Registration No. 333-28485
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
Pre-Effective Amendment No. 3
Registration Statement
Under the
Securities Act of 1933
IDM ENVIRONMENTAL CORP.
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(Exact Name of Registrant as Specified in its Charter)
New Jersey 22-2194790
- --------------------------------- ---------------------------------
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
396 Whitehead Avenue
South River, New Jersey 08882
(908) 390-9550
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(Address, including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Joel A. Freedman, President
IDM Environmental Corp.
396 Whitehead Avenue
South River, New Jersey 08882
(908) 390-9550
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(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
A copy to:
Michael Sanders, Esq.
Vanderkam & Sanders
440 Louisiana, Suite 475
Houston, Texas 77002
(713) 547-8900
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
_____________________________________
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If this Form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
______________________________________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed maximum Proposed maximum
Title of securities to Amount to offering price per aggregate offering Amount of
be registered registered (1) share (2) price registration fee (3)
- ---------------------- ---------------- ------------------- ------------------ --------------------
<S> <C> <C> <C> <C>
Common stock,
$.001 par value 7,000,000 $ 6.28125 $ 43,968,750.00 $ 13,323.86
====================== ================ ==================== ================== ====================
</TABLE>
(1) Includes a presently indeterminate number of shares issued or issuable upon
conversion of or otherwise in respect of Registrant's (i) Series B 7%
Convertible Preferred Stock, (ii) 7% Convertible Notes due January 31,
1999, (iii) 2,675,000 Warrants issued in conjunction with the Notes, (iv)
100,000 Warrants issued in conjunction with the Preferred Stock and (v)
100,000 stock options.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) based on the average bid and asked price as reported on
Nasdaq on November 18, 1997.
(3) $14,649.62 of the registration fee was previously paid with the initial
filing of this registration statement and amendment number 2 thereto.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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PROSPECTUS
IDM ENVIRONMENTAL CORP.
7,000,000 Shares of Common Stock
$.001 par value
All of the shares of Common Stock, par value $.001 per share ("Common
Stock"), of IDM Environmental Corp., a New Jersey corporation ("IDM" or the
"Company"), offered hereby are being offered for resale by certain stockholders
of the Company (the "Selling Stockholders") as described more fully herein. The
Company will not receive any proceeds from the sale of the shares offered
hereby. The Common Stock of the Company is quoted on the Nasdaq National Market
under the symbol "IDMC." The last reported sales price of the Company's Common
Stock on the Nasdaq National Market on November 18, 1997 was $6.25 per share.
The shares of Common Stock offered hereby by the Selling Stockholders
consist of a presently indeterminate number of shares issued or issuable upon
conversion or otherwise in respect of (i) 300 shares of Series B 7% Convertible
Preferred Stock (the "Series B Preferred Shares"); (ii) $3,025,000 of 7%
Convertible Notes due January 31, 1999 (the "Convertible Notes"); (iii)
2,675,000 Warrants issued in conjunction with the Convertible Notes (the "$3.00
Warrants"); (iv) 100,000 Warrants issued in conjunction with the Series B
Preferred Shares (the "$2.40 Warrants") and (v) 100,000 stock options (the
"Stock Options"). For the purpose of determining the number of shares of Common
Stock to be registered hereby, the number of shares of Common Stock calculated
to be issuable in connection with the conversion of the Series B Preferred
Shares and the Convertible Notes is based on an average closing bid price of the
Common Stock on the five trading days ended November 18, 1997 ($6.48125 per
share), and has been arbitrarily selected. The number of shares available for
resale is subject to adjustment and could be materially less or more than such
estimated amount depending on factors which cannot be predicted by IDM at this
time, including, among others, the timing of conversion of the Series B
Preferred Shares and Convertible Notes and the future market price of the Common
Stock at the time of conversion. This presentation is not intended, and should
in no way be construed, to constitute a prediction as to the future market price
of the Common Stock. See "Selling Stockholders" for a description of the rights
and conversion terms of the Series B Preferred Shares, Convertible Notes, $3.00
Warrants, $2.40 Warrants and Stock Options.
The Selling Stockholders, directly or through agents, broker-dealers or
underwriters, may sell the Common Stock offered hereby from time to time on
terms to be determined at the time of sale, in transactions on the Nasdaq
National Market, in privately negotiated transactions or otherwise. The Selling
Stockholders and any agents, broker-dealers or underwriters that participate in
the distribution of the Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933, as amended (the "Act"), and any
commission received by them and any profit on the resale of the Common Stock
purchased by them may be deemed to be underwriting discounts or commissions
under the Act. See "Plan of Distribution."
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE
A HIGH DEGREE OF RISK. SEE "RISK FACTORS" ON PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES 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 November , 1997
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All expenses of this offering will be paid by the Company except for
commissions, fees and discounts of any underwriters, brokers, dealers or agents
retained by the Selling Stockholders. Estimated expenses payable by the Company
in connection with this offering are approximately $45,000. The aggregate
proceeds to the Selling Stockholders from the Common Stock will be the purchase
price of the Common Stock sold less the aggregate agents' commissions and
underwriters' discounts, if any. The Company has agreed to indemnify the Selling
Stockholders and certain other persons against certain liabilities, including
liabilities under the Act.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
TABLE OF CONTENTS
Available Information............................................. 3
Incorporation of Certain Documents by Reference................... 3
The Company....................................................... 4
Risk Factors...................................................... 4
Selling Stockholders.............................................. 11
Plan of Distribution.............................................. 14
Legal Matters..................................................... 15
Experts........................................................... 15
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AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information may be inspected and copied at
the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York,
New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Common Stock of the Company is quoted on the Nasdaq
National Market. Reports and other information concerning the Company may be
inspected at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006. The Commission also maintains a World Wide
Web site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants, including the Company,
that file electronically with the Commission.
A registration statement on Form S-3 with respect to the Common Stock
offered hereby (the "Registration Statement") has been filed with the Commission
under the Act. This Prospectus does not contain all of the information contained
in such Registration Statement and the exhibits and schedules thereto, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus
regarding the contents of any contract or any other document are not necessarily
complete and, in each instance, reference is hereby made to the copy of such
contract or document filed as an exhibit to the Registration Statement. The
Registration Statement, including the exhibits thereto, may be inspected without
charge at the Commissions' principal office in Washington, D.C., and copies of
all or any part thereof may be obtained from the Public Reference Section,
Securities and Exchange Commission, Washington, D.C. 20549, upon payment of the
prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed or to be filed with the Commission under the
Exchange Act are hereby incorporated by reference into this Prospectus:
(1) The Company's Annual Report on Form 10-K/A for the year ended December
31, 1996.
(2) The Company's Quarterly Reports on Form 10-Q/A for the quarters ended
March 31, 1997 and June 30, 1997 and on Form 10-Q for the quarter ended
September 30, 1997.
(3) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the Annual Report
referred to in (1) above.
(4) The description of securities included in Form 8-A declared effective
by the Commission on April 26, 1994 (Commission File No. 0-23900).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing such documents. Any
statements contained in this Prospectus or 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 subsequently filed documents which also is or is
deemed to be incorporated by reference herein modifies 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.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus has been delivered, upon written or
oral request of such person, a copy of any or all of the documents that have
been incorporated by reference herein (not including exhibits to such documents
unless such exhibits are specifically incorporated by reference herein or into
such documents). Such requests may be directed to Mr. Michael B. Killeen, Chief
Financial Officer, IDM Environmental Corp., 396 Whitehead Avenue, South River,
New Jersey 08882, Telephone Number (908) 390-9550.
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THE COMPANY
The Company is a national provider of specialized contract services with an
emphasis on plant decommissioning, dismantlement, deconstruction and
environmental remediation. The Company serves private industry, utilities and
governmental entities in the areas of plant dismantling, plant deconstruction
and relocation, asbestos abatement, radiological remediation and hazardous waste
remediation, among others. Services are generally provided by trained craftsmen
employed by the Company based on work plans, schedules and cost estimates
developed by the Company's management team and implemented under the supervision
of Company superintendents and foremen. In order to satisfy customer concerns
with respect to project scheduling, cost control, work responsibility and
overall performance, the Company's full time work force is cross trained in each
of the Company's specialty areas allowing the Company to perform "whole jobs" in
virtually all instances. In addition to offering environmental services, the
Company buys and sells equipment and entire plants and offers relocation and
reinstallation services with respect to such plants and equipment.
The Company was incorporated under the laws of the State of New Jersey in
1978. The Company's executive offices are located at 396 Whitehead Avenue, South
River, New Jersey 08882, telephone number (908) 390- 9550.
RISK FACTORS
The securities which are the subject of this Prospectus are subject to
certain risk factors, some of which are described below. The following risk
factors should not be considered to be all of the potential risks to which the
Company and the securities are subject. The risk factors set forth below should
be considered carefully with respect to any investment in the Common Stock
underlying the Preferred Shares, Convertible Notes, $3.00 Warrants, $2.40
Warrants or Stock Options.
Losses From Operations. The Company has experienced significant operating
losses during the past two years. The Company had net losses of $9.1 million
during the year ended December 31, 1996 and $3.9 million during the year ended
December 31, 1995 and a net loss of $6.0 million during the nine months ended
September 30, 1997. Such losses have been attributable to a combination of
substantial infrastructure expenditures to support future growth, delays in the
commencement of projects and unusual expenses. Until such time as the Company is
able to begin one or more large projects on which delays in commencement have
been experienced, or until such time as other projects are begun, if ever, the
Company will continue to experience losses. While management believes that
multiple large projects will be performed during 1997, based on past delays and
past operating results, there can be no assurance that the Company will be able
to operate profitably during 1997 or in the future.
Intense Competition. Competition in the environmental services industry is
intense. The industry is dominated by large architectural engineering firms such
as Bechtel, Fluor, Westinghouse, Foster Wheeler and Haliburton, among others.
Such firms are called upon to serve as primary contractors and consultants on a
large portion of the Superfund, federal and state government and Department of
Energy projects. Additionally, many smaller engineering firms, construction
firms, consulting firms and other specialty firms have entered the environmental
services industry in recent years and additional firms can be expected to enter
into the industry. Many of the firms with which the Company competes in the
environmental services industry have significantly greater financial resources
and more established market positions than the Company. While management
believes that the Company's experience and expertise in the specialty areas of
decontamination and decommissioning will allow the Company to compete
successfully, there can be no assurance that other firms will not expand into or
develop expertise in the areas in which the Company specializes, thus decreasing
any competitive advantage which the Company may enjoy.
Uncertainty Relating to Integration of Recent Acquisitions. As a result of
increasingly intense competition in the environmental services industry, the
Company has undertaken various strategic technology acquisitions and alliances
in recent years in order to improve the Company's competitive position and
increase the Company's potential revenues. Included in such acquisitions and
alliances have been (1) the acquisition of rights relating to the deployment of
the proprietary "Kocee Gas Generator" technology of Enviropower Industries, Inc.
(fka Continental Waste Conversion), (2) the acquisition of an exclusive license
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from, and equity interest in, Life International Products pursuant to which the
Company utilizes Life's patented superoxygenation technology for long term
bioremediation of contaminated groundwater and (3) the formation of an alliance
with Solucorp Industries pursuant to which the Company received the rights to
utilize Solucorp's Molecular Bonding System soil remediation technology. Each of
such acquisitions and alliances entailed various funding commitments on the part
of the Company. While management believes that each of the described
acquisitions/alliances provides the Company with state-of-the-art technologies,
there can be no assurance that the Company will be successful in integrating
such new technologies with its existing service offerings. Further, it is
possible that certain state-of-the-art technologies, including technologies
which have been or may in the future be acquired by the Company, may not yet be
commercially viable or may require ongoing funding beyond the capabilities of
the Company before those technologies can be successfully deployed on a
commercial basis. In the event the Company is unable to successfully integrate
its technology acquisitions/alliances with its existing operations or the
Company is unable or unwilling to meet the funding requirements necessary to
fully commercialize such technologies, it is possible that the Company could
loss some or all of its investment in such technologies. Any such losses could
materially adversely impact the Company's operating results and financial
position.
While the Company is continually involved in the evaluation of new
technologies to supplement the Company's existing services offerings and to
enhance the Company's operating results and competitive position, the Company
has no current plans, arrangements or understandings with respect to future
acquisitions or mergers.
Dependence on Ability to Secure Bonding. In order to bid on and
successfully secure contracts to perform environmental services of the nature
offered by the Company, the Company may, depending upon the bid specifications,
be required to provide surety bonds for each respective project. Thus, the
number and size of contracts which the Company can perform is directly dependent
upon the Company's ability to obtain bonding which, in turn, is dependent upon
the Company's net worth, liquid working capital, and the nature and projected
profitability of projects undertaken, among other factors. The Company, prior to
completion of its initial public offering, was unable to secure additional and
larger contracts as a result of such bonding requirements and may incur similar
difficulties in the future. While capital raising efforts in recent years have
allowed the Company to substantially increase its working capital and net worth,
thus increasing its bonding capacity, there can be no assurance that the Company
will have adequate bonding capacity to bid on all of the projects which it would
otherwise bid upon were it to have such bonding capacity or that it will in fact
be successful in obtaining additional jobs on which it may bid.
Compliance with, and Potential Liability under, Applicable Environmental
Regulations. The scope and nature of environmental regulation, at the federal,
state and local levels, has expanded dramatically in recent years. Such
regulations impose stringent guidelines on companies which generate and handle
hazardous materials as well as other companies involved in various aspects of
the environmental services industry. Any future increases or changes in
regulation may result in the Company incurring additional costs for equipment,
retraining, development of new remediation or abatement plans, handling of
hazardous materials and other costs.
In addition to the burdens imposed on Company operations by various
environmental regulations, federal law imposes strict joint and several
liability upon present and former owners and operators of facilities that
release hazardous substances into the environment and the generators and
transporters of such substances as well as persons arranging for the disposal of
such substances. All such persons may be liable for the costs and damages
(including penalties and fines) associated with environmental remediation
including investigation, clean up and natural resource damages. Such costs can
be very substantial. The Company may be liable for such costs and damages in
connection with the generation, transportation and disposal of hazardous
materials. Additionally, in light of the growing trend to impose and expand the
responsibility and scope of liability for environmental clean-up costs, there
can be no assurance that future regulations or court rulings will not result in
the Company being exposed to clean-up cost liability, or other liability, for
activities conducted by the Company which do not presently expose the Company to
such liability.
The Company's surplus equipment and scrap sales operations may also expose
the Company to liability under environmental laws in the event of the sale of
contaminated equipment or scrap. While the Company inspects all such equipment
and scrap before purchasing or selling such items, there is no assurance that
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such inspection will identify all possible contamination and the Company may be
found to have certain liability should such items be bought or sold by the
Company. The Company has not experienced any claims with respect to the purchase
or sale of contaminated equipment or scrap.
While the Company has not incurred, or been notified that it may be treated
as a potentially responsible party with respect to, any liability as a generator
or transporter of hazardous materials, the Company on occasion has been named in
complaints, and may be named in future complaints, as violating various
regulations governing the removal of asbestos. The Company has settled certain
complaints in the past by agreeing to pay civil fines or penalties without
admitting liability. There can be no assurance, however, that any complaints
which may arise in the future can be settled on a favorable basis. In any event,
because of the nature of the Company's operations and the industry in which it
operates, the potential for liability and the extent of such potential liability
is very substantial. Any such liability which is determined to exist could have
a material adverse impact on the Company's business and financial condition.
Dependence on Continued Environmental Regulation. The growth of the
environmental services industry, as well as the growth of the Company, has been
largely attributable to, and tracks, the increase in environmental regulation
since the 1970's. The demand for environmental services has been largely the
result of facility owners attempting to comply with, or avoid liability under,
existing or newly imposed environmental regulations at the federal, state and
local levels. Because of the burden imposed on industry in complying with such
regulations, efforts have been made by various groups to seek the relaxation or
repeal of certain forms of environmental regulation. While such efforts to relax
environmental regulation have been largely unsuccessful to date, there can be no
assurance that the scope or growth of such regulation will not be curtailed in
the future. Any relaxation of environmental regulation may result in a decline
in demand for environmental services and may adversely effect the operations of
the Company.
Dependence on Spending Levels of Governmental and Industrial Entities.
Because of the nature of sites requiring environmental services, the growing
public emphasis on environmental matters and the cost of environmental services,
a significant portion of all funds spent for such services has been spent by
governmental agencies and large industrial concerns. While third party
reimbursement may be sought in various clean-ups, most Superfund clean-ups as
well as weapons and other nuclear facility clean-ups involve significant
spending by governmental agencies. As budget constraints and emphasis on
employment, international competition and other considerations grow, certain
governmental agencies and industrial concerns may choose to delay or curtail
expenditures for environmental services. Any curtailment or delays in spending
for environmental services by governmental agencies or large industrial concerns
can be expected to have a material adverse effect on the environmental services
industry and on the operations and profitability of the Company.
Limited Insurance Coverage. While the Company maintains insurance coverage,
including environmental impairment liability insurance covering such areas as
environmental clean ups, corrective action or damages, the Company's
environmental impairment insurance policy does not cover any liability arising
from radiological operations other than low level radioactive soil excavation
and facility cleaning. While the Company has evaluated such additional insurance
coverage in the past and may evaluate the same in the future, the Company does
not anticipate that such additional insurance will be available in the
foreseeable future at prices considered to be reasonable. If, in the absence of
such insurance, the Company were to incur liability for environmental impairment
in connection with its excluded radiological services, such liability could have
a material adverse effect on the financial condition and results of operations
of the Company. Further, as the cost of cleaning or correcting environmental
hazards can be extremely high, even if the Company is determined to be liable
for costs which are covered by insurance, there is no assurance that such
coverage will be adequate to pay the entire cost thereof and, therefor, the
Company may incur losses in excess of its insurance coverage.
Dependence on Major Customer. A significant portion of the Company's
revenues in recent years have come from, and a significant portion of the
Company's resources have been devoted to, one or more large clients (e.g.,
Allied-Signal and FFC Jordan Fertilizer Company). Revenues from the FFC Jordan
project constituted 34% of the Company's total revenues in 1995 and 44.7% of
revenues in 1994. Likewise, the Allied-Signal project accounted for 34.8% and
26.4% of the Company's total revenues in 1991 and 1992, respectively. In early
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1993, the Company completed the Allied-Signal project and the FFC Jordan project
was completed during 1996. In order for the Company to replace the revenues
attributable to such large projects, the Company must secure one or more large
projects or a large number of smaller projects. While the Company believes that
it can successfully replace its past and ongoing large projects with other large
projects and with a large volume of smaller projects, there is no assurance that
the Company can adequately replace such projects with other projects which will
produce as much revenue. Further, there is no assurance that the Company will
not continue to be dependent upon a small number of major customers for a
significant portion of its revenues and earnings.
Dependence on Key Personnel. The Company's operations are dependent upon
the continued efforts of senior management. While the Company has entered into
employment agreements with Joel Freedman and Frank Falco, the Company's
principal executive officers, the Company does not have employment agreements
with any of its other officers or employees. The Company has, however, entered
into agreements with certain executive personnel pursuant to which such persons
have agreed to maintain the confidentiality of certain information and to not
enter into competition with the Company for a period of three years after the
termination of their employment with the Company within 250 miles of the
Company's principal places of business. However, because of the lack of
accompanying employment agreements and the limited scope of such agreements and
the general difficulty of enforcing noncompetition agreements, there is no
assurance that such agreements can be enforced or that one or more of the
Company's key employees may not leave the Company and enter into direct
competition with the Company. Should any of the members of the Company's senior
management be unable or unwilling to continue in their present roles or should
such persons determine to enter into competition with the Company, the Company's
prospects could be adversely affected. The Company presently carries key-man
life insurance on its Chief Executive Officer, Joel Freedman, and its Chairman
of the Board and Chief Operating Officer, Frank Falco.
Dependence on Temporary Labor. As a result of the national and
international scope of the Company's operations, the Company is typically
required to staff jobs at least partially with temporary workers hired on
location. While all of the Company's jobs are performed under the supervision
and direction of the Company's supervisors and foremen and the Company attempts
to utilize as many of the Company's full time laborers as possible to staff
jobs, the location and other factors effecting jobs performed away from the
immediate vicinity of the Company's headquarters result in the Company regularly
hiring temporary workers on site. The Company carefully reviews the training and
qualifications of all temporary workers hired to assure that all such personnel
are qualified to perform the work in question. However, due to the temporary
nature of such employment, there is no assurance that all such temporary workers
will perform at levels acceptable to the Company and its customers. Accordingly,
the Company may experience difficulties in satisfactorily performing jobs and,
in some cases, may be exposed to certain liabilities as a result of the acts or
performance of such temporary workers. Additionally, in some locations, the
Company may be required to hire unionized temporary labor. The hiring of such
unionized workers may give rise to various other considerations affecting the
performance of jobs, including possible work stoppages and varying wage and
benefit demands, among others.
Seasonality of Business. While the Company provides its services on a
year-round basis, certain aspects of the Company's business display seasonal
characteristics. In particular, Company services provided outdoors or outside of
a sealed environment may be adversely affected by inclement weather conditions,
particularly in the northeast. Accordingly, extended periods of rain, cold
weather or other inclement weather conditions may result in delays in commencing
or completing projects, in whole or in part. Any such delays may adversely
effect the Company's operations and profitability and may adversely effect the
performance of other projects due to scheduling and staffing conflicts.
Substantial Working Capital and Additional Financing Requirements. The
Company requires substantial working capital to support its ongoing operations.
As is common in the environmental services industry, payment for services
rendered by the Company are generally received pursuant to specific draw
schedules after services are rendered. Thus, pending the receipt of payments for
services rendered, the Company must typically fund substantial project costs,
including significant labor and bonding costs, from financing sources within and
outside of the Company.
The Company historically relied heavily on bank financing to fund its
operations. With the consummation of the Company's initial public offering, the
Company has financed its operations internally without utilizing any substantial
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new lines of credit. Because of expenditures relating to the opening of new
offices to serve strategic growth markets and other infrastructure expenditures
to support growth, the Company experienced working capital shortages during the
third quarter of 1995, the first quarter of 1997 and the third quarter of 1997.
As a result of such working capital shortages, the Company was required to raise
additional capital through the sale of $5 million of convertible notes in
September of 1995, through the sale of $3 million of Series B Preferred Shares
in February of 1997 and through the sale of $3,025,000 of Convertible Notes and
$3.00 Warrants in August of 1997. There is no assurance that the Company will
not require additional financing in the future. While the Company intends to
seek any bank or other financing which may be required in the future, no such
source of potential financing has been identified and there is no assurance that
any such financing will available on terms acceptable to the Company, or at all,
if needed.
Susceptibility to Inventory Related Losses. As a part of the Company's
surplus equipment operations, the Company regularly purchases surplus equipment
from its customers in connection with the performance of services, as well as
from third parties. Because of the nature of most of the equipment purchased,
most of such equipment is not covered by documents of title. While the Company
receives invoices from the sellers of such equipment, there is no assurance that
creditors and other third parties may not assert claims to ownership or other
rights in some of such equipment from time to time. Management, however, is not
aware of any instances where such claims have arisen in the past and believes
that the Company has good title to all of its inventory of surplus equipment.
In addition to the risk of possible third party claims to the Company's
inventory of surplus equipment, because of the nature of such equipment and the
cost of acquiring, transporting and storing such equipment, the Company often
enters into joint venture arrangements whereby the Company will acquire a fifty
percent interest in surplus equipment with the equipment being held at the joint
venture partner's site pending the sale of such equipment. Such joint venture
arrangements often involve limited, or no, documentation. Accordingly, the
Company may have surplus equipment inventory in many locations throughout the
United States and, in some instances, foreign countries and much of such
inventory may not be under the Company's direct control. While management is not
aware of any material inventory losses to date, because of the above inventory
practices, the Company's inventory does not lend itself to typical inventory
control procedures, thus increasing the possibility of inventory loss, theft or
fraud.
While the Company has substantially reduced its ongoing exposure and
activities in the surplus equipment market with its entry into a joint marketing
relationship with, and sale of substantially all of its surplus equipment
inventory to, Universal Process Equipment Company ("UPE"), the Company may
continue to be exposed to certain inventory risks should claims arise in the
future with respect to equipment previously sold by the Company.
Possible Liability in Connection with Legal and Administrative Proceedings.
The Company is periodically subject to lawsuits and administrative proceedings
arising in the ordinary course of its business. Included in such proceedings are
periodic administrative proceedings initiated by various environmental
regulatory agencies. In 1992, the Company was notified by the EPA of alleged
violations relating to the handling of asbestos containing materials. During
1994, the Company paid a $195,000 fine in settlement of such allegations without
any final determination or admission of liability. Similarly, in 1995, the
Company agreed to settle a complaint filed by the EPA in another asbestos
related proceeding. The Company and the EPA agreed to settle such matter without
any finding or admission of liability with the Company agreeing to pay $18,500.
The Company is presently a party to an ongoing administrative proceeding in
which the Occupational Safety and Health Administration has proposed to assess a
penalty against the Company in the amount of $147,000 as a result of the
accidental death of an employee of a subcontractor. On February 11, 1997, the
Company was served with a lawsuit naming the Company as a co-defendant in a
wrongful death cause of action arising out of the accidental death of an
employee of a subcontractor. The suit, styled The Estate of Percey L. Richard,
and Percey D. Richard, a minor by next of friend Patricia Cunningham v. American
Wrecking Corp. and its successors, IDM Environmental Corp. and its successors,
SECO Corp. and its successors, all joint and individually, and all unknown
persons, Case No. 2:97CV filed in the Federal District Court for the Northern
District of Indiana is based on the same facts as gave rise to the above
referenced administrative proceeding instituted by the Occupational Safety and
Health Administration. Management believes that the suit, as it relates to the
Company, is without merit, and intends to vigorously contest the cause of
action.
8
<PAGE>
In addition to potential liability in connection with the Company's
performance of services, the Company is presently a defendant in a shareholder
action filed in November of 1996 in New Jersey Superior Court styled Goldberg v.
IDM Environmental Corp., Docket No. L-11783-96. The plaintiff in that cause of
action has alleged that the Company made certain fraudulent misrepresentations
to the detriment of the investing public and that certain officers of the
Company were unjustly enriched as a result of their sales of common stock during
the period in question. Management believes the cause of action is without merit
and intends to vigorously contest such cause of action. Any liability which may
arise from the cause of action, including costs of defending such cause of
action are covered under the Company's general liability insurance policy
subject to a $200,000 deductible. Notwithstanding management's belief that the
cause of action is without merit and the existence of insurance coverage, the
Company will be liable for costs of defending said cause of action to the extent
of the deductible and any damages awarded, in the event an adverse judgment is
rendered, in excess of the Company's liability insurance coverage. There can be
no assurance that this litigation will not have a material adverse effect on the
Company.
In April of 1997, the Company and its subsidiary, Global Waste & Energy,
Inc., were named as co-defendants in a cause of action styled Continental Waste
Conversion Inc. v. IDM Environmental Corp., Global Waste & Energy, Inc., et al,
filed in the Court of Queen's Bench of Alberta, Judicial District of Calgary
(Action No. 9701 04774). The plaintiff, Continental Waste ("CWC"), has alleged
that the license granted to the Company to utilize and market CWC's proprietary
gasification technology was granted without proper corporate authority due to
the lack of shareholder approval. The plaintiff has asserted the subsequent
employment by Global Waste & Energy of two former officers of CWC as a basis for
its allegations. CWC is seeking to have the license and all other agreements
between CWC and the Company declared null and void in addition to seeking
damages for alleged lost profits and other amounts. In September, 1997, the
Company was awarded interim judgment on all claims of CWC.
While the Company has been able to settle all prior legal and
administrative proceedings on terms believed to be acceptable to and in the best
interests of the Company, there is no assurance that the Company will not be
subject to legal and administrative proceedings in the future which may
materially adversely effect the Company.
Control by Management. Officers and directors of the Company, principally,
Messrs. Freedman and Falco, own an aggregate of approximately 6.9% of the issued
and outstanding shares of common stock as of November 18, 1997. Shareholders of
the Company do not have cumulative voting rights and, accordingly, each
shareholder is entitled to cast one vote per share held on all matters submitted
to a vote of shareholders, including the election of directors. Thus,
shareholders holding a majority of the outstanding shares will be able to elect
all of the directors. Further, Messrs. Freedman and Falco have entered into a
Voting Agreement pursuant to which each has agreed to vote for the other in all
elections of directors and, with respect to all other matters, they have agreed
to vote as a block.
Related Party Transactions and Possible Conflicts of Interest. The Company
has been controlled, and may continue to be controlled, by Joel Freedman and
Frank Falco, its principal shareholders, and has periodically engaged in
transactions with Messrs. Freedman and Falco and entities controlled by Messrs.
Freedman and Falco. During 1994, 1995 and 1996, the Company paid certain
personal expenses on behalf of Messrs. Freedman and Falco, which advances were
originally made on an unsecured non-interest bearing basis without definite
repayment terms.
Interest on such loans began to accrue at 7% per annum commencing in June of
1995. Mr. Freedman surrendered 36,621 shares of Common Stock as payment in full
of $192,260, representing all amounts owed by Mr. Freedman to the Company,
including excess draws under his employment agreement, in September of 1995. In
April of 1996, Mr. Falco surrendered 92,214 shares of Common Stock as payment in
full of $670,580 representing all amounts owed by Mr. Falco to the Company as at
such date, including excess draws under his employment agreement. At December
31, 1996, Mr. Falco owed a total of approximately $201,000 to the Company. The
Company presently leases its principal facilities from a partnership controlled
by Messrs. Freedman and Falco and, in 1995, performed certain construction work
to expand such facilities. Additionally, the Company previously loaned funds to
such partnership in order to construct certain leasehold improvements on the
9
<PAGE>
Company's premises and for various other purposes. While the loan to the
partnership had been repaid in full through periodic offsets against the lease
payments owed by the Company to the partnership, no formal terms for repayment
of such loan were ever established and no interest was paid on such loan.
Further, while the Company obtained an appraisal of the fair rental value of the
leased premises and management believes the terms of such lease to be fair,
there is no assurance that the Company could not obtain more favorable terms if
dealing with third parties. The Company has no present plans, proposals,
arrangements or understandings with respect to future related transactions.
While the Company has no formal policy relating to transactions with related
parties, the Company's audit committee reviews all proposed transactions with
related parties or entities controlled by related parties to determine the
fairness of such transactions. Any current or future transactions between the
Company and such affiliates may involve possible conflicts of interest.
Possible Issuance of Substantial Amounts of Additional Shares Without
Shareholder Approval. At November 18, 1997, the Company had an aggregate of
approximately 8,439,324 shares of Common Stock authorized but unissued and not
reserved for specific purposes and an additional 7,239,403 shares of Common
Stock unissued but reserved for issuance pursuant to (i) the Company's 1993 and
1995 Incentive Stock Option Plans, (ii) exercise of outstanding Class A Warrants
issued in the Company's initial public offering, (iii) exercise of nonqualified
options issued in connection with consulting services, and (iv) exercise of
warrants issued in connection with the placement of the Series B Preferred
Shares and Convertible Notes. Additionally, an as yet undetermined number of
shares of Common Stock equal to up to fifteen percent (15%) of the then
outstanding shares of Common Stock will be issued to Messrs. Freedman and Falco
if certain earnings criteria are satisfied and an indeterminate number of shares
of Common Stock will be issued if and when the Series B Preferred Stock and
Convertible Notes are converted. All of such shares may be issued without any
action or approval by the Company's shareholders. Although there are no other
present plans, agreements, commitments or undertakings with respect to the
issuance of additional shares, or securities convertible into any such shares by
the Company, any shares issued would further dilute the percentage ownership of
the Company held by the public shareholders.
Possible Issuance of Preferred Stock and Superior Rights of Preferred
Stock. In addition to the above referenced shares of Common Stock which may be
issued without shareholder approval, the Company has 1,000,000 shares of
authorized preferred stock. The Company, at November 18, 1997, had 270 shares of
Series B Preferred Stock issued and outstanding and has reserved a total of
200,000 shares for issuance pursuant to a Share Rights Plan adopted by the
Company in 1996. Prior to the distributions of any amounts to the holders of
Common Stock, whether as dividends or on liquidation, the holders of outstanding
preferred stock must have received their cumulative dividend or liquidation
preference, as appropriate. While the Company has no present plans to issue any
additional shares of preferred stock, other than shares which may be issued in
the event the Company's Share Rights Plan is triggered, the Board of Directors
has the authority, without shareholder approval, to create and issue one or more
series of such preferred stock and to determine the voting, dividend and other
rights of holders of such preferred stock. The issuance of any of such series of
preferred stock could have an adverse effect on the holders of Common Stock.
The ability of the board of directors to fix the terms of and issue shares
of Preferred Stock without shareholder approval, combined with the Share Rights
Plan and other anti-takeover provisions in the Company's certificate of
incorporation and bylaws, could (1) result in the Company being less attractive
to a potential acquiror and (2) result in shareholders receiving less for their
shares than otherwise might be available in the event of a take over attempt.
Shares Eligible for Future Sales. All of the shares of the Company's Common
Stock owned by non-public shareholders are "restricted securities" as that term
is defined under Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Act") and may only be sold pursuant to a registered offering or in
accordance with applicable exemptions from the registration requirements of the
Act. Rule 144 provides for the sale of limited quantities of restricted
securities without registration under the Act. In general, under Rule 144 a
person (or persons whose shares are aggregated) who has satisfied a one (1) year
holding period may, under certain circumstances, sell within any three (3) month
period, a number of shares which does not exceed the greater of one percent (1%)
of the then outstanding shares of common stock or the average weekly trading
volume during the four (4) calendar weeks prior to such sale. Rule 144(k) also
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<PAGE>
permits, under certain circumstances, the sale of shares without any quantity
limitation by a person who is not an affiliate of the Company and who has
satisfied a two (2) year holding period. The Company is unable to predict the
effect that future sales under Rule 144 may have on the then prevailing market
price of Common Stock. It can be expected, however, that the sale of any
substantial number of shares of Common Stock will have a depressive effect on
the market price of the Common Stock.
No Dividends. The Company has not declared or paid, and does not anticipate
declaring or paying in the foreseeable future, any cash dividends on its Common
Stock. The Company's ability to pay dividends is dependent upon, among other
things, future earnings, the operating and financial condition of the Company,
its capital requirements, general business conditions and other pertinent
factors, and is subject to the discretion of the Board of Directors. Further, as
noted above, no distributions may be made with respect to the Company's Common
Stock unless all cumulative dividends with respect to outstanding preferred
stock, if any, have been paid. Accordingly, there is no assurance that any
dividends will ever be paid on the Company's Common Stock.
SELLING STOCKHOLDERS
The Selling Stockholders are the holders of (i) shares of Series B
Preferred Stock and common stock issued on the conversion of Series B Preferred
Stock; (ii) Convertible Notes; (iii) $3.00 Warrants; (iv) $2.40 Warrants and (v)
Stock Options. The shares of Common Stock covered by this Prospectus are being
registered so that the Selling Stockholders may offer the shares for resale from
time to time. See "Plan of Distribution." Except as described below, none of the
Selling Stockholders has had a material relationship with the Company within the
past three years other than as a result of the ownership of the Series B
Preferred Shares, Convertible Notes, $3.00 Warrants, $2.40 Warrants or Stock
Options or the Common Stock issuable pursuant to the conversion or exercise of,
or dividends or interest on, the Series B Preferred Shares, Convertible Notes,
$3.00 Warrants, $2.40 Warrants or Stock Options.
The following table sets forth the names of the Selling Stockholders, the
number of shares of Common Stock owned beneficially by each of the Selling
Stockholders as of November 18, 1997, and the number of shares which may be
offered for resale pursuant to this Prospectus. For the purposes of calculating
the number of shares of Common Stock beneficially owned by the Selling
Stockholders, the number of shares of Common Stock calculated to be issuable in
connection with the conversion of the Series B Preferred Shares or Convertible
Notes is based on a conversion price that is derived from the average closing
bid price of the Common Stock on the five trading days ended November 18, 1997
(which was $6.48125).
The information included below is based upon information provided by the
Selling Stockholders. Because the Selling Stockholders may offer all, some or
none of their Common Stock, no definitive estimate as to the number of shares
that will be held by the Selling Stockholders after such offering can be
provided and the following table has been prepared on the assumption that all
shares of Common Stock offered under this Prospectus will be sold.
11
<PAGE>
<TABLE>
<CAPTION>
Shares of Shares of
Common Stock Shares of Common Stock
Beneficially Common Stock Owned After
Name Owned (1)(2) Offered Offering (1)
---- ------------ ---------------- ------------
<S> <C> <C> <C> >
Euro Factors International, Inc. (3)(8)........ 507,531 507,531 -0-
FTS Worldwide Corporation (3).................. 449,438 449,438 -0-
Beauchamp Finance Ltd. (3)..................... 224,719 224,719 -0-
Mitreco International, Inc. (3)................ 224,719 224,719 -0-
Murray Huberfeld/David Bodner
Partnership (4)(5)............................ 990,000 990,000 -0-
Newark Sales Corp. (4)(5)...................... 890,000 890,000 -0-
Jules Nordlicht (4)(5)......................... 440,000 440,000 -0-
Congregation Ahavas Tzedokah
V Chesed (4).................................. 90,000 90,000 -0-
Rita Folger (4)(5)............................. 110,000 110,000 -0-
Shor Yoshuv Institute, Inc. (4)(5)............. 27,500 27,500 -0-
Moshe Mueller (4)(5)........................... 27,500 27,500 -0-
Milwaukee Kollel, Inc. (4)(5).................. 27,500 27,500 -0-
Connie Lerner (4)(5)........................... 27,500 27,500 -0-
Seth J. Antine (4)(5).......................... 27,500 27,500 -0-
Mirrer Yeshiva Centrel Institute (4)(5)........ 27,500 27,500 -0-
Seymour Huberfeld (4)(5)....................... 27,500 27,500 -0-
Harry Adler (4)(5)............................. 13,750 13,750 -0-
Clifton Management & Trading (4)(5)............ 13,750 13,750 -0-
Fred Rudy (4)(5)............................... 13,750 13,750 -0-
Jonathan Mayer (4)(5).......................... 13,750 13,750 -0-
Adar Equities L.L.C. (5)....................... 750,000 750,000 -0-
M&A Management L.L.C. (5)...................... 105,525 105,525 -0-
Elda Capital Corp. (5)......................... 51,975 51,975 -0-
Rochon Capital Group, Ltd. (5)(6).............. 200,000 200,000 -0-
Alexander Charles Lentes (7)................... 50,000 50,000 -0-
Bernd Muller (7)............................... 50,000 50,000 -0-
----------- ----------- ----------
5,381,407 5,381,407 -0-
</TABLE>
- ------------------------
(1) Unless otherwise indicated in the footnotes to this table, the persons and
entities named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property
laws where applicable.
(2) As required by regulations of the Commission, the number of shares shown as
beneficially owned includes shares which can be purchased within 60 days
after November 18, 1997. The actual number of shares of Common Stock
beneficially owned is subject to adjustment and could be materially less or
more than the estimated amount indicated depending upon factors which
cannot be predicted by the Company at this time, including, among others,
the market price of the Common Stock prevailing at the actual date of
conversion of the Series B Preferred Shares or Convertible Notes, and
whether or to what extent dividends and penalty payments to the holders of
the Series B Preferred Shares and interest to the holders of Convertible
Notes are paid in Common Stock.
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<PAGE>
(3) The listed Selling Stockholders hold an aggregate of 270 Series B 7%
Convertible Preferred Shares (out of 300 shares originally issued) which
are convertible into shares of Common Stock. The Series B Preferred Shares
were issued by the Company in a private placement in February 1997 for
$10,000 per share. The Series B Preferred Shares are convertible commencing
May 14, 1997, in whole or in part, at the option of the holder. Each Series
B Preferred Share is convertible at a rate of $10,000 divided by the lesser
of (i) $2.67 or 82% of the average closing bid price of the Common Stock
over the five trading-day period preceding conversion for conversions
occurring between May 14, 1997 and June 12, 1997, (ii) $2.4475 or 79% of
the average closing bid price of the Common Stock over the five trading-day
period preceding conversion for conversions occurring between the June 13,
1997 and July 12, 1997, (iii) $2.225 or 76% of the average closing bid
price of the Common Stock over the five trading-day period preceding
conversion for conversions occurring between July 13, 1997 and August 11,
1997, and (iv) $2.225 or 73% of the average closing bid price of the Common
Stock over the five trading-day period preceding conversion for conversions
occurring on or after August 12, 1997. The conversion price is adjusted,
and the number of shares beneficially owned by the Selling Stockholders
will vary accordingly, to reflect stock dividends, stock splits and certain
other circumstances. Further, the Company has the right, upon notice to the
holders, to redeem for $12,200 per share any Series B Preferred Shares
submitted for conversion at a price of $1.80 or less. The number of shares
shown as being offered in the table is based on the assumed conversion of
the 270 Series B Preferred Shares at a hypothetical conversion price of
$2.225 per share (which is the conversion price based on the average
closing bid price of $6.48125 on the five trading days ended November 18,
1997) and assumes payment of dividends and penalties on the Series B
Preferred Shares in cash. The Series B Preferred Shares pay a 7% dividend
payable on conversion or at redemption in cash or Common Stock, at the
Company's option. Pursuant to the terms of a Registration Rights Agreement,
the holders of the Series B Preferred Shares are also entitled to receive
$200 per share per month, payable in cash or Common Stock, commencing May
14, 1997 and ending on the effective date of the Company's registration
statement covering the resale of the shares underlying the Series B
Preferred Shares. All Series B Preferred Shares remaining outstanding on
February 12, 2000 shall be automatically converted into Common Stock. For a
further description of the rights of holders of the Series B Preferred
Shares, see the Certificate of Designations, Preferences and Rights filed
as an exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
(4) The listed Selling Stockholders hold an aggregate of $3,025,000 of
Convertible Notes. The Convertible Notes were issued by the Company in a
private placement in August 1997. The Convertible Notes are convertible, in
whole or in part, at the option of the holder. The Convertible Notes are
convertible into Common Stock at the lesser of (i) $2.75 per share, or (ii)
75% of the average closing bid price of the Common Stock over the five
trading-day period preceding conversion. The conversion price will be
adjusted to reflect stock dividends, stock splits and certain other capital
reorganizations or reclassifications. Further, the company has the right,
upon notice to the holders, to redeem, for 125% of the amount proposed to
be converted, any Convertible Notes submitted for conversion at a
conversion price of less than $2.75. The number of shares shown as being
offered in the table is based on the assumed conversion of all $3,025,000
of Convertible Notes at a hypothetical conversion price of $2.75 per share
(which is the conversion price based on the average closing bid price of
$6.48125 on the five trading-days ended November 18, 1997) and assumes
payment of interest on the Convertible Notes in cash. The Convertible Notes
pay interest at 7% per annum payable quarterly and at maturity or on
conversion in cash or Common Stock, at the Company's option. The interest
rate on the Convertible Notes is subject to increase in the event a
registration statement covering the resale of shares underlying the
Convertible Notes is not effective within 90 days after the initial
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<PAGE>
sale of the Convertible Notes. The Convertible Notes mature on January 31,
1999. Conversion of the Convertible Notes are subject to the restrictions
that (i) the holders, individually, will not beneficially own in excess of
4.99% of the Company's Common Stock following any conversion, and (ii) the
issuance of shares upon conversion of the Convertible Notes and exercise of
the Warrants will not, in the aggregate, exceed 1,997,130 shares unless and
until the Company's shareholders have approved issuances above that level.
Shareholder approval of issuances in excess of 1,997,130 was received on
November 4, 1997. For a further description of the rights of the holders of
the Convertible Notes, see the form of Convertible Note filed as an exhibit
to the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997.
(5) The listed Selling Shareholders hold an aggregate of 2,675,000 $3.00
Warrants. The $3.00 Warrants were issued in conjunction with the Company's
private placement of Convertible Notes in August of 1997. The $3.00
Warrants are exercisable for a period of three years to purchase Common
Stock at $3.00 per share or, if less, the lowest conversion price of the
Convertible Notes occurring prior to each exercise. Exercise of the $3.00
Warrants is limited to the same extent as the Convertible Notes (i.e., no
exercise permitted where the holder will beneficially own in excess of
4.99% of the Company's Common Stock). For a further description of the
rights of the holders of the Warrants, see the form of Warrant filed as an
exhibit to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997.
(6) Includes 100,000 $2.40 Warrants. The $2.40 Warrants were issued in
conjunction with the Company's private placement of the Series B Preferred
Stock in February of 1997. The $2.40 Warrants are exercisable for a period
of five years to purchase Common Stock at $2.40 per share.
(7) The listed Selling Stockholders hold Stock Option, expiring May 9, 1999, to
acquire 50,000 shares of Common Stock each for $1.25 per share. The Stock
Options were granted in conjunction with consulting and marketing services
provided by the holders.
(8) Includes 192,925 shares of Common Stock currently held which were acquired
pursuant to the conversion of 30 shares of Series B Preferred Stock on the
terms set forth in note 3 above.
PLAN OF DISTRIBUTION
The Company is registering the shares of Common Stock offered by the
Selling Stockholders hereunder pursuant to contractual registration rights.
The shares of Common Stock offered hereunder may be sold from time to time
by the Selling Stockholders, or by pledgees, donees, transferees or other
successors in interest. Such sales may be made on the Nasdaq National Market or
in the over-the-counter market or otherwise at prices and on terms then
prevailing or related to the then current market price, or in negotiated
transactions. The shares of Common Stock may be sold to or through one or more
broker-dealers, acting as agent or principal in underwritten offerings, block
trades, agency placements, exchange distributions, brokerage transactions or
otherwise, or in any combination of transactions.
In connection with any transaction involving the Common Stock,
broker-dealers or others may receive from the Selling Stockholders, and may in
turn pay to other broker-dealers or others, compensation in the form of
commissions, discounts or concessions in amounts to be negotiated at the time.
Broker-dealers and any other person participating in a distribution of the
Common Stock may be deemed to be "underwriters" within the meaning of the Act in
connection with such distribution, and any such commissions, discounts or
concessions may be deemed to be underwriting discounts or commissions under the
Act.
Any or all of the sales or other transactions involving the Common Stock
described above, whether effected by the Selling Stockholders, any broker-dealer
or others, may be made pursuant to this Prospectus. In addition, any shares of
Common Stock that qualify for sale pursuant to Rule 144 under the Act may be
sold under Rule 144 rather than pursuant to this Prospectus.
To comply with the securities laws of certain states, if applicable, the
Common Stock may be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, shares of Common Stock may not be sold
unless they have been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied with
under applicable state securities laws.
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<PAGE>
The Company and the Selling Stockholders have agreed, and hereafter may
further agree, to indemnify each other and certain persons, including
broker-dealers or others, against certain liabilities in connection with any
offering of the Common Stock, including liabilities arising under the Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Vanderkam &
Sanders, of Houston, Texas.
EXPERTS
The consolidated financial statements of IDM appearing in the IDM
Environmental Corp. Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1996, have been audited by Samuel Klein and Company, independent
certified public accountants, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following is a list of the estimated expenses to be incurred in
connection with the issuance and distribution of the securities being registered
hereby, all of which are payable by the Company, other than underwriting
discounts and commissions.
Registration Fee.......................... $ 14,649.62
Accountants' Fees and Expenses............ 4,000.00
Legal Fees and Expenses................... 25,000.00
Miscellaneous............................. 1,350.38
Total.................................. $ 45,000.00
Item 15. Indemnification of Directors and Officers
The Company's Articles of Incorporation, as amended, eliminate the personal
liability of directors to the Company or its stockholders for monetary damages
for breach of fiduciary duty to the extent permitted by New Jersey law. The
Company's Bylaws provide that the Company shall indemnify its officers and
directors to the extent permitted by the Business Corporation Act of the State
of New Jersey. Section 14A:3-5 of the New Jersey Business Corporation Act
authorizes a corporation to indemnify directors, officers, employees or agents
of the corporation in non-derivative suits if such party acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interest
of the corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful, as determined in
accordance with New Jersey law. Section 14A:3-5 further provides that
indemnification shall be provided if the party in question is successful on the
merits or otherwise.
The provisions affecting personal liability do not abrogate a director's
fiduciary duty to the Company and its shareholders, but eliminate personal
liability for monetary damages for breach of that duty. The provisions do not,
however, eliminate or limit the liability of a director for failing to act in
good faith, for engaging in intentional misconduct or knowingly violating a law,
for authorizing the illegal payment of a dividend or repurchase of stock, for
obtaining an improper personal benefit, for breaching a director's duty of
loyalty, which is generally described as the duty not to engage in any
transaction which involves a conflict between the interest of the Company and
those of the director, or for violations of the federal securities laws.
The provisions regarding indemnification provide, in essence, that the
Company will indemnify its directors against expenses (including attorneys
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any action, suit or proceeding arising out of the
director's status as a director of the Company, including actions brought by or
on behalf of the Company (shareholder derivative actions). The provisions
II-1
<PAGE>
do not require a showing of good faith. Moreover, they do not provide
indemnification for liability arising out of willful misconduct, fraud, or
dishonesty, for "short-swing" profits violations under the federal securities
laws, or for the receipt of illegal remuneration. The provisions also do not
provide indemnification for any liability to the extent such liability is
covered by insurance. The Company currently provides such insurance to its
directors.
The provisions also limit or indemnify against liability resulting from
grossly negligent decisions including grossly negligent business decisions
relating to attempts to change control of the Company.
Item 16. Exhibits
4.1* Certificate of Designations, Voting Powers, Preferences and
Rights of Series B 7% Convertible Preferred Stock
5.1*** Opinion and consent of Vanderkam & Sanders re: the legality of
the shares being registered
10.1** Form of 7% Convertible Note due January 31, 1999
10.2** Form of Three Year $3.00 Warrant
10.3*** Alexander Charles Lentes Stock Option
10.4*** Bernd Muller Stock Option
10.5 Amended and Restated Warrant Agreement with Rochon Capital
Group, Ltd.
23.1 Consent of Vanderkam & Sanders
23.2 Consent of Samuel Klein and Company
24.1*** Power of Attorney
- ------------------------
* Incorporated by reference to the respective exhibits filed with the
Company's Annual Report on Form 10-K for the year ended December 31,
1996.
** Incorporated by reference to the respective exhibits filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997.
*** Previously filed.
Item 17. Undertakings
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 provisions described in Item 15, 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.
The registrant hereby undertakes:
(1) (i) To include any prospectus required by Section 10(a)(3) of the
Act;
(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.
II-2
<PAGE>
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post effective amendment by these
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus 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.
(4) That, for purposes of determining any liability under the Act, each
filing of the Company's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit's plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
<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-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of South River, State of New Jersey on the 21, day of
November, 1997.
IDM ENVIRONMENTAL CORP.
By: /s/ Joel A. Freedman
-------------------------------
JOEL FREEDMAN, President
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.
Signatures Title Date
---------- ----- ----
/s/ Joel A. Freedman President, Chief Executive November 21, 1997
- ------------------------ Officer and Director and
JOEL A. FREEDMAN Director (Principal Executive
Officer)
/s/ Frank A. Falco Chairman of the Board, Chief November 21, 1997
- ------------------------ Operating Officer, Executive
FRANK A. FALCO Vice President and Director
/s/ Michael B. Killeen Treasurer and Chief Financial November 21, 1997
- ------------------------ Officer (Principal Financial
MICHAEL B. KILLEEN and Accounting Officer)
Director November 21, 1997
- ------------------------
FRANK PATTI
Director November 21, 1997
- ------------------------
ROBERT MCGUINNESS
/s/ Richard Keller Director November 21, 1997
- ------------------------
RICHARD KELLER
II-4
AMENDED AND RESTATED WARRANT AGREEMENT
AMENDED AND RESTATED WARRANT AGREEMENT, dated as of November , 1997
--------
by and between IDM ENVIRONMENTAL CORP., a New Jersey corporation (the
"Company"), and ROCHON CAPITAL GROUP, LTD. (the "Placement Agent").
The Company previously issued to the Placement Agent warrants (the
"Original Warrants") to purchase 100,000 shares of common stock of the Company,
$.001 par value per share ("Common Stock") in connection with services provided
pursuant to a Placement Agency Agreement, dated as of February 10, 1997, by and
between the Company and the Placement Agent (the "Placement Agency Agreement").
The Original Warrants were issued subject to the terms and conditions of that
certain Warrant Agreement, dated as of February 11, 1997 (the "Original Warrant
Agreement"), by and between the parties hereto. Subsequent to the issuance of
the Original Warrants, certain disputes arose between the Company and the
Placement Agent. Pursuant to the terms of a Settlement Agreement (the
"Settlement Agreement"), the Company agreed to amend the terms of the Original
Warrants and the parties hereto agreed to surrender and cancel the Original
Warrants and to cause replacement warrants (the "First Warrants") to be issued
to the Placement Agent to purchase 100,000 shares of Common Stock and to cause
new warrants (the "Second Warrants") to be issued to the Placement Agent to
purchase 100,000 shares of Common Stock (except as other specifically indicated,
when used herein, the term "Warrants" shall refer to both the "First Warrants"
and the "Second Warrants"), subject to adjustment as provided in Section 8
hereof (such number of shares, as adjusted, being hereinafter referred to as the
"Shares"), each Warrant entitling the holder ("Holder") thereof to purchase one
share of Common Stock. All capitalized terms used herein and not otherwise
defined herein shall have the same meanings as assigned thereto in the
Settlement Agreement, or if not defined therein, in the Placement Agency
Agreement. This Amended and Restated Warrant Agreement amends and restates the
Original Warrant Agreement in its entirety.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Issuance of Warrants; Form of Warrant. On the Settlement Date the
Company will issue, sell and deliver the Warrants to the Placement Agent or its
bona fide officers or principals. The form of the Warrant and of the form of
Election to Purchase to be attached thereto shall be as set forth on Exhibits A
and B attached hereto. The Warrants shall be executed on behalf of the Company
by the manual or facsimile signature of the present or any future Chairman or
Co-Chairman, President or any Vice President of the Company, under its corporate
seal, affixed or in facsimile, and attested by the manual or facsimile signature
of the present or any future Secretary or Assistant Secretary of the Company.
<PAGE>
2. Registration. The Warrants shall be numbered and shall be registered in
a Warrant register (the "Warrant Register"). The Company shall be entitled to
treat the registered holder of any Warrant on the Warrant Register as the owner
in fact thereof for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in such Warrant on the part of any other
person, and shall not be liable for any registration or transfer of Warrants
which are registered or are to be registered in the name of a fiduciary or the
nominee of a fiduciary unless made with the actual knowledge that a fiduciary or
nominee is committing a breach of trust in requesting such registration or
transfer, or with such knowledge of such facts that its participation therein
amounts to bad faith. The Warrants shall be registered initially in the name of
the Placement Agent in such denominations as the Placement Agent may request in
writing to the Company; provided, however, that the Placement Agent may
designate that all or a portion of the Warrants be issued in varying amounts
directly to its bona fide officers or principals and not to itself. Such
designation will only be made by the Placement Agent if it determines that such
issuances would not violate the interpretation of the Board of Governors of the
National Association of Securities Dealers, Inc. (the "NASD"), relating to the
review of corporate financing arrangements.
3. Transfer of Warrants. The Holder of a Warrant Certificate, by its
acceptance thereof, acknowledges that the Warrants are "restricted securities"
which have not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and represents that the Warrants are being acquired as an
investment and not with a view to the distribution thereof and will not transfer
such Warrants, except to bona fide officers, directors, shareholders,
principals, employees or registered representatives of the Holder upon written
request to the Company delivered in accordance with Section 12 hereof and upon
delivery of the Warrant Certificate duly endorsed by the Holder or by his duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. In all cases of transfer by an
attorney, the original power of attorney, duly approved, or an official copy
thereof, duly certified, shall be deposited with the Company. In case of
transfer by executors, administrators, guardians or other legal representatives,
duly authenticated evidence of their authority shall be produced, and may be
required to be deposited with the Company in its discretion. Upon any
registration of transfer, the Company shall deliver a new Warrant or Warrants to
the persons entitled thereto. The Warrants may be exchanged at the option of the
Holder thereof for other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of shares of
Common Stock upon surrender to the Company or its duly authorized agent. The
Company may require payment of a sum sufficient to cover all taxes and other
governmental charges that may be imposed in connection with any voluntary
transfer, exchange or other disposition of the Warrants. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrants to be
transferred on its books to any person, if such transfer would violate the
Securities Act or applicable state securities laws.
2
<PAGE>
4. Exercise of Warrants.
(a) Term of Warrants; Exercise of Warrants. The Placement Agent is
hereby granted 100,000 First Warrants and 100,000 Second Warrants. Each
First Warrant entitles the registered owner thereof to purchase one Share
at a purchase price of $2.40 per share and each Second Warrant entitles the
registered owner thereof to purchase one Share at a purchase price equal to
the lesser of (i) $3.00 per share or (ii) the lowest conversion price of
the Convertible Notes issued by the Company on August 13, 1997 (the
purchase price with respect to each specific exercise of Second Warrants
shall be determined based on all conversions of Convertible Notes occurring
prior to the date of that exercise)(as adjusted from time to time pursuant
to the provisions hereof, the "Exercise Price"). The Exercise Price and the
Shares issuable upon exercise of Warrants are subject to adjustment upon
the occurrence of certain events, pursuant to the provisions of Section 8
of this Agreement. Subject to the provisions of this Agreement, each Holder
shall have the right, which may be exercised for a period commencing on the
date on which a registration statement covering the Shares is declared
effective by the Securities and Exchange Commission, and ending on February
12, 2002 with respect to First Warrants and August 20, 2000 with respect to
Second Warrants, to purchase from the Company (and the Company shall issue
and sell to such Holder) the number of fully paid and nonassessable shares
(rounded up to the nearest full share) specified in such Warrants, upon
surrender to the Company, or its duly authorized agent, of such Warrants,
with the form of Election to Purchase attached thereto duly completed and
signed, with signatures guaranteed by a member firm of a national
securities exchange, a commercial bank (not a savings bank or savings and
loan association) or trust company located in the United States or a member
of the NASD and upon payment to the Company of the Exercise Price, as
adjusted in accordance with the provisions of Section 8 of this Agreement,
for the number of Shares in respect of which such Warrants are then
exercised. Payment of such Exercise Price may be made in cash or by
certified check or official bank check payable to the order of the Company.
No adjustment shall be made for any dividends on any Shares issuable upon
exercise of a Warrant. Upon each surrender of Warrants and payment of the
Exercise Price as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of the
Holder of such Warrants and in such name or names as such Holder may
designate, a certificate or certificates for the number of full Shares so
purchased upon the exercise of such Warrants. Such certificate or
certificates shall be deemed to have been issued and any person so
designated to be named therein shall be deemed to have become a holder of
record of such Shares as of the date of the surrender of Warrants and
payment of the Exercise Price as aforesaid; provided, however, that if, at
the date of surrender of such Warrants and payment of such Exercise Price,
the transfer books for the Common Stock or other class of securities
issuable upon the exercise of such Warrants shall be closed, the
certificates for the Shares shall be issuable as of the date on which such
books shall next be opened and until such date the Company shall be under
no duty to deliver any certificate for such Shares; provided, further,
however, that the transfer books of record, unless otherwise required by
law, shall not be closed at any one time for a period longer than twenty
(20) days. The rights of purchase represented by the Warrants shall be
exercisable, at the election of the Holder(s) thereof, either in full or
from time to time in part and, in the event that any Warrant is exercised
in respect of less than all of the Shares issuable upon such exercise, a
new Warrant or Warrants will be issued for the remaining number of Shares
specified in the Warrant so surrendered.
3
<PAGE>
(b) Exercise by Surrender of Warrant. In addition to the method of
payment set forth in subsection (a) above and in lieu of any cash payment
required thereunder, the Holder of the Warrants shall have the right at any
time and from time to time to exercise the Warrants in full or in part by
surrendering the Warrant in the manner specified in the Warrant in exchange
for the number of Shares equal to the product of (x) the number of shares
as to which the Warrants are being exercised multiplied by (y) a fraction,
the numerator of which is the Market Price (as defined below) of the Shares
less the Exercise Price and the denominator of which is such Market Price.
Solely for the purposes of this paragraph, Market Price shall be the
average closing bid price of the Common Stock as calculated over the five
(5) trading-day period preceding the date on which the Election to Purchase
is sent to the Company.
5. Payment of Taxes. The Company will pay all documentary stamp taxes, if
any, attributable to the issuance of Shares upon the exercise of Warrants;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue or
delivery of any certificates for Shares in a name other than that of the Holder
of Warrants in respect of which such Shares are issued.
6. Mutilated or Missing Warrants. In case any of the Warrants shall be
mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and representing an equivalent right or interest, but only
upon receipt of evidence reasonably satisfactory to the Company of such
mutilation, loss, theft or destruction of such Warrant and indemnity, if
requested, reasonably satisfactory to the Company. An applicant for such
substitute Warrants shall also comply with such other reasonable regulations and
pay such other reasonable charges and expenses as the Company may prescribe.
7. Reservation of Shares, etc. There have been reserved, and the Company
shall at all times keep reserved, out of the authorized and unissued Common
Stock of the Company, a number of shares of Common Stock sufficient to provide
for the exercise of the rights of purchase represented by the outstanding
Warrants. Continental Stock Transfer & Trust Company, transfer agent for the
Common Stock (the "Transfer Agent"), and every subsequent transfer agent, if
any, for the Company's securities issuable upon the exercise of the Warrants
will be irrevocably authorized and directed at all times to reserve such number
of authorized and unissued shares as shall be required for such purpose. The
Company will keep a copy of this Agreement on file with the Transfer Agent and
with every subsequent transfer agent for any shares of the Company's securities
issuable upon the exercise of the Warrants. The Company will supply the Transfer
Agent or any subsequent transfer agent with duly executed certificates for such
purpose. All Warrants surrendered in the exercise of the rights thereby
evidenced shall be canceled, and such canceled Warrants shall constitute
sufficient evidence of the number of Shares that have been issued upon the
exercise of such Warrants.
8. Adjustments of Exercise Price and Number of Shares. The Exercise Price
and the number and kind of securities issuable upon exercise of each Warrant
shall be subject to adjustment from time to time upon the happening of certain
events, as follows:
(a) In case the Company shall (i) declare a dividend on its Common
Stock in shares of Common Stock or make a distribution in shares of Common
Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine
its outstanding shares of Common Stock into a smaller number of shares of
Common Stock or (iv) issue by reclassification of its shares of Common
Stock other securities of the Company (including any such reclassification
in connection with a consolidation or merger in which the Company is the
continuing corporation), the number of Shares purchasable upon exercise of
each Warrant immediately prior thereto shall be adjusted so that the Holder
of each Warrant shall be entitled to receive the kind and number of Shares
or other securities of the Company which he would have owned or have been
entitled to receive after the happening of any of the events described
above, had such Warrant been exercised immediately prior to the happening
of such event or any record date with respect thereto. An adjustment made
pursuant to this paragraph (a) shall become effective immediately after the
effective date of such event retroactive to immediately after the record
date, if any, for such event.
4
<PAGE>
(b) In case the Company shall issue rights, options or warrants to all
holders of its shares of Common Stock, without any charge to such holders,
entitling them (for a period expiring within 45 days after the record date
mentioned below in this paragraph (b)) to subscribe for or to purchase
shares of Common Stock at a price per share that is lower at the record
date mentioned below than the then current market price per share of Common
Stock (as defined in paragraph (d) below), the number of Shares thereafter
purchasable upon exercise of each Warrant shall be determined by
multiplying the number of Shares theretofore purchasable upon exercise of
each Warrant by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock offered for subscription or purchase, and
of which the denominator shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares which the
aggregate offering price of the total number of shares of Common Stock so
offered would purchase at the then current market price per share of Common
Stock. Such adjustment shall be made whenever such rights, options or
warrants are issued, and shall become effective retroactively to
immediately after the record date for the determination of shareholders
entitled to receive such rights, options or warrants.
(c) In case the Company shall distribute to all holders of its shares
of Common Stock shares of stock other than Common Stock or evidences of its
indebtedness or assets (excluding cash dividends payable out of
consolidated earnings or retained earnings and dividends or distributions
referred to in paragraph (a) above) or rights, options or warrants or
convertible or exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock (excluding those referred to in
paragraph (b) above), then in each case the number of Shares thereafter
issuable upon the exercise of each Warrant shall be determined by
multiplying the number of Shares theretofore issuable upon the exercise of
each Warrant, by a fraction, of which the numerator shall be the current
market price per share of Common Stock (as defined in paragraph (d) below)
on the record date mentioned below in this paragraph (c), and of which the
denominator shall be the current market price per share of Common Stock on
such record date, less the then fair value (as determined in good faith by
the Board of Directors of the Company, whose determination shall be
conclusive) of the portion of the shares of stock other than Common Stock
or assets or evidences of indebtedness so distributed or of such
subscription rights, options or warrants, or of such convertible or
exchangeable securities applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of distribution retroactive to immediately
after the record date for the determination of shareholders entitled to
receive such distribution.
(d) For the purpose of any computation under paragraphs (b) and (c) of
this Section 8, the current market price per share of Common Stock at any
date (the "Current Market Price") shall be the average of the daily closing
prices for fifteen (15) consecutive trading days commencing twenty (20)
trading days before the date of such computation. The closing price for
each day shall be the last reported sale price or, in case no such reported
sale takes place on such day, the average of the closing bid and asked
prices for such day, in either case on the principal national securities
exchange on which the shares are listed or admitted to trading, or if they
are not listed or admitted to trading on any national securities exchange,
but are traded in the over-the-counter market, the closing sale price of
the Common Stock or, in case no sale is publicly reported, the average of
the representative closing bid and asked quotations for the Common Stock on
the Nasdaq system or any comparable system, or if the Common Stock is not
listed on the Nasdaq system or a comparable system, the closing sale price
of the Common Stock or, in case no sale is publicly reported, the average
of the closing bid and asked prices as furnished by two members of the NASD
selected from time to time by the Company for that purpose.
(e) No adjustment in the number of Shares purchasable hereunder shall
be required unless such adjustment would require an increase or decrease of
at least one percent (1%) in the number of Shares purchasable upon the
exercise of each Warrant; provided, however, that any adjustments which by
reason of this paragraph (e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment but not later
than three years after the happening of the specified event or events. All
calculations shall be made to the nearest one thousandth of a share.
5
<PAGE>
(f) Whenever the number of Shares purchasable upon the exercise of
each Warrant is adjusted, as herein provided, the Exercise Price shall be
adjusted by multiplying the Exercise Price in effect immediately prior to
such adjustment by a fraction, of which the numerator shall be the number
of Shares purchasable upon the exercise of each Warrant immediately prior
to such adjustment, and of which the denominator shall be the number of
Shares so purchasable immediately thereafter.
(g) For the purpose of this Section 8, the term "shares of Common
Stock" shall mean (i) the class of stock designated as the Common Stock of
the Company at the date of this Agreement or (ii) any other class of stock
resulting from successive changes or reclassifications of such shares
consisting solely of changes in par value, or from no par value to par
value, or from par value to no par value. In the event that at any time, as
a result of an adjustment made pursuant to paragraph (a) above, the Holders
shall become entitled to purchase any shares of capital stock of the
Company other than shares of Common Stock, thereafter the number of such
other shares so purchasable upon exercise of each Warrant and the Exercise
Price of such shares shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Shares contained in paragraphs (a) through (f),
inclusive, and paragraphs (h) through (m), inclusive, of this Section 8,
and the provisions of Sections 4, 5, 7 and 10, with respect to the Shares,
shall apply on like terms to any such other shares.
(h) Upon the expiration of any rights, options, warrants or conversion
rights or exchange privileges, if any thereof shall not have been
exercised, the Exercise Price and the number of shares of Common Stock
purchasable upon the exercise of each Warrant shall, upon such expiration,
be readjusted and shall thereafter be such as it would have been had it
originally been adjusted (or had the original adjustment not been required,
as the case may be) as if (i) the only shares of Common Stock so issued
were the shares of Common Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or conversion rights or exchange
privileges and (ii) such shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company upon such
exercise plus the aggregate consideration, if any, actually received by the
Company for the issuance, sale or grant of all of such rights, options,
warrants or conversion rights or exchange privileges whether or not
exercised; provided, however, that no such readjustment shall have the
effect of decreasing the number of shares issuable upon the exercise of
each Warrant or increasing the Exercise Price by an amount in excess of the
amount of the adjustment initially made in respect of the issuance, sale or
grant of such rights, options, warrants or conversion rights or exchange
privileges.
(i) The Company may, at its option at any time during the term of the
Warrants, reduce the then current Exercise Price to any amount deemed
appropriate by the Board of Directors of the Company.
(j) Whenever the number of Shares issuable upon the exercise of each
Warrant or the Exercise Price of such Shares is adjusted, as herein
provided, the Company shall promptly mail by first class mail, postage
prepaid, to each Holder, notice of such adjustment or adjustments. The
Company shall retain a firm of independent public accountants (who may be
the regular accountants employed by the Company) to make any computation
required by this Section 8 and shall cause such accountants to prepare a
certificate setting forth the number of Shares issuable upon the exercise
of each Warrant and the Exercise Price of such Shares after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made. Such certificate shall be conclusive as to the correctness of such
adjustment and each Holder shall have the right to inspect such certificate
during reasonable business hours.
(k) Except as provided in this Section 8, no adjustment in respect of
any dividends shall be made during the term of a Warrant or upon the
exercise of a Warrant.
(l) In case of any consolidation of the Company with or merger of the
Company with or into another corporation or in case of any sale or
conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the Company or such successor or
purchasing corporation (or an affiliate of such successor or purchasing
corporation), as the case may be, agrees that each Holder shall have the
right thereafter upon payment of the Exercise Price in effect immediately
prior to such
6
<PAGE>
action to purchase upon exercise of each Warrant the kind and amount of
shares and other securities and property (including cash) which he would
have owned or have been entitled to receive after the happening of such
consolidation, merger, sale or conveyance had such Warrant been exercised
immediately prior to such action. The provisions of this paragraph (l)
shall similarly apply to successive consolidations, mergers, sales or
conveyances.
(m) Notwithstanding any adjustment in the Exercise Price or the number
or kind of shares purchasable upon the exercise of the Warrants pursuant to
this Agreement, certificates for Warrants issued prior or subsequent to
such adjustment may continue to express the same price and number and kind
of Shares as are initially issuable pursuant to this Agreement.
9. Reserved.
10. Registration Rights.
(a) Demand Registration Rights. The Company covenants and agrees with
the Placement Agent and any other or subsequent Holders of the Registrable
Securities (as defined in paragraph (f) of this Section 10) that, subject
to the availability of audited financial statements which would comply with
Regulation S-X under the Securities Act, upon written request of the then
Holder(s) of at least a majority of the Warrants or the Registrable
Securities, or both, which were originally issued to the Placement Agent or
its designees, made at any time within the period commencing on the
Settlement Date and ending five years after the Closing Date, the Company
will file as promptly as practicable and, in any event, within 60 days
after receipt of such written request, at its expense (other than the fees
of counsel and sales commissions for such Holders), no more than once, a
post-effective amendment (the "Amendment") to a registration statement, or
a new registration statement or a Regulation A Offering Statement (an
"Offering Statement") under the Securities Act, registering or qualifying
the Registrable Securities for sale. Within fifteen (15) days after
receiving any such notice, the Company shall give notice to the other
Holders of the Registrable Securities advising that the Company is
proceeding with such Amendment, registration statement or Offering
Statement and offering to include therein the Registrable Securities of
such Holders. The Company shall not be obligated to any such other Holder
unless such other Holder shall accept such offer by notice in writing to
the Company within ten (10) days thereafter. The Company will use its best
efforts, through its officers, directors, auditors and counsel in all
matters necessary or advisable, to file and cause to become effective such
Amendment, registration statement or Offering Statement as promptly as
practicable and for a period of nine months thereafter to reflect in the
Amendment, registration statement or Offering Statement financial
statements which are prepared in accordance with Section 10(a)(3) of the
Securities Act and any facts or events arising that, individually, or in
the aggregate, represent a fundamental and/or material change in the
information set forth in the Amendment, registration statement or Offering
Statement to enable any Holders of the Warrants to either sell such
Warrants or to exercise such Warrants and sell Shares, or to enable any
holders of Shares to sell such Shares, during said nine-month period. The
Holders may sell the Registrable Securities pursuant to the Amendment,
registration statement or the Offering Statement without exercising the
Warrants. If any registration pursuant to this paragraph (a) is an
underwritten offering, the Holders of a majority of the Registrable
Securities to be included in such registration shall be entitled to select
the underwriter or managing underwriter (in the case of a syndicated
offering) of such offering, subject to the Company's approval which shall
not be unreasonably withheld.
(b) Piggyback Registration Rights. The Company covenants and agrees
with the Placement Agent and any other Holders or subsequent Holders of the
Registrable Securities that if, at any time within the period commencing on
the Settlement Date and ending five years after the Closing Date, it
proposes to file a registration statement or Offering Statement with
respect to any class of equity or equity-related security (other than in
connection with an offering to the Company's employees or in connection
with an acquisition, merger or similar transaction) under the Securities
Act in a primary registration on behalf of the Company and/or in a
secondary registration on behalf of holders of such securities and the
registration form or Offering Statement to be used may be used for
registration of the Registrable Securities, the Company will give prompt
written notice (which, in the case of a registration statement or
notification pursuant to the exercise of demand registration rights other
7
<PAGE>
than those provided in Section 10(a) of this Agreement, shall be within ten
(10) business days after the Company's receipt of notice of such exercise
and, in any event, shall be at least 30 days prior to such filing) to the
Holders of Registrable Securities (regardless of whether some of the
Holders shall have theretofore availed themselves of the right provided in
Section 10(a) of this Agreement) at the addresses appearing on the records
of the Company of its intention to file a registration statement or
Offering Statement and will offer to include in such registration statement
or Offering Statement all but not less than 20% of the Registrable
Securities and limited, in the case of a Regulation A offering, to the
amount of the available exemption, subject to paragraphs (i) and (ii) of
this paragraph (b), such number of Registrable Securities with respect to
which the Company has received written requests for inclusion therein
within ten (10) days after the giving of notice by the Company. All
registrations requested pursuant to this paragraph (b) are referred to
herein as "Piggyback Registrations". All Piggyback Registrations pursuant
to this paragraph (b) will be made solely at the Company's expense. This
paragraph is not applicable to a registration statement filed by the
Company with the Commission on Forms S-4 or S-8 or any successor forms.
(i) Priority on Primary Registrations. If a Piggyback
Registration includes an underwritten primary registration on behalf
of such Company and the underwriter(s) for such offering determines in
good faith and advises the Company in writing that in its/their
opinion the number of Registrable Securities requested to be included
in such registration exceeds the number that can be sold in such
offering without materially adversely affecting the distribution of
such securities by the Company, the Company will include in such
registration (A) first, the securities that the Company proposes to
sell and (B) second, the Registrable Securities requested to be
included in such registration, apportioned pro rata among the Holders
of Registrable Securities, provided, however, the Company will use its
best efforts to include not less than 20% of the Registrable
Securities, and (C) third, securities of the holders of other
securities requesting registration.
(ii) Priority on Secondary Registrations. If a Piggyback
Registration consists only of an underwritten secondary registration
on behalf of holders of securities of the Company (other than pursuant
to Section 10(a)), and the underwriter(s) for such offering advises
the Company in writing that in its/their opinion the number of
Registrable Securities requested to be included in such registration
exceeds the number which can be sold in such offering without
materially adversely affecting the distribution of such securities by
the Company, the Company will include in such registration (A) first,
the securities requested to be included therein by the holders
requesting such registration and the Registrable Securities requested
to be included in such registration, pro rata among all such holders
on the basis of the number of shares requested to be included by each
such holder, provided, however, the Company will use its best efforts
to include not less than 20% of the Registrable Securities, and (B)
second, other securities requested to be included in such
registration.
Notwithstanding the foregoing, if any such underwriter shall determine in
good faith and advise the Company in writing that the distribution of the
Registrable Securities requested to be included in the registration concurrently
with the securities being registered by the Company would materially adversely
affect the distribution of such securities by the Company, then the Holders of
such Registrable Securities shall delay their offering and sale for such period
ending on the earliest of (1) 90 days following the effective date of the
Company's registration statement, (2) the day upon which the underwriting
syndicate, if any, for such offering shall have been disbanded or, (3) such date
as the Company, managing underwriter and Holders of Registrable Securities shall
otherwise agree. In the event of such delay, the Company shall file such
supplements, post-effective amendments and take any such other steps as may be
necessary to permit such Holders to make their proposed offering and sale for a
period of 120 days immediately following the end of such period of delay. If any
party disapproves of the terms of any such underwriting, it may elect to
withdraw therefrom by written notice to the Company, the underwriter, and the
Placement Agent. Notwithstanding the foregoing, the Company shall not be
required to file a registration statement to include Shares pursuant to this
Section 10(b) if independent counsel, reasonably satisfactory to counsel for the
Company and counsel for the Placement Agent, renders an opinion to the Company
that the Shares proposed to be disposed of may be transferred pursuant to the
provisions of Rule 144 under the Securities Act or otherwise without
registration under the Securities Act.
8
<PAGE>
(c) Other Registration Rights. In addition to the rights above provided,
the Company will cooperate with the then Holders of the Registrable Securities
in preparing and signing any registration statement or Offering Statement, in
addition to the registration statements and Offering Statements discussed above,
required in order to sell or transfer the Registrable Securities and will supply
all information required therefor, but such additional registration statement or
Offering Statement, shall be at the then Holders' cost and expense; provided,
however, that if the Company elects to register or qualify additional shares of
Common Stock, the cost and expense of such registration statement or Offering
Statement will be pro rated between the Company and the Holders of the
Registrable Securities according to the aggregate sales price of the securities
being issued. Notwithstanding the foregoing, the Company will not be required to
file a registration statement or Offering Statement pursuant to this paragraph
(c), (i) at a time when the audited financial statements required to be included
therein are not available, which time shall be limited to the period commencing
45 days after the end of the Company's last fiscal year and ending 90 days after
the end of such fiscal year, or (ii) within 90 days after completion of a public
offering by the Company of any of its Common Stock or equity-related securities
or (iii) if it would adversely impact the Company in its capital raising plans
or otherwise (in which latter case filing may be delayed no longer than 120
days).
(d) Action to be Taken by the Company. In connection with the registration
of Registrable Securities in accordance with paragraphs (a), (b) or (c) of this
Section 10, the Company agrees to:
(i) Bear the expenses of any registration or qualification under
paragraphs (a) or (b) of this Section 10, including, but not limited to,
legal, accounting and printing fees; provided, however, that in no event
shall the Company be obligated to pay (A) any fees and disbursements of
special counsel for Holders of Registrable Securities, or (B) any
underwriters' discount or commission in respect of such Registrable
Securities, (C) any stock transfer taxes attributable to the sale of the
Registrable Securities, or (D) upon the exercise of any demand registration
right provided for in paragraph (a) of this Section 10, the cost of any
liability or similar insurance required by an underwriter, to the extent
that such costs are attributable solely to the offering of such Registrable
Securities, payment of which shall, in each case, be the sole
responsibility of the Holders of the Registrable Securities.
(ii) Use its best efforts to register or qualify the Registrable
Securities for offer or sale under state securities or Blue Sky laws of
such jurisdictions in which the Placement Agent or such Holders shall
reasonably request, provided, however, that no qualification shall be
required in any jurisdiction where, as a result thereof, the Company would
be subject to service of general process or to taxation as a foreign
corporation doing business in such jurisdiction to which it is not then
subject, and to do any and all other acts and things which may be necessary
or advisable to enable the holders to consummate the proposed sale,
transfer or other disposition of such securities in any jurisdiction; and
(iii) Enter into a cross-indemnity agreement, in customary form, with
each underwriter, if any, and each holder of securities included in such
Amendment, registration statement or Offering Statement.
(e) Action to be Taken by the Holders. In connection with the registration
of Registrable Securities in accordance with paragraphs (a), (b) or (c) of this
Section 10, the Company's obligation shall be conditioned as to each such public
offering upon a timely receipt by the Company in writing of:
(i) Information as to the terms of such public offering furnished by
or on behalf of each Holder intending to make a public offering of his, her
or its Registrable Securities; and
(ii) Such other information as the Company may reasonably require from
such Holders, or any underwriter for any of them, for inclusion in such
registration statement or Notification on Form 1-A.
(f) For purposes of this Section 10, (i) the term "Holder" shall include
holders of Shares, and (ii) the term "Registrable Securities" shall mean the
Shares, if issued.
9
<PAGE>
11. Notices to Holders.
(a) Nothing contained in this Agreement or in any of the Warrants shall be
construed as conferring upon the Holders thereof the right to vote or to receive
dividends or to consent or to receive notice as shareholders in respect of the
meetings of shareholders or the election of directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company; provided,
however, that in the event that a meeting of shareholders shall be called to
consider and take action on a proposal for the voluntary dissolution of the
Company, other than in connection with a consolidation, merger or sale of all,
or substantially all, of its property, assets, business and good will as an
entirety, then and in that event the Company shall cause a notice thereof to be
sent by first-class mail, postage prepaid, at least twenty (20) days prior to
the date fixed as a record date or the date of closing the transfer books in
relation to such meeting, to each registered Holder of Warrants at such Holder's
address appearing on the Warrant Register; but failure to mail or to receive
such notice or any defect therein or in the mailing thereof shall not affect the
validity of any action taken in connection with such voluntary dissolution.
(b) In the event the Company intends to make any distribution on its Common
Stock (or other securities which may be issuable in lieu thereof upon the
exercise of Warrants), including, without limitation, any such distribution to
be made in connection with a consolidation or merger in which the Company is the
continuing corporation, or to issue subscription rights or warrants to holders
of its Common Stock, the Company shall cause a notice of its intention to make
such distribution to be sent by first-class mail, postage prepaid, at least
twenty (20) days prior to the date fixed as a record date or the date of closing
the transfer books in relation to such distribution, to each registered Holder
of Warrants at such Holder's address appearing on the Warrant Register, but
failure to mail or to receive such notice or any defect therein or in the
mailing thereof shall not affect the validity of any action taken in connection
with such distribution.
12. Notices. Any notice pursuant to this Agreement to be given or made by
the Holder of any Warrant and/or the holder of any Share to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed as follows or to such other address as the Company may
designate by notice given in accordance with this Section 12, to the Holders of
Warrants and/or the holders of Shares:
IDM ENVIRONMENTAL CORP.
396 Whitehead Avenue
South River, NJ 08882
Attention: Chief Financial Officer
Notices or demands authorized by this Agreement to be given or made by the
Company to or on the Holder of any Warrant and/or the holder of any Share shall
be sufficiently given or made (except as otherwise provided in this Agreement)
if sent by first-class mail, postage prepaid, addressed to such Holder or such
holder of Shares at the address of such Holder or such holder of Shares as shown
on the Warrant Register or the books of the Company, as the case may be.
13. Governing Law. This Agreement and each Warrant issued hereunder shall
be governed by and construed in accordance with the substantive laws of the
State of New York. The Company hereby agrees to accept service of process by
notice given to it pursuant to the provisions of Section 12.
10
<PAGE>
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day, month and year first above written.
IDM ENVIRONMENTAL CORP.
By:_____________________________
Name: Joel A. Freedman
Title: President
ROCHON CAPITAL GROUP, LTD.
By:_____________________________
Name: Phillip L. Neiman
Title: President
11
<PAGE>
EXHIBIT A
No. ____ 100,000 Warrants
IDM ENVIRONMENTAL CORP.
Warrant Certificate
THIS CERTIFIES THAT for value received Rochon Capital Group, Ltd., or
registered assigns, is the owner of the number of Warrants set forth above, each
of which entitles the owner thereof to purchase one fully paid and nonassessable
share of common stock, $.001 par value (the "Common Stock"), of IDM
ENVIRONMENTAL CORP., a New Jersey corporation (the "Company"), at the purchase
price equal to $2.40, which is the Exercise Price, as defined in the Amended and
Restated Warrant Agreement, dated as of November , 1997 (the "Warrant
Agreement"), between the Company and Rochon Capital Group, Ltd., upon
presentation and surrender of this Warrant Certificate with the Form of Election
to Purchase duly executed. The number of Warrants evidenced by this Warrant
Certificate (and the number of shares which may be purchased upon exercise
thereof, rounded up to the nearest full share) set forth above, and the Exercise
Price per share set forth above, are the number and Exercise Price as of the
date of original issuance of the Warrants, based on the shares of Common Stock
of the Company as constituted at such date. As provided in the Warrant
Agreement, the Exercise Price and the number or kind of shares which may be
purchased upon the exercise of the Warrants evidenced by this Warrant
Certificate are, upon the happening of certain events, subject to modification
and adjustment.
This Warrant Certificate is subject to, and entitled to the benefits of,
all of the terms, provisions and conditions of the Warrant Agreement, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitations of rights, duties and immunities
hereunder of the Company and the holders of the Warrant Certificates. Copies of
the Warrant Agreement are on file at the principal office of the Company.
This Warrant Certificate, with or without other Warrant Certificates, upon
surrender at the principal office of the Company, may be exchanged for another
Warrant Certificate or Warrant Certificates of like tenor and date evidencing
Warrants entitling the holder to purchase a like aggregate number of shares of
Common Stock as the Warrants evidenced by the Warrant Certificate or Warrant
Certificates surrendered entitled such holder to purchase. If this Warrant
Certificate shall be exercised in part, the holder hereof shall be entitled to
receive upon surrender hereof another Warrant Certificate or Warrant
Certificates for the number of whole Warrants not exercised.
No holder of this Warrant Certificate shall be entitled to vote, receive
dividends, subscription rights or be deemed the holder of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issue of stock, reclassification of stock, change of
par value or change of stock to no par value, consolidation, merger, conveyance,
or otherwise) or, except as provided in the Warrant Agreement, to receive notice
of meetings, until the Warrant or Warrants evidenced by this Warrant Certificate
shall have been exercised and the Shares shall have become deliverable as
provided in the Warrant Agreement.
If this Warrant shall be surrendered for exercise within any period during
which the transfer books for the Company's Common Stock or other class of stock
purchasable upon the exercise of this Warrant are closed for any purpose, the
Company shall not be required to make delivery of certificates for shares
purchasable upon such exercise until the date of the reopening of said transfer
books, provided, however, that such books shall not be closed for longer than a
20-day period.
A-1
<PAGE>
IN WITNESS WHEREOF, THE COMPANY has caused the signature (or facsimile
signature) of its President and its Secretary to be printed hereon and its
corporate seal (or facsimile) to be printed hereon.
Dated: November __, 1997
IDM ENVIRONMENTAL CORP.
By:_____________________________
Name: Joel A. Freedman
Title: President
Attest:
By:_________________________
Name: Frank A. Falco
Title: Secretary
A-2
<PAGE>
FORM OF
ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificates.)
FOR VALUE RECEIVED __________________ hereby sells, assigns and transfers
unto this Warrant Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
____________________, to transfer the within Warrant Certificate on the books of
the within-named Company, with full power of substitution.
Dated: ______________________, 199_
-----------------------------------
Signature
Signature Guaranteed:
NOTICE
The signature of the foregoing Assignment must correspond to the name as
written upon the face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
A-3
<PAGE>
FORM OF
ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Warrant Certificate).
TO: IDM ENVIRONMENTAL CORP.
The undersigned hereby irrevocably elects to exercise Warrants represented
by this Warrant Certificate to purchase ______ shares of Common Stock issuable
upon the exercise of such Warrants and requests that certificates for such
shares be issued in the name of:
(Please insert social security, tax identification or other identifying number)
-------------------------------
-------------------------------
-------------------------------
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security, tax identification or other identifying number
-------------------------------
-------------------------------
-------------------------------
(Please print name and address)
Dated: _______________, 19__
------------------------------
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of this
Warrant Certificate)
Signature Guaranteed:
A-4
<PAGE>
EXHIBIT B
No. ____ 100,000 Warrants
IDM ENVIRONMENTAL CORP.
Warrant Certificate
THIS CERTIFIES THAT for value received Rochon Capital Group, Ltd., or
registered assigns, is the owner of the number of Warrants set forth above, each
of which entitles the owner thereof to purchase one fully paid and nonassessable
share of common stock, $.001 par value (the "Common Stock"), of IDM
ENVIRONMENTAL CORP., a New Jersey corporation (the "Company"), at the purchase
price equal to the lesser of (i) $3.00 or (ii) the lowest conversion price of
the Convertible Notes issued by the Company on August 13, 1997 (the purchase
price with respect to each specific exercise of Second Warrants shall be
determined based on all conversions of Convertible Notes occurring prior to the
date of that exercise), which is the Exercise Price, as defined in the Amended
and Restated Warrant Agreement, dated as of November , 1997 (the "Warrant
Agreement"), between the Company and Rochon Capital Group, Ltd., upon
presentation and surrender of this Warrant Certificate with the Form of Election
to Purchase duly executed. The number of Warrants evidenced by this Warrant
Certificate (and the number of shares which may be purchased upon exercise
thereof, rounded up to the nearest full share) set forth above, and the Exercise
Price per share set forth above, are the number and Exercise Price as of the
date of original issuance of the Warrants, based on the shares of Common Stock
of the Company as constituted at such date. As provided in the Warrant
Agreement, the Exercise Price and the number or kind of shares which may be
purchased upon the exercise of the Warrants evidenced by this Warrant
Certificate are, upon the happening of certain events, subject to modification
and adjustment.
This Warrant Certificate is subject to, and entitled to the benefits of,
all of the terms, provisions and conditions of the Warrant Agreement, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitations of rights, duties and immunities
hereunder of the Company and the holders of the Warrant Certificates. Copies of
the Warrant Agreement are on file at the principal office of the Company.
This Warrant Certificate, with or without other Warrant Certificates, upon
surrender at the principal office of the Company, may be exchanged for another
Warrant Certificate or Warrant Certificates of like tenor and date evidencing
Warrants entitling the holder to purchase a like aggregate number of shares of
Common Stock as the Warrants evidenced by the Warrant Certificate or Warrant
Certificates surrendered entitled such holder to purchase. If this Warrant
Certificate shall be exercised in part, the holder hereof shall be entitled to
receive upon surrender hereof another Warrant Certificate or Warrant
Certificates for the number of whole Warrants not exercised.
No holder of this Warrant Certificate shall be entitled to vote, receive
dividends, subscription rights or be deemed the holder of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issue of stock, reclassification of stock, change of
par value or change of stock to no par value, consolidation, merger, conveyance,
or otherwise) or, except as provided in the Warrant Agreement, to receive notice
of meetings, until the Warrant or Warrants evidenced by this Warrant Certificate
shall have been exercised and the Shares shall have become deliverable as
provided in the Warrant Agreement.
If this Warrant shall be surrendered for exercise within any period during
which the transfer books for the Company's Common Stock or other class of stock
purchasable upon the exercise of this Warrant are closed for any purpose, the
Company shall not be required to make delivery of certificates for shares
purchasable upon such exercise until the date of the reopening of said transfer
books, provided, however, that such books shall not be closed for longer than a
20-day period.
B-1
<PAGE>
IN WITNESS WHEREOF, THE COMPANY has caused the signature (or facsimile
signature) of its President and its Secretary to be printed hereon and its
corporate seal (or facsimile) to be printed hereon.
Dated: November __, 1997
IDM ENVIRONMENTAL CORP.
By:_____________________________
Name: Joel A. Freedman
Title: President
Attest:
By:_________________________
Name: Frank A. Falco
Title: Secretary
B-2
<PAGE>
FORM OF
ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificates.)
FOR VALUE RECEIVED __________________ hereby sells, assigns and transfers
unto this Warrant Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
____________________, to transfer the within Warrant Certificate on the books of
the within-named Company, with full power of substitution.
Dated: ______________________, 199_
-----------------------------------
Signature
Signature Guaranteed:
NOTICE
The signature of the foregoing Assignment must correspond to the name as
written upon the face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
B-3
<PAGE>
FORM OF
ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Warrant Certificate).
TO: IDM ENVIRONMENTAL CORP.
The undersigned hereby irrevocably elects to exercise Warrants represented
by this Warrant Certificate to purchase ______ shares of Common Stock issuable
upon the exercise of such Warrants and requests that certificates for such
shares be issued in the name of:
(Please insert social security, tax identification or other identifying number)
-------------------------------
-------------------------------
-------------------------------
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security, tax identification or other identifying number
-------------------------------
-------------------------------
-------------------------------
(Please print name and address)
Dated: _______________, 19__
------------------------------
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of this
Warrant Certificate)
Signature Guaranteed:
B-4
CONSENT OF VANDERKAM & SANDERS
We hereby consent to the use of our name under the heading "Leagal Matters" in
the Prospectus constituting a part of Pre-Effective Amendment No. 3 to the Form
S-3 Registration Statement (File No. 333-28485) of IDM Environmental Corp.
VANDERKAM & SANDERS
/s/ Vanderkam & Sanders
-----------------------------------
Houston, Texas
November 21, 1997
CONSENT OF SAMUEL KLEIN AND COMPANY, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of IDM Environmental
Corp. for the registration of 7,000,000 shares of its common stock and to the
incorporation by reference therein of our report dated April 4, 1997, with
respect to the consolidated financial statements of IDM Environmental Corp.
included in its Annual Report on Form 10-K, and amendments no. 1 and 2 thereto,
for the year ended December 31, 1996, filed with the Securities and Exchange
Commission.
SAMUEL KLEIN AND COMPANY
/s/ Samuel Klein and Company
-------------------------------------
Newark, New Jersey
November 19, 1997
