attorneys' fees and
disbursements and amounts paid in settlement or in satisfaction of judgments or
as fines or penalties) incurred or paid in connection with any action, suit or
proceeding, whether civil, criminal, administrative, investigative, or
otherwise, in which he or she may be involved by reason of the fact that he or
she served or is serving in these capacities, if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no cause o believe his or her conduct was unlawful. In the case
of a claim, action, suit or proceeding made or brought by or in the right of the
corporation to procure a recovery or judgment in its favor, the corporation
shall not indemnify such person in respect of any claim issue or matter as to
which such person has been adjudged to be liable to the corporation for
negligence or misconduct int he performance of his or her duty to the
corporation, except for such expenses as the Court may allow. Any such person
who has been wholly successful on the merits or otherwise with respect to any
such claim, action, suit or proceeding or with respect to any claim, issue or
matter therein, shall be indemnified as of right against all expenses in
connection therewith or resulting therefrom. The effect of this provision in the
certificate of incorporation is to eliminate the rights of the Registrant and
its stockholders (through stockholders' derivative suits on behalf of the
Registrant) to recover monetary damages against a director for breach of
fiduciary duty as a director (including breaches resulting from negligent or
grossly negligent behavior) except in the situations described above.
The Company's By-laws provide for indemnification of the Company's
officers and directors against all liabilities (including reasonable costs,
expenses, attorney's fees, obligations for payment in settlement and final
judgment) incurred by or imposed upon them in the preparation, conduct or
compromise of any actual or threatened action, suit, or proceeding, whether
civil, criminal, or administrative, including any appeals therefrom and any
collateral proceedings in which they shall be involved by reason of any action
or omission by them in their capacity as a director or officer of the Company,
or of any other corporation which they serve as a director or officer at the
request of the Company, whether or not such person is a director or officer at
the time such liabilities are incurred or any such action, suit, or proceeding
is commenced against them. The indemnification provided by the By-laws does not
extend, however, to certain situations involving misconduct, willful
misfeasance, bad faith, or gross negligence.
34
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by registrant of expenses incurred in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Except to the extent hereinabove set forth, there is no charter provision,
by-law, contract, arrangement or statute pursuant to which any director or
officer of registrant is indemnified in any manner against any liability which
he may incur in his capacity as such.
35
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents are incorporated by reference in this registration
statement.
(a) Registrant's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1998, filed pursuant to Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(b) Registrant's quarterly reports on Forms 10-QSB for the fiscal
quarters ended September 30, 1998, December 31, 1998, and March 31,
1999, filed pursuant to Section 15(d) of the Exchange Act, and
Registrant's Current Reports on Form 8-K, dated May 27, 1998 (filed
with the Commission on August 3, 1998), September 14, 1998 (filed
with the Commission on September 18, 1998), March 17, 1999 (filed
with the Commission on March 23, 1999), and May 4, 1999 (filed with
the Commission on May 18, 1999);
All documents filed by the Registrant pursuant to Section 13(a), 13(c),
14, and 15(d) of the Securities Act and Sections 13(a), 13(c), and 14 of the
Exchange Act after the date of this registration statement and prior to the
filing of a post-effective amendment to this registration statement which
indicates that all securities offered hereunder have been sold, or which
registers all securities then remaining unsold under this registration
statement, shall be deemed to be incorporated by reference in this registration
statement and to be a part hereof from the date of filing of such documents.
Item 4. Description of Securities.
The authorized capital stock of Registrant consists of one hundred twenty
million shares (120,000,000), par value $.001 per share, of which one hundred
fifteen million, (115,000,000) shares are designated Common Stock par value
$.001 per share, and five million (5,000,000) shares are designated Class A
Stock, par value $.001 per share. As at May 10, 1999 there were eighty seven
million, four hundred twenty eight thousand, seven hundred seventy nine
(87,428,779) shares of Common Stock issued and outstanding. The Class A Stock
may be issued from time to time, in one or more classes, or one or more series
within any class thereof, in any manner permitted by law, as determined from
time to time by Registrant's board of directors, and stated in the resolution or
resolutions providing for the issuance of such shares adopted by Registrant's
board of directors pursuant to authority vested in it in Registrant's
Certificate of Incorporation, each class or series to be appropriately
designated, prior to the issuance of any shares thereof, by some distinguishing
letter, number designation or title. All shares of stock in such classes or
series may be issued for such consideration and have such voting powers, full or
36
<PAGE>
limited, or no voting powers, and shall have such designations, preferences and
relative, participating, optional, or other special rights, and qualifications,
limitations or restrictions thereof, permitted by law, as shall be stated and
expressed in the resolution or resolutions, providing for the issuance of such
shares adopted by Registrant's board of directors pursuant to authority vested
in Registrant's Certificate of Incorporation. The number of shares of stock of
any class or series within any class, so set forth in such resolution or
resolutions may be increased (but not above the total number of authorized
shares) or decreased (but not below the number of shares thereof then
outstanding) by further resolution or resolutions adopted by Registrant's board
of directors pursuant to authority vested in it in Registrant's Certificate of
Incorporation.
Registrant's board of directors may determine the times when, the terms
under which and the consideration for which Registrant shall issue, dispose of
or receive subscriptions for its shares, including treasury shares, or acquire
its own shares. The consideration for the issuance of the shares shall be paid
in full before their issuance and shall not be less than the par value per
share. Upon payment of such consideration, such shares shall be deemed to be
fully paid and nonassessable by Registrant.
The holders of shares of Common Stock are entitled to dividends when and
as declared by the Board of Directors from funds legally available therefore
and, upon liquidation, are entitled to share pro rata in any distribution to
shareholders. Holders of the Common Stock have one non-cumulative vote for each
share hold. There are no pre-emptive, conversion or redemption privileges, nor
sinking fund provisions, with respect to the Common Stock.
Stockholders are entitled to one vote of each share of Common Stock held
of record on matters submitted to a vote of stockholders. The Common Stock does
not have cumulative voting rights. As a result, the holders of more than 50% of
the shares of Common Stock voting for the election of directors can elect all of
the directors if they choose to do so, and, in such event, the holders of the
remaining shares of Common Stock will not be able to elect any person or persons
to the board of directors of Registrant.
Item 5. Interest of Named Experts and Counsel.
Frances Katz Levine, counsel to the Registrant, is employed by Registrant
as its corporate and securities counsel. As at May 10, 1999 Ms. Levine and her
husband, Robert Levine, were the record and beneficial owners of approximately
6.1% of the Registrant's issued and outstanding common stock. Scott Rapfogel,
counsel to the Registrant, is employed by Registrant as its assistant corporate
and securities counsel. Mr. Rapfogel is the record and beneficial owner of less
than 1% of the Registrant's issued and outstanding common stock.
37
<PAGE>
Item 6. Indemnification of Directors and Officers.
Registrant's certificate of incorporation provides for indemnification to
the fullest extent permitted by Section 145 of the Delaware General Corporation
Law ("Section 145"). Pursuant thereto, the Registrant indemnifies its officers,
directors, employees and agents to the fullest extent permitted for losses and
expenses incurred by them in connection with actions in which they are involved
by reason of their having been directors, officers, employees, or agents of the
Registrant. Section 145 permits a corporation to indemnify any person who is or
has been a director, officer, employee, or agent of the corporation or who is or
has been serving as a director, officer, employee or agent of another
corporation, organization, or enterprise at the request of the corporation,
against all liability and expenses (including but not limited to attorneys' fees
and disbursements and amounts paid in settlement or in satisfaction of judgments
or as fines or penalties) incurred or paid in connection with any action, suit
or proceeding, whether civil, criminal, administrative, investigative, or
otherwise, in which he or she may be involved by reason of the fact that he or
she served or is serving in these capacities, if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no cause o believe his or her conduct was unlawful. In the case
of a claim, action, suit or proceeding made or brought by or in the right of the
corporation to procure a recovery or judgment in its favor, the corporation
shall not indemnify such person in respect of any claim issue or matter as to
which such person has been adjudged to be liable to the corporation for
negligence or misconduct int he performance of his or her duty to the
corporation, except for such expenses as the Court may allow. Any such person
who has been wholly successful on the merits or otherwise with respect to any
such claim, action, suit or proceeding or with respect to any claim, issue or
matter therein, shall be indemnified as of right against all expenses in
connection therewith or resulting therefrom. The effect of this provision in the
certificate of incorporation is to eliminate the rights of the Registrant and
its stockholders (through stockholders' derivative suits on behalf of the
Registrant) to recover monetary damages against a director for breach of
fiduciary duty as a director (including breaches resulting from negligent or
grossly negligent behavior) except in the situations described above.
The Registrant's By-laws provide for indemnification of the Registrant's
officers and directors against all liabilities (including reasonable costs,
expenses, attorney's fees, obligations for payment in settlement and final
judgment) incurred by or imposed upon them in the preparation, conduct or
compromise of any actual or threatened action, suit, or proceeding, whether
civil, criminal, or administrative, including any appeals therefrom and any
collateral proceedings in which they shall be involved by reason of any action
or omission by them in their capacity as a director or officer of the
Registrant, or of any other corporation which they serve as a director or
officer at the request of the Registrant, whether or not such person is a
director or officer at the time such liabilities are incurred or any such
action, suit, or proceeding is commenced against them. The indemnification
provided by the By-laws does not extend, however, to certain situations
involving misconduct, willful misfeasance, bad faith, or gross negligence.
38
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by registrant of expenses incurred in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Except to the extent hereinabove set forth, there is no charter provision,
by-law, contract, arrangement or statute pursuant to which any director or
officer of registrant is indemnified in any manner against any liability which
he may incur in his capacity as such.
Item 7. Exemption From Registration Claimed.
Not Applicable.
Item 8. Exhibits.
The exhibits filed as a part of this Report or incorporated herein by
reference are as follows:
Exhibit No. Item
- ----------- ----
5.1 Opinion of Scott Rapfogel, Esq., regarding the legality of the
securities being registered under this Registration Statement.
10.1 Employment Agreement dated as of February 26, 1999 between
Registrant and Michael D.A. Ash
10.2 Employment Agreement dated July 1, 1997 between Registrant and
Alan Crossley(1)
10.3 Employment Agreement dated December 22, 1996 between Registrant
and Frances Katz Levine(2)
10.4 Amendment, dated May 1, 1997, to Employment Agreement of December
22, 1996, between the Registrant and Frances Katz Levine(3)
39
<PAGE>
10.5 Employment Agreement made as of July 23, 1998 between the
Registrant and Louis Sanzaro (4)
10.6 Employment Agreement dated January 18, 1995 between the
Registrant and Terence C. Byrne (5)
10.7 Amendment No. 1 dated May 30, 1996 to Employment Agreement dated
January 18, 1995 between the Registrant and Terence C. Byrne (6)
10.8 Employment Agreement made as of June 22, 1998 between the
Registrant and Scott Rapfogel (7)
24.1 Consent of Pinkham & Pinkham, P.C., Certified Public Accountants
Independent Auditors for the Registrant.
24.2 Consent of Scott Rapfogel, Esq., counsel for the Registrant (set
forth in the opinion of counsel included as Exhibit 5.1).
- ----------
(1) Filed with the Securities and Exchange Commission, as Exhibit 10(zz) to
the Registrant's Annual Report or Form 10-KSB for the fiscal year ended
June 30, 1998, which exhibit is incorporated herein by reference.
(2) Filed with the Securities and Exchange Commission, as exhibit 10(gggg) to
the Registrant's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997, which exhibit is incorporated herein by reference.
(3) Filed with the Securities and Exchange Commission, as exhibit 10(hhhh) to
the Registrant's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997, which exhibit is incorporated herein by reference.
(4) Filed with the Securities and Exchange Commission on July 30, 1998 as
Exhibit 10.1 to the Company's Current Report on Form 8-K dated May 27,
1998, which exhibit is incorporated herein by reference.
(5) Filed with the Securities and Exchange Commission, as Exhibit 10(rr) to
the Registrant's Annual Report or Form 10-KSB for the fiscal year ended
June 30, 1995, which exhibit is incorporated herein by reference.
(6) Filed with the Securities and Exchange Commission, as Exhibit 4.7, to the
Registration Statement of the Registrant on Form S-8 (Registration No.
333-5310), which exhibit is incorporated herein by reference.
40
<PAGE>
(7) Filed with the Securities and Exchange Commission on July 30, 1998 as
Exhibit 10.3 to the Company's Current Report on Form 8-K dated May 27,
1998, which exhibit is incorporated herein by reference.
Item 9. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
41
<PAGE>
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities /Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the act and will be governed by the final adjudication of
such issue.
42
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Montreal, Province of Quebec, Canada, on the 20th day
of May, 1999.
THE TIREX CORPORATION
By /s/ Terence C. Byrne
----------------------------------
Terence C. Byrne,
Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Terence C. Byrne Chairman of the Board May 20, 1999
- ------------------------------ of Directors and Chief
Terence C. Byrne Executive Officer
/s/ Michael D.A. Ash Secretary, Treasurer May 20, 1999
- ------------------------------ and Chief Financial and
Michael D.A. Ash Accounting Officer
Majority of the Board of Directors
/s/ Terence C. Byrne Director May 20, 1999
- ------------------------------
Terence C. Byrne
/s/ Louis Sanzaro Director May 20, 1999
- ------------------------------
Louis Sanzaro
/s/ Louis V. Muro Director May 20, 1999
- ------------------------------
Louis V. Muro
/s/ Henry Meier Director May 20, 1999
- ------------------------------
Henry Meier
43
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Documents Page
- ------ ------------------------ ----
5.1 Opinion of Scott Rapfogel, Esq., regarding the legality
of the securities being registered under this
Registration Statement. 46
10.1 Employment Agreement dated as of February 26, 1999
between Registrant and Michael D.A. Ash 48
10.2 Employment Agreement dated July 1, 1997 between
Registrant and Alan Crossley(1)
10.3 Employment Agreement dated December 22, 1996 between
Registrant and Frances Katz Levine(2)
10.4 Amendment, dated May 1, 1997, to Employment Agreement
of December 22, 1996, between the Registrant and
Frances Katz Levine(3)
10.5 Employment Agreement made as of July 23, 1998 between
the Registrant and Louis Sanzaro (4)
10.6 Employment Agreement dated January 18, 1995 between the
Registrant and Terence C. Byrne (5)
10.7 Amendment No. 1 dated May 30, 1996 to Employment Agreement
dated January 18, 1995 between the Registrant and
Terence C. Byrne (6)
10.8 Employment Agreement made as of June 22, 1998 between
the Registrant and Scott Rapfogel (7)
24.1 Consent of Pinkham & Pinkham, P.C., Certified Public
Accountants Independent Auditors for the Registrant. 61
24.2 Consent of Scott Rapfogel, Esq., counsel for the Registrant
(set forth in the opinion of counsel included as Exhibit 5.1).
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- ----------
(1) Filed with the Securities and Exchange Commission, as Exhibit 10(zz) to
the Registrant's Annual Report or Form 10-KSB for the fiscal year ended
June 30, 1998, which exhibit is incorporated herein by reference.
(2) Filed with the Securities and Exchange Commission, as exhibit 10(gggg) to
the Registrant's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997, which exhibit is incorporated herein by reference.
(3) Filed with the Securities and Exchange Commission, as exhibit 10(hhhh) to
the Registrant's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997, which exhibit is incorporated herein by reference.
(4) Filed with the Securities and Exchange Commission on July 30, 1998 as
Exhibit 10.1 to the Company's Current Report on Form 8-K dated May 27,
1998, which exhibit is incorporated herein by reference.
(5) Filed with the Securities and Exchange Commission, as Exhibit 10(rr) to
the Registrant's Annual Report or Form 10-KSB for the fiscal year ended
June 30, 1995, which exhibit is incorporated herein by reference.
(6) Filed with the Securities and Exchange Commission, as Exhibit 4.7, to the
Registration Statement of the Registrant on Form S-8 (Registration No.
333-5310), which exhibit is incorporated herein by reference.
(7) Filed with the Securities and Exchange Commission on July 30, 1998 as
Exhibit 10.3 to the Company's Current Report on Form 8-K dated May 27,
1998, which exhibit is incorporated herein by reference.
45
EXHIBIT
5.1
OPINION OF
SCOTT RAPFOGEL, ESQ.
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The Tirex Corporation
Office of Corporate Counsel
================================================================================
Frances Katz Levine, Esq.* 621 Clove Road
Scott Rapfogel, Esq.* Staten Island, NY 10310
*Member, New York and Telephone (718) 981-8485
New Jersey Bars Telefax (718) 447-1153
May 20, 1999
The Tirex Corporation
740 St. Maurice, Suite 201
Montreal, Quebec
Canada H3C 1L5
Ladies and Gentlemen:
You have requested my opinion as counsel for The Tirex Corporation, a
Delaware corporation (the "Registrant"), in connection with the registration
under the Securities Act of 1933, as amended, and the Rules and Regulations
promulgated thereunder, and the public offering by the selling shareholders (the
"Selling Shareholders") named in the Registrant's Registration Statement on Form
S-8, to be filed with the Securities and Exchange Commission on or about May 21,
1999 (the "Registration Statement"), of an aggregate of three million, five
hundred forty thousand, twenty three (3,540,023) shares of Common Stock of the
Registrant, $.001 par value, per share, currently issued and outstanding in the
names of the Selling Shareholders (the "Shares").
I have examined the Registration Statement in the form to be filed with
the Securities and Exchange Commission, the Certificate of Incorporation of the
Registrant as certified by the Secretary of State of the State of Delaware, the
Bylaws and the minute books of the Registrant as a basis for the opinion
hereafter expressed.
Based on the foregoing examination, it is my opinion, and I so advise,
that the 3,540,023 Shares currently are, and upon sale in the manner described
in the Registrant Statement will be, legally issued, fully paid and
nonassessable.
I consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Scott Rapfogel
47
EXHIBIT
10.1
EMPLOYMENT AGREEMENT DATED AS OF FEBRUARY 26, 1999
BETWEEN REGISTRANT AND MICHAEL D.A. ASH
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----------
THE TIREX CORPORATION
----------
Executive Agreement
----------
This Executive Agreement (the "Agreement") is made and entered into as of
this 26th day of February 1999 by and among:
The Tirex Corporation
740 St. Maurice, Suite 201
Montreal, Quebec
Canada H3C 1L5
(the "Corporation")
Michael Ash
310 Montee Sabourin
St. Bruno PQ
J3V 4P6
(the "Executive")
Whereas, The Tirex Corporation (the "Corporation"), is a publicly-held
Delaware corporation, the common stock of which is traded in the
over-the-counter market in the United States and quoted on the electronic
bulletin board of the National Association of Securities Dealers (the "OTC
Bulletin Board").
Whereas, The Corporation desires to employ the Executive as a Vice
President of the Corporation and the Executive is willing to accept such
employment by the Corporation, on the terms and subject to the conditions set
forth in this Agreement.
Whereas, The Corporation is in very early stages of development, with very
limited assets, income, operations, and financial resources on hand to finance
the development of their technology and the commencement of their commercial
operations. Their future financial prospects and positions are therefore highly
contingent and, as at the date hereof, impossible to predict. Based upon the
foregoing, the Corporation's Board of Directors believe that unregistered
49
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shares of the Corporation's common stock, which cannot be sold into the public
market for an extended period of time, may reasonably be deemed to have a value
which reflects the Corporation's poor financial position and uncertain future,
and can reasonably be expected to be saleable by the Corporation, in arm's
length transactions, for approximately 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 the Corporation and all other
corporations, partnerships, or other entities, now or in the future controlled
by the Corporation, jointly and severally.
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 "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.
1.3 "Effective Date" shall mean January 4, 1999.
1.4 "Termination For Cause" shall mean termination by the Corporation of
the Executive's employment by reason of the Executive's willful dishonesty
towards, fraud upon, or deliberate injury or attempted injury to, the
Corporation or by reason of the Executive's willful material breach of this
Agreement which has resulted in material injury to the Corporation.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause without (i) Written notice to the Executive setting forth
the reasons for the Corporation's
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intention to terminate for Cause, (ii) an opportunity on not less than 20 days
written notice from the Corporation to the Executive for the Executive, together
with his counsel, to be heard before the full Board of Directors of the
Corporation, and (iii) delivery to the Executive 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 Executive was guilty of conduct set forth above and specifying the
particulars thereof in detail.
1.5 "Termination for 'Good Reason'" shall mean termination by the
Executive of the Executive'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 Executive to the Corporation, (iii) the determination by the
Executive 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 Executive can no longer properly and effectively discharge his
responsibilities as a Vice President 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 Executive'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).
1.6 "Termination Other Than For Cause" shall mean termination by the
Corporation of the Executive's employment by the Corporation (other than in a
Termination for Cause).
1.7 "Termination Upon a Change in Control" shall mean a termination by the
Corporation of the Executive's employment with the Corporation within 120 days
following a "Change in Control", as that term is defined in Paragraph 1.1.
1.8 "Voluntary Termination" shall mean termination by the Executive of the
Executive's employment by the Corporation other than (i) Termination Upon a
Change in Control or (ii) Termination for Good Reason, and (iv) termination by
reason of the Executive's death or disability as described in Paragraphs 6.4 and
6.5.
2. Employment
During the term of this Agreement, the Executive agrees to be employed by
the Corporation and to serve as Secretary, Treasurer and Chief Financial and
Accounting Officer of the Corporation or in such other positions as the
Corporation shall require, and the Corporation agrees to employ and retain the
Executive in such capacities.
3. Duties and Responsibilities
3.1 Time and Reporting Obligations. The Executive shall devote his full
time, energy, and skills to the affairs of the Corporation, reporting solely and
exclusively to Terence C. Byrne,
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the President and Chief Executive Officer thereof, or such other person as Mr.
Byrne shall designate.
3.2 Duties. The Executive's duties and responsibilities shall include, but
may not be limited to the normal duties and responsibilities of the office or
offices set forth in Section 2, above.
3.3 Other Activities. The Executive hereby acknowledges that the
Corporation reserves the right to review with the Executive his present
directorships and any other positions held by him in business organizations, and
the Executive agrees to terminate his participation in such positions if the
Corporation shall determine, in a particular case, that there is a potential
material conflict with the Corporation's best interests. Any future proposed
directorships and/or positions in or with other business organizations shall be
subject to review by the board of directors of the Corporation, providing
however, that such board shall not prohibit any such activities unless such
potential material conflicts with the Executive's duties as a Vice President of
the Corporation shall exist.
4. Term of Employment
4.1 Term. The term of employment of the Executive by the Corporation shall
be for a period of three 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 Executive may by
mutual written agreement extend the Executive'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 Signing Bonus. In consideration of the Executive's agreeing to
discontinue, as expeditiously as practicable in a reasonable and orderly manner,
his other business activities in order to enter into this agreement, the
Corporation will issue to the Executive, upon execution of this Agreement, one
million (1,000,000) shares of the common stock of the Corporation.
5.2 Annual Salary. As payment for the services to be rendered by the
Executive as provided in Section 3, the Corporation agrees to pay to the
Executive an annual salary ("Salary"), beginning as of the Effective Date, at
the rate of one hundred twenty-five thousand United States dollars (US $125,000)
per annum payable in 26 equal bi-weekly installments subject to annual review
and increase, as the board of directors shall determine.
5.3 Compensation Shares in Lieu of Cash Payments. Notwithstanding the
requirements of Paragraph 5.2, above, the Executive and the Corporation agree
and acknowledge that:
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5.3.1 From time to time, during the foreseeable future, the Corporation
may not have available the financial resources to pay to the Executive, in cash,
the full amount of the Salary; In such event, with the consent of the Executive,
the obligations of the Corporation with respect to any unpaid amount of Salary
will be satisfied by the issuance to the Executive of shares of the common stock
of the Corporation ("Compensation Shares"), which Compensation Shares shall
constitute compensation pursuant to the terms of this Executive Agreement.
5.3.2 All Compensation Shares will be issued to and held by the Executive
pursuant to the terms of a stock restriction agreement, on terms mutually
agreeable to the parties.
5.3.3 All Compensation Shares will be issued to the Executive at a value
equal to fifty percent (50%) of the average of the high and low bid prices of
the Corporation's common stock, during the period when such Compensation Shares
were earned, as traded in the over-the-counter market and quoted in the OTC
Electronic Bulletin Board or such other public market in the United States in
which the common stock of the Corporation shall then be traded.
5.3.4 From time to time, all or part of the Compensation Shares may be
registered by the Corporation 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 Corporation or the executive committee thereof shall determine.
5.4 Bonuses. the Executive 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 Executive's performance during such year. All such bonuses
shall be reviewed annually by the Compensation Committee, if any shall be in
existence.
5.5 Additional Benefits. During the term of this Agreement, the Executive
shall be entitled to the following fringe benefits:
(a) Executive Benefits. The Executive 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 Executive's employment
with will be deemed to have commenced on the Effective Date.
(b) Vacation. The Executive shall be entitled to reasonable vacation
time during each year during the term of this Agreement and any
extensions thereof, in an amount to be determined by the mutual
agreement of the
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Executive and the board of director of the Corporation, provided
however that such amount shall be a minimum of three weeks per year.
(c) Car Allowance. The Executive shall receive a monthly car allowance
of two hundred fifty Canadian dollars (Cdn $500).
5.6 Reimbursement for Expenses. During the term of this Agreement, the
Corporation shall reimburse the Executive for reasonable and properly documented
out-of-pocket business and/or entertainment expenses incurred by the Executive
in connection with his duties under this Agreement.
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 1.5 at any
time during the term of this Agreement and shall be effected by written
notification to the Executive in accordance with Paragraph 6.9, below. Upon the
effectiveness of a Termination For Cause, the Executive 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
the Corporation in which the Executive is a participant to the full extent of
the Executive's rights under such plans, accrued vacation pay and any
appropriate business expenses incurred by the Executive in connection with his
duties hereunder, all to the date of termination, but the Executive shall not be
paid any other compensation or reimbursement of any kind.
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 Executive of such termination. Upon
the effectiveness of any Termination Other Than For Cause, the Executive 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 Executive is a participant to the full
extent of the Executive's rights under such plans (including accelerated
vesting, if any, of awards granted to the Executive under the Corporation's
stock option plan), accrued vacation pay and any appropriate business expenses
incurred by the Executive in connection with his duties hereunder, all to the
date of termination, and all severance compensation as provided in Paragraph
6.1.
6.3 Termination For Good Reason. Notwithstanding anything else in this
Agreement, the Executive 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 Executive 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 Executive is
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a participant to the full extent of the Executive's rights under such plans
(including accelerated vesting, if any, of awards granted to the Executive
under's stock option plan), accrued vacation pay and any appropriate business
expenses incurred by the Executive in connection with his duties hereunder, all
to the date of termination, and all severance compensation as provided in
Paragraph 6.1.
6.4 Termination by Reason of Disability. If, during the term of this
Agreement, the Executive fails to perform his 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 Executive's employment
hereunder by written notification to the Executive and payment to the Executive
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 Executive is a participant to the full extent of the Executive's
rights under such plans, accrued vacation pay and any appropriate business
expenses incurred by the Executive in connection with his 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 Executive
shall not be paid any other compensation or reimbursement of any kind.
6.5 Death. In the event of the Executive's death during the term of this
Agreement, the Executive's employment shall be deemed to have terminated as of
the last day of the month during which his death occurs and the Corporation
shall promptly pay to his estate or such beneficiaries as the Executive may from
time to time designate 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 Executive is a participant to the full
extent of the Executive's rights under such plans, accrued vacation pay and any
appropriate business expenses incurred by the Executive in connection with his
duties hereunder, all to the date of termination, but the Executive'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 Executive is a participant
to the full extent of the Executive's rights under such plans, accrued vacation
pay and any appropriate business expenses incurred by the Executive in
connection with his 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 Executive shall immediately
be paid all accrued salary, bonus compensation to the extent earned, vested
deferred compensation (other than pension plan
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or profit sharing plan benefits which will be paid in accordance with the
applicable plan), any benefits under any plans of in which the Executive is a
participant to the full extent of the Executive's rights under such plans
(including accelerated vesting, if any, of any awards granted to the Executive
under the Corporation's Stock Option Plan), accrued vacation pay and any
appropriate business expenses incurred by the Executive in connection with his
duties hereunder, all to the date of termination, and all severance compensation
as provided in Paragraph 6.1.
6.8 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 Executive of such termination. The Executive
may effect a termination of this Agreement 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; or Termination Upon a Change in Control Pursuant to Paragraph
6.7. In the event that, after the expiration of one-year from the Effective date
of this Agreement, the Executive's employment is terminated in a termination:
Other Than for Cause pursuant to Paragraph 6.2; for Good Reason pursuant to
Paragraph 6.3; or a Change in Control pursuant to Paragraph 6.7, the Executive
shall be paid the following as severance compensation:
7.1.1 For terminations which occur during the second year of the term of
this Agreement: fifty percent (50%) of the amount of the annual Salary (at the
rate payable at the time of such termination), for a period of twelve (12)
months from the date of such termination. The Executive shall also be entitled
to accelerated vesting of any awards granted to the Executive under any Stock
Option Plan, stock option agreement, or any other employee benefit plan or any
agreement entered into in connection therewith at the time of grant or award.
The Executive shall continue to accrue retirement benefits and shall continue to
enjoy any benefits under any plans of in which the Executive is a participant to
the extent of fifty percent (50%) of the Executive's pre-termination rights
under such plans, including any perquisites provided under this Agreement,
though the twelve months following such termination, provided, however, that the
benefits under any such plans of in which the Executive 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 Executive 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 Executive shall have forfeited
under the terms of any Stock Restriction Agreement.
7.1.2 For terminations which occur during the third year of the term of
this Agreement: one hundred percent (100%) of the amount of the annual Salary
(at the rate payable at the time of such termination), for a period of twelve
(12) months from the date of such termination. The Executive shall also be
entitled to accelerated vesting of any awards granted
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to the Executive under any Stock Option Plan, stock option agreement, or any
other employee benefit plan or any agreement entered into in connection
therewith at the time of grant or award. The Executive shall continue to accrue
retirement benefits and shall continue to enjoy any benefits under any plans of
in which the Executive is a participant to the full extent of the Executive's
pre-termination rights under such plans, including any perquisites provided
under this Agreement, though the twelve months following such termination,
provided, however, that the benefits under any such plans of in which the
Executive 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 Executive 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 Executive shall have forfeited under the terms of any Stock Restriction
Agreement.
7.1.3 For terminations which occur after the expiration of the first three
years of the initial term of this Agreement, including any extensions of such
term: two hundred percent (200%) of the amount of the annual Salary (at the rate
payable at the time of such termination), for a period of twelve (12) months
from the date of such termination. The Executive shall also be entitled to
accelerated vesting of any awards granted to the Executive under any Stock
Option Plan, stock option agreement, or any other employee benefit plan or any
agreement entered into in connection therewith at the time of grant or award.
The Executive shall continue to accrue retirement benefits and shall continue to
enjoy any benefits under any plans of in which the Executive is a participant to
the full extent of the Executive's pre-termination rights under such plans,
including any perquisites provided under this Agreement, though the twelve
months following such termination, provided, however, that the benefits under
any such plans of in which the Executive 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 Executive
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 Executive shall have forfeited under the terms of any
Stock Restriction Agreement.
7.1.4 Notwithstanding the provisions of Subparagraphs 7.1.1 and 7.1.2,
above, or Paragraph 7.2, below, if the basic cause of termination shall be a
Change in Control, as that term is defined in Paragraph 1.1, above: (i) the
Executive shall be paid, as severance compensation, two hundred percent (200%)
of the amount of the annual Salary (at the rate payable at the time of such
termination), for a period of twelve (12) months from the date of such
termination; and (ii) the Executive may in the Executive'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 Executive pursuant to
this Paragraph. In addition, the Corporation shall, on request of the Executive,
immediately take steps to register any or all Compensation Shares or other
unregistered shares of the common stock of the Corporation then held by the
Executive, of issuable to him in accordance with the provisions of this Section
7, with the Securities and Exchange Commission under a Form S-8 registration
statement filed with the United States
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Securities and Exchange Commission and effective under the United States
Securities Act of 1933, as Amended, or such other Form of registration statement
as shall then be available to the Corporation including without limitation Forms
S-1 and SB-2.
7.1.5 In the event that the Executive shall be entitled to any cash
payments pursuant to this Section 7 and the Corporation shall not have
sufficient cash resources available therefor, the Executive shall be issued
shares of the Common Stock of the Corporation in lieu of such cash payments, in
whole or in part, as the parties hereto shall mutually agree.
7.2 No Severance Compensation Upon Other Termination. In the event of
Termination: (i) for any reason during the first year following the Effective
Date of this Agreement; (ii) For Cause pursuant to Paragraph 6.1; (iii)
termination by reason of the Executive's Disability or Death pursuant to
Paragraphs 6.4 or 6.5; or (iv) Voluntary Termination pursuant to Paragraph 6.6
hereof, neither the Executive nor his estate shall not be paid any severance
compensation.
8. Payment Obligations
The Corporation's obligation to pay the Executive the compensation and to
make the arrangements provided herein shall be unconditional, and the Executive
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
Executive for the Executive's reasonable attorneys' fees and disbursements
incurred in such litigation.
9. Confidentiality
The Executive 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.
10. Withholdings
All compensation and benefits to the Executive hereunder shall be reduced
by all federal, state, local and other withholdings and similar taxes and
payments required by applicable law.
11. Indemnification
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In addition to any rights to indemnification to which the Executive is
entitled to under the Corporation's Articles of Incorporation and Bylaws, the
Corporation shall indemnify the Executive at all times during and after the term
of this Agreement to the maximum extent permitted under Delaware Business
Corporation Law or any successor provision thereof and any other applicable
state law, and shall pay the Executive's expenses in defending any civil or
criminal action, suit, or proceeding in advance of the final disposition of such
action, suit or proceeding, to the maximum extent permitted under such
applicable state laws.
12. 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:
The Tirex Corporation
740 St. Maurice Suite, 201
Montreal, Quebec H3C 1L5
addressed to the Executive at:
Michael Ash
310 Montee Sabourin
St. Bruno PQ
J3V 4P6
or at any other address as any party may, from time to time, designate by notice
given in compliance with this Paragraph.
13. Law Governing
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware.
14. General
14.1 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.
14.2 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.
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14.3 Agreement Binding. This Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
14.4 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.
14.5 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.
14.6 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.
14.7 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.
14.8 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.
14.9 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.
14.10 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.
THE TIREX CORPORATION
By /s/ Terence C. Byrne
-----------------------
Terence C. Byrne, President
/s/ Michael Ash
---------------
Michael Ash
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EXHIBIT
24.1
CONSENT OF PINKHAM & PINKHAM, P.C.
Certified Public Accountants
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Pinkham & Pinkham, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
Report of Independent Auditors
We consent to the incorporation by reference in this Registration Statement of
The Tirex Corporation on Form S-8 of our report dated February 9, 1999,
appearing in the incorporated by reference Annual Report on Form 10-KSB of The
Tirex Corporation for the year ended June 30, 1998.
/s/ Pinkham & Pinkham, P.C.
---------------------------
Pinkham & Pinkham, P.C.
Certified Public Accountants
May 11, 1999
Cranford, New Jersey
514 Centennial Avenue, Cranford, NJ 07016 Tel: 908-653-1710 Fax: 908-653-1713
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