UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended July 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
Commission File Number: 0-25024
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TITAN TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
New Mexico 85-0388759
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(State or other jurisdiction of (I.R.S. Employer
incorporation or other organization) (Identification No.)
3206 Candelaria Road, N.E., Albuquerque, New Mexico 87107
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 505-884-0272
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
No Par Value Common Stock
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No____.
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $333,967.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of October 20, 1996: $9,127,500.
The number of shares outstanding of the Registrant's No Par Value common stock,
as of October 20, 1996, was: 18,236,411 shares.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference herein: Part II - Items
5(c), 6, 7, - Registrant's Annual Report for the fiscal year ended July 31,
1996.
Part III- Items 9, 10, 11, and 12 - Registrant's Definitive Proxy Statement
for the Annual Meeting of Shareholders to be held on December 16, 1996.
PART I
ITEM 1: DESCRIPTION OF BUSINESS
History
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Titan Technologies, Inc. (hereafter the "Company") was incorporated under the
laws of the State of New Mexico on July 14, 1954, as Titan Uranium Corporation,
which, at that time intended to engage in the business of mining exploration and
operations, with its principal efforts being directed toward precious metals and
uranium. The Company's name was change to Titan Technologies, Inc. in 1986.
In 1989, the Company acquired approximately 97.5% of the outstanding common
stock of Aegis Technologies, Inc., a privately held New Mexico corporation, and
in 1991 acquired the balance of that company's common stock. In 1991, the
Company acquired all of the outstanding common stock of Tire Recycling
Technologies Corporation., a privately held North Carolina corporation
(subsequently reorganized as a New Mexico corporation). The stock of Aegis
Technologies Corporation was sold on July 7, 1995. All of the Company's present
business is being conducted by Tire Recycling Technologies Corporation.
After 1986, the Company began looking for new assets and businesses that it
might acquire. It acquired two businesses, those being Aegis Technologies, Inc.,
a corporation that had certain technology related to the manufacture of building
tiles, which was acquired in 1989, and Tire Recycling Technologies Corporation,
which was acquired in 1991. The Company was never able to develop the business
of Aegis Technologies, Inc. and that corporation was sold during fiscal 1995.
The acquisition of Tire Recycling Technologies Corporation ("TRTC") was based on
a formula of Company shares for the shares of stock in TRTC, which formula was
based on the perceived value of the technologies that TRTC owned. The Company
exchanged four shares of its common stock for each share of TRTC's common stock.
Since 1991, the Company has devoted substantially all of it resources to further
the development of TRTC's business.
Tire Recycling Technologies Corporation. ("TRTC")
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As stated above, TRTC, a wholly owned Company subsidiary, conducts the primary
Company business operations. TRTC has developed and is currently marketing
commercial scale plants capable of converting scrap tires into high quality,
readily marketable oil, steel, and carbon black. The Company is offering for
sale to interested operators on a turnkey basis a completed, licensed and
operational tire recycling plant together with a license with the Company for
the use of the Company's TRTC process that is discussed below.
The TRTC technology being utilized by the Company was developed by the Company
to recover the oil, steel and carbon black that was utilized in the manufacture
of tires. The process is self contained, using scrap tires as the feed-stock
resource, which, with heat and a physical enabler reduces the tires to their
basic chemicals. Minor residue from combustion is vented into the atmosphere,
which is believed by management to result in minimal environmental impact.
Certain rights to technology acquired by the Company from other individuals was
abandoned during the year because it was not viable and the Company's
obligations under the agreements relating to this other technology was
terminated.
During the past three years, the Company has learned that the initial technology
was not fully developed and has been required to devote substantial resources to
develop its technology to meet the criteria of its clients to dispose of tires
through the use of the TRTC technology. The current evolution of the Company's
technology does not require the catalyst originally used in the TRTC process. An
enabler developed by the Company and now being used by the Company has proven to
be superior in initiating the necessary catalytic reaction and continuing the
process of breaking down the tires into their basic constituent parts.
The TRTM-60 Technology employs enhanced pyrolysis, which, unlike known competing
scrap tire recovery systems, is true tertiary recycling: the original elements
that went into making the tires, primarily oil, steel and carbon black, are
reclaimed in near virgin form.
The entire tire recycling process is a closed system. The only emissions are the
exhaust gases from firing the retort burners. Because methane and other
components of the gas fraction are clean burning, release of pollutants to the
atmosphere is minimal. The only nonresalable materials from the process are the
small quantities of ash and dirt produced that are landfilled.
The TRTM-60 technology was developed to meet the world-wide need for an
economically viable method for the permanent disposal of tires. Total quantities
of tires in stock piles and dumps in the United States have been estimated at 3
billion tires. Tires are introduced into these stock piles through the
distribution of new cars (which is expected to reach 58 million units per year
by the year 2,000) and by replacement tires for older vehicles, of which there
are approximately 15 for each new car introduced into the market. The Scrap Tire
Management Council estimates that there is about one scrap tire generated
annually per person in the United States, or approximately 240 million scrap
tires annually. Tire production has been estimated at 260 million tires per
year. In 1989, replacement tires for all auto, buses, trucks and motor cycles,
but not including military equipment, was approximately 189 million tires. The
difference between the estimated 260 million tire production and use is believed
to be from use by military and on farm machinery and aircraft.
Stockpiled tires and the risks associated with them, from mosquito production to
fire hazard, have become a significant environmental problem. Legislation has
been introduced and passed in many states controlling tire disposal, storing and
transportation. Massachusetts, Minnesota and Wisconsin have established programs
to eliminate stockpiles of tires. Fourteen states have adopted or plan to adopt
tax measures to provide the resources to eliminate tire stockpiles, while
thirteen other states have established or will establish grants or subsidy
arrangements for tire recycling and disposal.
The Company's Management believes that the Company's process is unique in the
industry in that it operates on a continuous basis at the unusually low
temperature of 450 degrees Farenheit rather than competing pyrolytic
technologies, which typically function at temperatures of 1000 degrees Farenheit
and greater. The low temperature at which the Company's process operates
translates into cost efficiencies by using less energy to operate and reduced
wear and tear on the equipment. The low temperatures result in qualitative
enhancement of the end products generated by the process.
The TRTM-60 technology is proprietary. However, two patent application have been
filed relating to advancement in the technology. While the feedstock used in the
process initially consisted of shredded tires, the Company has developed some
initial applications looking toward the eventual application of the process to
various plastics.
Governmental regulations regarding plant operations.
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Because the process uses natural gas to fire its retort burners, discharge from
a plant utilizing the TRTM process is minimal. However, because the plant
creates and stores recovered oil and carbon black, each plant must meet all
requirements established by federal and state environmental laws related to the
storage and transportation of such products. The storage and transportation
requirements are well established and present no significant problem in
obtaining all necessary licenses for operation of any facility.
Current Status of Marketing Efforts.
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The TRTM process was initially demonstrated in a plant constructed by the
Company near Bradley, Oklahoma. Through this pilot plant the Company
demonstrated that the pilot plant was capable of processing from 60 to 100 tons
of scrap tires daily. At this plant, scrap tires were converted into oil (with a
97% fuel content), steel, methane gas, carbon black, and other marketable
byproducts. The Bradley Plant was constructed as a proto-type facility to
demonstrate the TRTM process and, because of its limited size, was not designed
nor intended to be an operating facility. The Company terminated its operations
of the Bradley plant in 1992, but continues to own and maintain the plant
anticipating that it may be used to demonstrate a plastics recycling process if
such a process is eventually developed. The Company leases the land on which the
plant is located, which lease may be terminated and the plant removed from the
premises upon 30 days written notice. Because the Bradley facility was
considered a research and development project, all costs associated with the
plant were expensed.
In 1995, Dong Kook Steel Material Company, Ltd. ("Dong Kook"), a Republic of
Korea corporation, completed construction of two plants in the Republic of Korea
that employ the TRTM-60 process. One of the plants is located approximately
twenty miles from the city of Chong Ju, while the other is located approximately
two miles from Taegu City. Each of these plants is capable of processing
approximately 60 tons of scrap tires per day and are estimated to produce
approximately 150 barrels of oil, 6 tons of steel, and 17 tons of carbon black
per day. Although both plants are now complete, Dong Kook has experienced delays
in reaching sustained operations because of inadequate tire shredding equipment
needed to prepare the tires for introduction into the system.
Although there has been significant and unexpected delay in getting the Dong
Kook plants to operate up to their capacity on a continuous basis, the Company
has been fortunate in that it has been able to work closely with Dong Kook to
experiment with various methods of preparing the feed-stock of tires, various
configurations for the plants and various forms of catalytic agents. all of
which has resulted in a more efficient plant that should eventually result in
greater production and, thereby, profitability for Dong Kook.
The two licenses to use the Company's TRTM process were sold to Dong Kook steel
for a net amount of $755,100 after payment of estimated Korean taxes of
$144,900. The Company retained no royalty on any products produced from the
initial plant, while the Company retained a royalty of 3.5% of all gross
receipts from the sale of products produced by the second plant, less the cost
of transportation to the point of sale of the products. To date, Dong Kook has
not reported any sale of any products from the plants and the Company has
received no payment other than the initial license payment.
Dong Kook was primarily responsible for the cost of construction of the plant
with Company management overseeing and assisting in the construction. The
Company anticipates that it will have the primary responsibility of construction
of all future plants sold and anticipates that the sales price for a completed
plant will range from $6,000,000 to $7,000,000. It also anticipates that future
licenses will retain a royalty of 7.5% of all after tax receipts for products
produced from each plant. Although these are Management's current estimated
prices and royalties, each plant must be custom made for the country and area in
which it may be located and negotiations for any such plant may result in price
and royalty structures that vary substantially from such present intentions.
Current Status of Marketing Efforts.
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In April, 1996, the Company concluded an agreement with the Environmental
Solutions Agency of Ft. Meyers, Florida and Skoda Klatovy, a wholly owned
subsidiary of the Czech Republic conglomerate Skoda Holding, a.c., for the sale
and construction of a TRTC tire recycling plant to be built in Austria. The
preliminary engineering and design and site preparation work for the plant has
been completed. The Company anticipates that the project will be started during
the spring of 1997. Upon the completion of the Austrian facility, the Company
has been assured that five additional European companies will purchase
additional facilities from the Company for location at other sites in Europe.
Recoverable Products.
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Oil
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The oil recovered by the Company's tire recycling process in Korea has been as
high as 34.1 gravity extender oil, oil with an extremely high percentage of
usage fuels (in the range of 99.4% gasoline, naphtha and kerosene), that is used
primarily to lighten heavier oils either before or after refining. It can also
be used in the manufacture of carbon black and rubber products. The oil has a
high content of kerosene and light gas, as well as gasoline.
A TRTC-60 tire recycling plant typically recovers about one gallon of oil per
tire. At 60 ton capacity, a plant is capable of recovering 150 barrels of oil
per day from sixty tons of tires.
While it is impossible to predict the future market price for the recovered oil,
in 1992 the Company sold oil produced from its Bradley plant for $15.00 per
barrel. Any price received for the oil will necessarily be based upon the then
current market for crude oil.
Carbon Black
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The carbon black recovered by the TRTM-60 tire recycling process is a
semi-reinforcing carbon black. North America manufacturing facilities consume
nearly 3 billion pounds of carbon black annually, of which 50 percent are of the
semi-reinforcing type.
Carbon black, when combined with rubber, substantially increases the hardness
and durability of the product. The wear characteristic of carbon black is a
function of the particle size. The finer the particles, the better the rubber
reinforcing properties. Particle size is measured by numerical grade, in
nanometers (nm). The highest grade with particle sizes under 20 nm is designed
as super abrasion furnace. The lowest grades are the semi-reinforcing furnace
blacks with particle sizes from 50 nm to 1000 nm.
Tire manufacturers traditionally use grades 500 to 700 in the interior of the
tire, and grade 200 for the sidewalls and tread. Grade 100 is typically used in
the production of very high abrasion products such as automobile racing tires,
while the various other industrial applications use varying grades, depending
upon the performance required.
Because much of the tread has been worn away in a scrap tire, the carbon black
recovered by the TRTC-60 tire recycling process is dominated by grades 500 to
700. It is this category which is the target market for TRTC recovered carbon
black. In 1990, the market demand for grade 700 was 300 million pounds. Initial
test results of the carbon black produced from the Company's Bradley plant were
found to be a substitute for IRB 5 carbon black for which the market price
varies between $0.30 and $0.32 per pound. Because the costs of operations of the
TRTC-60 are nominal, it might be offered for sale at a price significantly lower
than the prevailing market rate for IRB 5 carbon black.
A market price for TRTC-60 carbon black remains to be established, but
preliminary indications are that a price of ten cents to fifteen cents per pound
should be maintainable.
At sixty ton capacity, the TRTC tire recycling plant is capable of recovering
30,000 pounds of carbon black per day.
Steel
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Scrap steel can be used in a variety of applications, and there is a large and
very active market for such steel. The steel recovered from a scrap tire is
comprised of woven steel threads. Thus, this steel is more easily recycled by a
recycler of steel and consequently generates a higher market price than solid
scrap steel pieces.
In general, 10 percent of the weight of a tire is steel, assuming it is a steel
belted tire. At full capacity, the TRTC tire recycling plant should recover six
tons of steel per day. The market price for such steel varies, but generally
commands a price of between $30.00 and $60.00 per ton.
The Industry and the Company's Competition.
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Historically scrap tires have been piled or buried, neither of which offer a
solution to disposal of scrap tires. The scrap Tire Management Council in its
Scrap Tire Use Disposal Study published September 11, 1990, identified two basic
areas in which waste tires have been used in industry. Each of these areas have
developed into separate industries that will compete with the Company for tires.
These areas and industries are: (I) a substitute for traditional fossil fuels in
cement kilns, paper mills, utilities, and dedicated tire-to-energy facilities,
and (ii) as an ingredient for asphalt paving. Limited numbers of tires have been
made into sandals and other rubber products, but have not and probably will not
contribute significantly to waste tire disposal. In July, 1994 this same council
identified numerous companies that are now using waste tires in numerous
products, including, ball-point pens, video cassettes, bulletin boards, flooring
products, rubber mats, rubber protection devices for marine applications, garden
products, various forms of hoses, belts, and similar products that have
historically been made from new product. It is unknown what percentage of used
tires these competing products use, but Management believes that they represent
a very small percentage of the more than 250 million scrap tires that are
discarded in the United States each year.
Management believes that as a substitute fuel, waste tires provide only marginal
savings for the user, while their use in asphalt paving has yet to be proven
viable or to meet the expectations that it will substantially extend asphalt
service life. At present, these industries consume less than twelve percent of
the waste tires discarded in this country each year.
With respect to recycling, the only technology at all comparable to that
developed by TRTC is pyrolysis. Such pyrolytic facilities as currently exist in
Japan and Germany, however, rely on government subsidies because they involve
significant capital outlays and operating costs and are unable to handle any
significant tonnage of scrap tire rubber. The Scrap Tire Management Council has
observed, "[the volume capability of pyrolysis is negligible". Furthermore, due
to the high temperatures employed in pyrolysis, the by-products recovered from
the scrap tire rubber are of a lower, less marketable quality than those derived
through the TRTC process as demonstrated at its Bradley, Oklahoma plant. Because
the TRTC process operates efficiently at temperatures below 450 degrees
Farenheit the oil and carbon black recovered through the TRTM process undergo
minimal degradation and have correspondingly higher market value than pyrolytic
byproducts.
Marketing Arrangements.
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On December 27, 1990, the Company sold the exclusive marketing rights to its
technology. This sale provided that the Company was to furnish completed plants
on a turn-key basis, without any reservation of royalty from the licensing
arrangement. Because of the royalty limitation, the Company subsequently
repurchased the rights. As a result of that sale, approximately 67 corporations
located world wide remain subject to a right retained by the former marketer
that if any sales are made to such corporations for the construction of a plant
to be located within the United States, the former marketer will be entitled to
a fee of $400,000 for each such sale. No agreements for the sale of any plant or
the reservation of any royalty were entered into during the time that the
Company did not own its marketing rights.
In 1992, the Company entered into a national and international marketing
arrangement for its technology with Geotech, based in Orange County California.
As a result of the agreements, Geotech acquired the exclusive worldwide
marketing rights exclusive of the States of California, Oregon, Washington, and
the Dominion of Canada. The Company retained the marketing rights for
California, Oregon, and Washington. The agreement provides that the Company will
sell the marketers a fully licensed and operational plant for the actual cost of
the plant plus a markup of one-third over such actual costs.
As a result of Geotech's default, marketing rights reverted to the Company;
however, the Company entered into a new agreement with a former corporate
principal of Geotech which, during the past year, was reorganized under the laws
of Korea and was renamed "Dowon Company, Ltd." Under the agreement with Dowon
Company, Ltd. that corporation has the elusive marketing and manufacturing
rights on the continent of Asia, with the exception of the Asiatic portions of
the Commonwealth of Independent States. The Company believes that because of
Dowon Company, Ltd.'s location and business contacts in Asia it will be able to
effectively develop and implement a marketing strategy for the Company's tire
recycling plants in all of the areas covered by the agreement. The Company has
been informed by Dowon Company, Ltd. that it is currently negotiating with a
Taiwanese group for the purchase of three of the Company's tire recycling plants
to be located in Taiwan.
On February 12, 1996, the Company concluded an agreement with the Environmental
Solutions Agency ("E.S.A") whereby E.S.A. was granted the exclusive marketing
rights for Europe, the Republic of South Africa and Austria. As a means of
effectively proving the feasibility of the Company's tire recycling system in a
European environment, E.S.A. has formed a joint venture to construct the first
Company tire recycling facility in Austria which incorporates advancements,
modifications and improvements resulting from the Company's experiences with the
two facilities operating in Korea. Participants in the joint venture formed by
E.S.A. include Semperit/Conti, A.G., Continental Tires Austrian subsidiary, and
large recycling and environmental firms located in Europe. The first European
facility is designed to the Company's state of the art showcase, which
Management believes will attract other purchasers and result in additional sales
of its facilities..
Management estimates that there is a market for approximately one hundred
TRTM-60 tire recycling plants in the United States alone. This estimate is based
on demographic to scrap tire stockpile ratios indicating approximately 27.1
scrap tires per capita of population. Given this figure, it appears that a
population base of approximately one million people will generate sufficient
scrap tires to sustain the operations of a TRTM-60 recycling machine.
Preliminarily, marketing efforts in the United States have been focused on the
larger population centers. Management believes that because of the current
policies of providing incentives and inducements to promote recycling, market
conditions for its technology should continue to improve.
Plastics Technologies.
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The Company, with the assistance and through an arrangement with and under the
direction of Adherent Technologies, Inc., a company owned by Dr. Ronald E.
Allred, is currently working on the initial development efforts toward creating
a low-temperature catalytic conversion process for reclaiming waste plastics,
scrap electronics, and other organic materials. It is believed by management
that the Company has developed a new and unique process that will allow
efficient and economical reclamation of many types of waste plastics by turning
them into valuable fuels and chemical products. Initial testing has been
extremely encouraging and Adherent Technologies' research has been funded by a
Small Business Innovative Research Grant from the United States Air Force, by
the Defense Department's Advanced Research Products Agency and by Sandia
National Laboratories. The effort to develop this new technology is in its
formative stages and has not yet been commercialized.
All developments relating to the technology belong to the Company and the
Company is not obligated by contract or otherwise to reimburse any research and
development expenses incurred by Adherent Technologies.
In the past year, the Company has concluded two agreements for the commercial
implementation of its plastic technology for two separate applications. Those
are:
(1) The Company and AbTech, LLC, of Phoenix, Arizona, have executed an agreement
through which AbTech, LLC has acquired the exclusive right to use the Company's
plastics recycling process for the recovery of oil and hydrocarbon chemicals
from polymer waters that AbTech, LLC manufactures. The AbTech, LLC product is
unique and the only known effective technique for rapid clean up and full
recovery of petroleum spills. At the present time, the only way that the wafers
can be disposed of is as hazardous waste. The Company and AbTech, LLC believe
that the Company's tertiary recycling technology is a method through which the
oil and hydrocarbons contained in the wafers may be recovered.
(2) The Company and Fiberite, Inc., of Phoenix, Arizona, have executed an
agreement through which Fiberite, Inc. may use the Company's technology for
recycling carbon composite materials such as those used extensively in the
aerospace industry. Fiberite, Inc. is a leading manufacturer of such carbon
composite materials which have an ever growing world-wide market demand. The
Company believes that its process is the only known way to recover the original
components of the carbon composites for reuse. Fiberite is currently undertaking
a marketing and gathering survey while the Company, with the assistance of
Adherent Technologies, is undertaking the final phases of research and
development of this application of the Company's technology. Management believes
that commercialization of the process could be accomplished by the Spring of
1997.
Employees.
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The Company has four full time employees and one contract engineer. Each of the
full time employees is presently paid at the rate of $2,500 per month, while the
engineer's contracted compensation is paid on the basis of $600 per 40 hour
week.
ITEM 2: DESCRIPTION OF PROPERTIES
The Company has the exclusive right to use the technology incorporated into its
TRTM-60 plants and the right to develop such technology for the recycling of
plastics and other organic materials. In addition, the Company owns its research
and development facility now located in Oklahoma which has an estimated
replacement value of approximately $500,000. Since the plant was built for
research and development purposes, all plant expenditures have been charged to
operations. It also owns certain office furniture having an estimated
replacement value of approximately $12,000. Management believes that its
facility and equipment is adequate for the Company's needs at the present and
during the foreseeable future.
The Company leases approximately 2,150 square feet for its executive offices
located at 3202 Candelaria, N.E., Albuquerque, New Mexico 87107 at a month to
month rent of $925. The Company also leases approximately 4 acres of land
located in Bradley County, Oklahoma for its tire recycling plant under a five
year lease beginning on September 4, 1991, at a monthly cost of $500. The
Bradley, Oklahoma lease may be terminated, without penalty, upon 30 days prior
notice. At such time as a suitable location for this facility may be acquired in
New Mexico and the facility moved to such new location, the Company will
terminate the Bradley, Oklahoma lease. The Company's management believes that
the executive offices now leased by it will be adequate for the Company's
business for the near future.
ITEM 3: LEGAL PROCEEDINGS
The only legal proceedings to which the Company is a party or of which any of
its property is subject are pending or known to be contemplated are:
1, On September 12, 1994, in the Second Judicial District Court for Bernalillo
County New Mexico (Civil Action CV-94-7558), an individual sued Mr. Bruce Clark,
a Company officer and director, alleging damages to be proved at trial for
injuries sustained in an automobile accident involving an automobile driven by
Mr. Clark. The Company was also named as a defendant on the theory that at the
time of the accident Mr. Clark was acting within the scope of his employment by
the Company. The Company answered the Complaint and denied that Mr. Clark was
acting within the scope of his employment at the time of the accident. This
matter went to jury trial in August, 1996, and the jury found that Mr. Clark was
not acting within the scope of his employment and found that the Company was not
liable to the Plaintiff for any amount of money. The time during which the
Plaintiff may appeal the judgment in this matter has not yet expired and the
Company does not presently know whether such an appeal will be made by the
Plaintiff.
2. On May 15, 1996, the Company filed an action in the United States District
Court for New Mexico (Civil Action 673-JP-LFG) against Floyd Wallace and Harold
Barrington alleging that certain technology purportedly developed by Mr. Wallace
which was acquired by the Company had, at the time of the sale to the Company,
been misrepresented. Mr. Wallace answered denying the allegations of the
Complaint and counterclaimed against the Company for breach of contract, an
accounting under the contract, and a prima facie tort resulting from a
stop-transfer instruction given by the Company to its transfer agent relating to
the stock given to Mr. Wallace as part of the consideration for his technology.
Mr. Barrington answered denying the allegations of the Complaint and
subsequently filed a separate action against the Company alleging breach of
contract and prima facie tort resulting from a stop-transfer instruction given
by the Company to its transfer agent relating to the stock given Mr. Barrington
as consideration for the Wallace technology (see below).
The litigation between the Company and Mr. Wallace was settled on September 11,
1996, through a mutual release and a dismissal of all claims and the Company's
relinquishing all claims it may have had to the use of certain expired patent
and catalatic regime, which the Company had alleged in the action did not
perform as represented.
3. On September 15, 1996. Mr. Harold Barrington filed an action in the Second
Judicial District Court for Bernallilo County, New Mexico (Civil Action
C.V.-96-08824) alleging breach of contract and a prima facie tort resulting from
a stop-transfer instruction given by the Company to its transfer agent relating
to the stock given to Mr. Barrington as part of the consideration for the
Wallace technology. The Company has answered denying the allegations of the
complaint.
No time has been set for discovery in either of the lawsuits involving the
Company and Mr. Barrington. It is anticipated that unless the matters can be
settled by a mutually agreed release, discovery will take place during the
fiscal 1997 and trial will not occur until some time thereafter.
4. On June 17, 1996, the Company filed an action in the Second Judicial District
Court for Bernalillo County, New Mexico (Civil Action CV-96-6134) against Robert
Aragon and Anne Trawicky for fraud or negligent misrepresentation by them at the
time they issued a license to Aegis Technologies, in exchange for Company
shares. At the time the Company shares were issued to Mr. Aragon and Ms.
Trawicky they represented to the Company that a license previously issued to
Aegis Technologies was in full force and effect. Subsequent to the issuance of
the Company shares to them, they informed the Company that the license had
expired prior to the date that Aegis Technologies was acquired by the Company.
Aegis only business at the time of its acquisition by the Company was the
ownership of the license. The defendants have denied the allegations of the
complaint and Ms. Trawicky has filed a counterclaim against the Company seeking
the removal of a stop-transfer instruction given by the Company to its transfer
agent relating to Ms. Trawicky's shares.
No time has yet been set for discovery in this matter. It is anticipated that
unless the matters can be settled by a mutually agreed release, discovery will
take place during the fiscal 1997 and trial will not occur until some time
thereafter.
The Company knows of no other legal proceedings pending or threatened, or
judgment against any director or officer of the Company in their capacity as
such.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended July 31, 1996.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information required by this item is incorporated by reference to the item in
the Registrant's Annual Report to Shareholders for the year ended July 31, 1996
entitled "Market Price and Dividends on the Company's Common Equity and Related
Stockholder Matters."
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The information required by this item is incorporated by reference to the item
in the Registrant's Annual report to Shareholders for the fiscal year ended July
31, 1996 entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operation."
ITEM 7: FINANCIAL STATEMENTS
The information required by this item is incorporated by reference to the
Financial Statements in the Registrant's Annual Report to Shareholders for the
fiscal year ended July 31, 1996 which is attached as an exhibit to this report.
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with Accountants of the kind
described by Item 304 of Regulation S-B at any time during the Registrant's two
(2) most recent fiscal years.
PART III
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
The information required by this item is incorporated by reference to the items
in the Registrant's Definitive Proxy Statement for the December 13, 1996, Annual
Meeting of Shareholders entitled "Election of Directors" and "Directors and
Executive Officers". All reports required by Section 16(a) of the Exchange Act
to be filed during the fiscal year were filed.
ITEM 10: EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the item
in the Registrant's Definitive Proxy Statement for the December 13, 1996, Annual
Meeting of Shareholders entitled "Executive Compensation".
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to the item
in the Registrant's Definitive Proxy Statement for the December 13, 1996, Annual
meeting of Shareholders entitled "Voting Securities and Principal Holders
Thereof".
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the item
in the Registrant's Definitive Proxy Statement for the December 13, 1996, Annual
Meeting of Shareholders entitled "Voting Securities and Principal Holders
Thereof" and "Executive Compensation".
PART IV
ITEM 13: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-KSB
1. Financial Statements, incorporated by reference to the Registrant's Annual
Report to Shareholders as of and for each of the two years in the period ended
July 31, 1996:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Exhibits:
A. The following exhibits are incorporated herein by reference to the
Registrant's Form 10-SB, File no. 0-25024
Exhibit
Number Title
3 Articles of Incorporation and By-laws.
(i) Articles of Incorporation:
(a) Articles of Incorporation dated July 14, 1954.
(b) Articles of Amendment to Articles of Incorporation dated October 2,
1986.
(ii) By-laws currently in effect.
10. Material Contracts.
(a) Conveyance of Rights Agreement dated October 6, 1991, between Floyd D.
Wallace and Tire Recycling Technologies Corporation.
(b) Exclusive Marketing Rights Agreement dated December 14, 1991, between
Tire Recycling Technologies Corporation (the Company) and Global Tire Recycling,
Inc., Recycling Technology International, Inc. and Tedesco Recycling, Inc.
(c) Division of Proceeds Agreement dated May 19, 1992, between Tire
Recycling Technologies Corporation and Chuck Wages.
(d) Consulting Agreement dated September 15, 1992, between Tire Recycling
Technologies Corporation (the Company) and Ronald E. Allred.
(e) Purchase and Nonexclusive Licensing Agreement dated June 9, 1993,
between Tire Recycling Technologies Corporation (the Company) and
Geotechnologies Corporation and Dong Kook Steel Material Company, Ltd.
(f) Agreement for Assignment of the Exclusive Marketing Rights in the
Republic of Korea dated July 12, 1993, between Tire Recycling Technologies
Corporation (the Company) and Geotechnologies Corporation and Dong Kook Steel
Material Company, Ltd.
(g) Technical License Agreement dated July 23, 1993, between Tire Recycling
Technologies Corporation (the Company) and Hannam Co., Ltd.
(h) Technical License Agreement dated July 23, 1993, between Tire Recycling
Technologies Corporation (the Company) and Dong Kook Steel Material Co., Ltd.
(i) Purchase and Nonexclusive Licensing Agreement dated July 21, 1994,
between Tire Recycling Technologies Corporation (the Company) and
Geotechnologies Corporation.
(j) Purchase and Nonexclusive Licensing Agreement dated July 21, 1994,
between Tire Recycling Technologies Corporation (the Company) and
Geotechnologies Corporation and Southeast Environmental Tire Recycling
Corporation.
(k) Conveyance of Rights Agreement between Titan Technologies, Inc. and
Floyd D. Wallace, dated October 6, 1991.
(l) Catalyst Fee and Technical Assistance Agreement between Tire Recycling
Technologies, Inc. and Floyd D. Wallace, dated October 12, 1992.
B. The following exhibit is encorporated herein by reference to the Registrants
Annual Report on Form 10-KSB for the fiscal year ended July 31, 1995.
(m) Option agreement between the Company and Joseph Henry dated September
19, 1995.
C. The following exhibits are filed with this Form 10-KSB for the fiscal year
ended July 31, 1996:
(n) License Agreement as amended dated February 16, 1996, with
Environmental Solutions Agency, Inc., relating to Europe, South Africa and North
and South America.
(o) Marketing and License Agreement dated March 19,1996, with Dowan
Company, Ltd., relating to Asia.
(p) Agreement dated April 25, 1996, with SKODA Klatovy S.P.D., relating to
the construction of a TRTC recycling pland in Austria.
(q) Addendum to SKODA Klotovy S.P.D. Agreement dated April 25, 1996.
(r) Irrevocable Option Agreement with Abtech Industries, LLC, dated June
10, 1996.
(s) Option agreement between the Company, Adherent Technologies and
Fiberite, Inc. dated September 4, 1996.
(t) Promissory Note dated September 24, 1996. .
13. Annual Report to Shareholders for the Fiscal year ended July 31, 1996.
----------------------------------------------------------------------
21. Subsidiaries of the Small Business Issuer.
------------------------------------------
The Company has one wholly owned subsidiary, which is:
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
Tire Recycling Technologies Corporation New Mexico
The subsidiary operates only under its corporate name.
All other exhibits required by Item 601 of Regulation S-B are inapplicable to
this Registrant in this filing.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by this Registrant during the last quarter of
the period covered by this report.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TITAN TECHNOLOGIES, INC.
By Ronald L. Wilder
---------------------------------------------
Ronald L. Wilder, President, Chief Executive Officer,
Chief Operating Officer and Director
Date: October 11, 1996
In accordance with the Exchange Act, this report has been signed below by
the following persons in behalf of the registrant and in the capacities and on
the dates indicated.
By Bruce R. Clark
---------------------------------------------
Bruce R. Clark, Secretary-Treasurer, General Counsel,
Chief Financial Officer and Director
Date: October 11, 1996
By Ronald E. Allred
---------------------------------------------
Dr. Ronald E. Allred, Director
Date: October 11, 1996
By Jelle deBoer
---------------------------------------------
Dr. Jelle deBoer, Director
Date: October 11, 1996
By Alan L. Wilder
---------------------------------------------
Alan L. Wilder, Director
Date: October 11, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 272714
<SECURITIES> 0
<RECEIVABLES> 609
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 273323
<PP&E> 8475
<DEPRECIATION> 6732
<TOTAL-ASSETS> 351548
<CURRENT-LIABILITIES> 174876
<BONDS> 71683
0
0
<COMMON> 1160694
<OTHER-SE> (1055705)
<TOTAL-LIABILITY-AND-EQUITY> 351548
<SALES> 0
<TOTAL-REVENUES> 15420
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 384471
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6466
<INCOME-PRETAX> (369051)
<INCOME-TAX> 0
<INCOME-CONTINUING> (369051)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (369051)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
TITAN TECHNOLOGIES, INC.
ANNUAL REPORT TO SHAREHOLDERS
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
The Company
- -----------
The Company's principal operations are conducted by its wholly owned subsidiary
Tire Recycling Technologies Corporation ("TRTC"), a New Mexico corporation. TRTC
has developed and is currently marketing commercial scale plants capable of
converting scrap tires into high quality, readily marketable oil, steel, and
carbon black. The Company is offering for sale to interested operators on a
turnkey basis a completed, licensed and operational tire recycling plant
together with a license with the Company for the use of the Company's TRTC
process that is discussed below.
The TRTM-60 technology was developed to meet the world-wide need for an
economically viable method for the permanent disposal of tires. Stockpiled tires
and the risks associated with them, from mosquito production to fire hazard,
have become a significant environmental problem. Legislation has been introduced
and passed in many states controlling tire disposal, storing and transportation.
Massachusetts, Minnesota and Wisconsin have established programs to eliminate
stockpiles of tires. Fourteen states have adopted or plan to adopt tax measures
to provide the resources to eliminate tire stockpiles, while thirteen other
states have established or will establish grants or subsidy arrangements for
tire recycling and disposal.
The Company's Management believes that the Company's process is unique in the
industry in that it operates continuously at the unusually low temperature of
450 degrees Farenheit rather than competing pyrolytic technologies, which
typically function at temperatures of 1000 degrees Farenheit and greater. The
low temperature at which the Company's process operates translates into cost
efficiencies by using less energy to operate and reduced wear and tear on the
equipment. The low temperatures result in qualitative enhancement of the end
products generated by the process.
The TRTM-60 technology is proprietary, however, two patent applications have
been filed relating to the technology. The feedstock used in the process
consists of shredded tires.
The TRTM-60 Technology employs catalytic destructive distillation, which, unlike
known competing scrap tire recovery systems, is true tertiary recycling: the
original elements that went into making the tires, primarily oil, steel and
carbon black, are reclaimed in near virgin form.
The entire tire recycling process is a closed system. The only emissions are the
exhaust gases from firing the retort burners. Because methane and other
components of the gas fraction are clean burning, release of pollutants to the
atmosphere is minimal. The only nonresalable materials from the process are the
small quantities of ash and dirt produced that are landfilled.
During fiscal 1995, Dong Kook Steel Material Company, Ltd. ("Dong Kook"), a
Republic of Korea corporation, has completed construction of two plants in the
Republic of Korea that employ the TRTM-60 process. One of the plants is located
approximately twenty miles from the city of Chong Ju, while the other is located
approximately two miles from Taegu City. Each of these plants is capable of
processing approximately 60 tons of scrap tires per day and is estimated to
produce approximately 150 barrels of oil, 6 tons of steel, and 17 tons of carbon
black per day.
With the completion of the first two plants using the Company's process,
Management expects that its technology will gain wider publicity and additional
sales of plants incorporating its technology will occur at an increasing rate.
Management estimates that a community or group of communities with a population
of approximately one million people would economically support one of its
plants, while centers with greater populations could economically support more
than one such plant.
Recoverable Products
- --------------------
Oil: The oil recovered by the Company's tire recycling process is a 34.1 gravity
extender oil, oil with an extremely high percentage of usage fuels, that is used
primarily to lighten heavier oils either before or after refining. It can also
be used in the manufacture of carbon black and rubber products. The oil has a
high content of kerosene and light gas, as well as gasoline.
A TRTC-60 tire recycling plant typically recovers about one gallon of oil per
tire. At 60 ton capacity, a plant is capable of recovering 150 barrels of oil
per day from sixty tons of tires.
Carbon Black: The carbon black recovered by the TRTM-60 tire recycling process
is a semi-reinforcing carbon black. North America manufacturing facilities
consume nearly 3 billion pounds of carbon black annually, of which 50 percent
are of the semi-reinforcing type.
Carbon black, when combined with rubber, substantially increases the hardness
and durability of the product. The wear characteristic of carbon black is a
function of the particle size. The finer the particles, the better the rubber
reinforcing properties. Particle size is measured by numerical grade, in
nanometers (nm). The highest grade with particle sizes under 20 nm is designed
as super abrasion furnace. The lowest grades are the semi-reinforcing furnace
blacks with particle sizes from 50 nm to 1000 nm.
At sixty ton capacity, the TRTC tire recycling plant is capable of recovering
30,000 pounds of carbon black per day.
Steel: In general, 10 percent of the weight of a tire is steel, assuming it is a
steel belted tire. At full capacity, the TRTC tire recycling plant should
recover six tons of steel per day. The market price for such steel varies, but
generally commands a price of between $30.00 and $60.00 per ton.
Proposed Technologies.
- ---------------------
The Company, with the assistance and through an arrangement with and under
the direction of Adherent Technologies, a company owned by Dr. Ronald E. Allred,
is currently working on the initial development efforts to create a
low-temperature catalytic conversion process for reclaiming waste plastics and
other organic materials. It is believed by management that the Company, through
Adherent Technologies, has developed a new and unique process that will allow
efficient and economical reclamation of many types of waste plastics by turning
them into valuable fuels and chemical products. Initial testing has been
extremely encouraging and Adherent Technologies' research has been funded by a
Small Business Innovative Research Grant from the United States Air Force, by
the Defense Department's Advanced Research Products Agency and by Sandia
National Laboratories. The effort to develop this new technology is in its
formative stages and has not yet been proven viable.
All developments relating to the technology will belong to the Company, but the
Company is not obligated by contract or otherwise to reimburse any research and
development expenses incurred by Adherent Technologies for the last two fiscal
years.
In addition, Adherent Technologies has undertaken the preliminary development of
processes relating to coal gasification. At this time the Company has not
demonstrated that the coal gasification technology can be implemented
commercially, and final development of the process or commercial implementation
of the process may never be proven.
Recently the Company entered into two option agreements relating to the further
development of its technology as it relates to the recovery of oil spills,
recycling used motor oil and the depolymerization of carbon fiber reinforced
composite materials. The first agreement is with Abtech Industries, LLC, an
Arizona corporation. Abtech Industries, LLC is a corporation whose business is
the recovery of oil based spills. The Company and Abtech Industries, LLC believe
that through the affiliation of each company's technology a more economic way
may be found to recover the oil from such oil based spills and to also recover
used motor oil. The second agreement is with Fiberite, Inc., also an Arizona
corporation, whose business is the manufacture of impregnated organic matrix
composite materials for use by industry and military. The agreement with
Fiberite, Inc. looks to developing a method, using the Company's technology and
Fiberite, Inc.'s knowledge of its materials, for the recycling of carbon fiber
reinforced composite materials. The structure through which each of these other
companies and Titan will participate in the operations and income, if any, from
any developed operation has not yet been finalized. The Company, with the
assistance of Adherent Technologies, is pursuing the development of these two
possible areas of business.
Management's Discussion and Analysis or Plan of Operation.
- ---------------------------------------------------------
The Company's primary activities are to manufacture and sell commercial plants
designed to recycle waste tires, which plants will be granted a license to
utilize the Company's technology subject to a reservation of a royalty relating
to the sale from the plant of the various products produced and sold from it.
The Company's business is to manufacture large capacity recycling plants capable
of processing 100 tons or more of tires per day and to sell those plants to be
operated by governments or individuals. Two plants are now operating in Korea
while a third is being designed for construction in Austria. Additionally, the
Company performs ongoing research and analysis devoted to establishing a
technology for the commercial recycling of plastics. Recently the Company
entered into option arrangements with two Arizona corporations looking toward
combining certain knowledge and technology owned by those corporation with
certain of the knowledge and technologies developed by the Company (see
discussion above). It is hoped that these associations will lead to an expanded
use of the Company's technology.
The Company has narrowed the focus of its activities to the refinement of its
underlying technology and its development for various applications within the
field of depolymerization. In doing so, the Company has continued to conduct its
operations in a way to minimize overhead and the incurrence of long term debt by
contracting out both manufacturing and ongoing research, which it has managed to
do at virtually no cost to the Company. To facilitate marketing, the Company has
entered into strategic alliances with such Companies as Dowon Company Ltd. and
Environmental Solutions Agency. Through these alliances, the Company has
obtained worldwide coverage of the potential market for its products, and, as a
result of these alliances, the Company has generated interest in the TRTC
recycling system and is now engaged in negotiations for the sale of its systems
throughout the world. By pursuing the strategy Titan has with respect to
manufacturing, research, and marketing, the Company has achieved leverage over
vast resources which are normally not available to a Company undertaking the
development and marketing of new technology.
The Company's research on plastic recycling is being conducted through an
arrangement with Adherent Technologies, a research laboratory operated by Ronald
Allred, a Company Director. Adherent Technologies has received contracts from
the Department of the Army and from the U.S. Air Force to apply to research on
the Company's plastic technology directed toward the depolymerization of carbon
fiber reinforced composite materials. Adherent has also received a significant
grant from the Advanced Research Project Agency of the Department of Defense for
recycling scrap electronic components such as used computers, FAX machines,
copiers, etc. The Company is not responsible for reimbursing Adherent
Technologies any of that company's expenses related to such research. Management
believes that this contract is sufficient to cover all research the expenses
that may be by required Adherent Technologies to evaluate the technology.
Results of Operations
- ---------------------
The delay in completion of the TRTC Korean plants had a material and adverse
impact upon the Company's ability to market additional plants. Prospective
purchasers have awaited the ongoing operations of the Korean plants to measure
their economics. Management believes that these delays are behind the Company
and the marketing of additional plants will occur during the current fiscal
year. During the year ended July 31, 1996, the Company had no revenue from plant
licensing while in 1995 the Company had $302,500 of revenue from such licensing.
Total revenues were only $15,420 in fiscal 1996, compared to $ 333,967 in fiscal
1995. As a result of the lack of revenue and the ongoing operating expenses and
costs associated with completion of the Korean plants, the Company experienced a
loss of $369,051 during the current fiscal year compared to a net loss of
$27,448 for the previous fiscal year. Presently, management is negotiating
several transactions and anticipates further licensing revenue in 1997, but
cannot assure when closings will occur.
Financial Condition
- -------------------
The Company's cash position improved from $169,493 in fiscal 1995 to $272,714 in
fiscal 1996, due to the sale of Company shares in reliance upon certain
exemptions from registration under the Securities Act of 1933, as amended.
During the year, the Company sold a total 1,111,111 shares of its common stock
from which it received, after costs, $450,000, which it has used as operating
capital. Also during the year the Company granted options to purchase an
aggregate of 2,000,000 shares for a total consideration, if all options are
exercised, of $1,750,000. These options will expire on February 12, 1997 if not
exercised by the option holders or extended by the Company prior to that date.
Any proceeds received by the Company from the exercise of the options, which
exercise cannot be assured, will be used by the Company as working capital.
The Company's costs and expenses of operations increased from $313,025 in 1995
to $384,471 in 1996. Operations provided no revenue during the current fiscal
year, but used cash of $345,886, while in 1995 operating cash used exceeded cash
provided by $27,984. Because of this shortfall of income, the Company has been
forced to secure operating funds through the sale of shares of its common stock
and the borrowing of money. After the end of the current fiscal year the Company
borrowed $112,000, which loan is repayable in September 1997 and bears interest
at the rate of 12%. Management believes that the proceeds of this sale of common
stock and the borrowing substantially improved its liquidity and have provided
adequate funds to meet the Company's operating needs for the next fiscal year.
MARKET PRICE OF AND DIVIDENDS ON COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information: The Company's common stock is listed on the NASD's bulletin
board under the symbol " TITT" and is traded over the counter. . The high and
low bid prices for the Company's common stock for the past two years, as
furnished by National Quotation Bureau, Inc. is as follows::
High Low
Quarter ended September 30, 1994: $ 1.12 $ 0.5625
Quarter ended December 31, 1994: $ 1.12 $ 0.5625
Quarter ended March 31, 1995: ... $ 1.12 $ 0.5625
Quarter ended June 30, 1995: .... $ 1.00 $ 0.24
Quarter ended September 30, 1995: $ 0.68 $ 0.5625
Quarter ended December 31, 1995: $ 0.37 $ 0.3125
Quarter ended March 31, 1996: ... $ 1.06 $ 0.625
Quarter ended June 30, 1996 ..... $ 1.84 $ 1.53125
Dividends: The Company has never paid dividends and its earnings have not
warranted such payment. However, it should be anticipated that, should the
Company experience earnings that might otherwise warrant the payment of
dividends, the possible future business development needs of the Company could
result in no dividends being paid in the foreseeable future.
On September 30, 1994, there were 895 shareholders of holders of record.
Shareholders: At October 20, 1996, the Company had approximately 958
shareholders of record.
ON WRITTEN REQUEST, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS
ANNUAL REPORT ON FORMS 10-KSB FOR THE FISCAL YEAR ENDED JULY 31, 1996 FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING THE FINANCIAL STATEMENTS AND
THE SCHEDULES THERETO) TO ANY RECORD HOLDER OR BENEFICIAL OWNER OF THE COMPANY'S
SHARES AS OF THE CLOSE OF BUSINESS ON APRIL 30, 1996. ANY EXHIBIT WILL BE
PROVIDED ON REQUEST UPON PAYMENT OF THE REASONABLE EXPENSES OF FURNISHING THE
EXHIBIT. ANY SUCH WRITTEN REQUEST SHOULD BE ADDRESSED TO BRUCE R. CLARK,
SECRETARY, TITAN TECHNOLOGIES, INC., 3202 CANDELARIA ROAD, N.E., ALBUQUERQUE,
NEW MEXICO 87107.
Report of Independent Certified Public Accountants
The Shareholders
Titan Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Titan
Technologies, Inc. and Subsidiaries, as of July 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Titan
Technologies, Inc. and Subsidiaries, as of July 31, 1996 and 1995, and the
consolidated results of their operations and their consolidated cash flows for
the years then ended in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Oklahoma City, Oklahoma
August 22, 1996 (except for Note L, as to
which the date is September 25, 1996)
Titan Technologies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
July 31,
ASSETS 1996 1995
----------- -----------
CURRENT ASSETS
Cash (note A7) ................................. $ 272,714 $ 169,493
Accounts receivable - stockholder .............. 609 609
----------- -----------
Total current assets ................ 273,323 170,102
PROPERTY AND EQUIPMENT - AT COST (note A3)
Furniture and fixtures ......................... 5,737 5,737
Machinery ...................................... 2,738 2,738
----------- -----------
8,475 8,475
Less accumulated depreciation ................ 6,732 5,374
----------- -----------
1,743 3,101
OTHER ASSETS (notes A4, D, F, and L)
Trade secrets, net of accumulated
amortization of $56,995 in 1996
and $44,915 in 1995 .......................... 76,482 88,562
----------- -----------
$ 351,548 $ 261,765
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ............................... $ 5,093 $ 1,398
Current maturities of note payable
to stockholder (notes F and L) ............... 10,651 5,542
Accrued interest payable ....................... 5,301 --
Accrued liability to stockholder
(notes B and L) .............................. 150,000 150,000
Other accrued liabilities ...................... 3,831 3,100
----------- -----------
Total current liabilities ........... 174,876 160,040
NOTE PAYABLE TO STOCKHOLDER, net of current
maturities (notes F and L) ..................... 71,683 77,685
STOCKHOLDERS' EQUITY (note I)
Common stock - no par value; authorized,
50,000,000 shares; issued and outstanding,
18,236,411 shares in 1996 and 17,125,300
shares in 1995 ............................... 1,160,694 710,694
Accumulated deficit ............................ (1,055,705) (686,654)
----------- -----------
104,989 24,040
----------- -----------
$ 351,548 $ 261,765
=========== ===========
The acompanying notes are an integral part of these statements
Titan Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended July 31,
1996 1995
------------ ------------
Revenues
Plant licensing ............................ $ -- $ 302,500
Other income ............................... 15,420 15,547
Gain from sale of subsidiary (note H) ...... -- 15,920
------------ ------------
15,420 333,967
Costs and expenses
General and administrative ................. 320,306 259,853
Outside services ........................... 44,261 30,284
Depreciation and amortization .............. 13,438 15,070
Interest ................................... 6,466 7,818
------------ ------------
384,471 313,025
Net earnings (loss)
before income taxes ........... (369,051) 20,942
Provision for income taxes (note E) .......... -- 48,390
------------ ------------
NET LOSS ........................ $ (369,051) $ (27,448)
============ ============
Weighted average common shares outstanding ... 18,044,630 17,125,300
============ ============
Net loss per common share .................... $ (.02) $ --
============ ============
The acompanying notes are an integral part of these statements
Titan Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended July 31, 1996 and 1995
<TABLE>
<CAPTION>
Common stock
no par value
------------------------- Accumulated
Shares Amount deficit Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at August 1, 1995 .............. 17,125,300 $ 710,694 $ (659,206) $ 51,488
Net loss ............................... -- -- (27,448) (27,448)
----------- ----------- ----------- -----------
Balance at July 31, 1995 ............... 17,125,300 710,694 (686,654) 24,040
Sale of 1,111,111 shares of common stock 1,111,111 450,000 -- 450,000
Net loss ............................... -- -- (369,051) (369,051)
----------- ----------- ----------- -----------
Balance at July 31, 1996 ............... 18,236,411 $ 1,160,694 $(1,055,705) $ 104,989
=========== =========== =========== ===========
<FN>
The acompanying notes are an integral part of this statement
</FN>
</TABLE>
Titan Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended July 31,
1996 1995
--------- ---------
Increase (Decrease) in Cash
Cash flows from operating activities
Cash received for plant licensing .................. $ -- $ 302,500
Interest received .................................. 15,420 15,547
Cash paid to suppliers and subcontractors .......... (360,141) (290,758)
Cash paid for interest ............................. (1,165) (6,883)
Cash paid for income taxes ......................... -- (48,390)
--------- ---------
Net cash used in
operating activities ............... (345,886) (27,984)
Cash flows from investing activities
Acquisition of property and equipment .............. -- (984)
Proceeds from sale of subsidiary ................... -- 10
--------- ---------
Net cash used in
investing activities ............... -- (974)
Cash flows from financing activities
Payments on borrowings ............................. (893) (5,117)
Proceeds from sale of common stock ................. 450,000 --
--------- ---------
Net cash provided by (used in)
financing activities ............... 449,107 (5,117)
--------- ---------
NET INCREASE (DECREASE) IN CASH ...... 103,221 (34,075)
Cash at beginning of year ............................ 169,493 203,568
--------- ---------
Cash at end of year .................................. $ 272,714 $ 169,493
========= =========
Reconciliation of Net Loss to Net Cash Used in
Operating Activities
Net loss ............................................. $(369,051) $ (27,448)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization ...................... 13,438 15,070
Gain from sale of subsidiary ....................... -- (15,920)
Change in assets and liabilities, net of
effects of sale of Aegis Corporation
Increase (decrease) in accounts payable .......... 3,695 (533)
Increase in accrued interest payable ............. 5,301 934
Increase (decrease) in accrued liabilities ....... 731 (87)
--------- ---------
Net cash used in operating activities $(345,886) $ (27,984)
========= =========
The acompanying notes are an integral part of these statements
Titan Technologies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996 and 1995
NOTE A - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows.
1. Consolidation
The consolidated financial statements include the accounts of Titan
Technologies, Inc. (the "Company") and Aegis Technologies Corporation
("Aegis") (see Note H) and Tire Recycling Technologies Corporation ("Tire
Recycling"), its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in the accompanying
consolidated financial statements.
2. Nature of Operations
The Company, located in Albuquerque, New Mexico, is a holding company which
invests in businesses developing new technology. Tire Recycling, also located
in Albuquerque, developed a tire recycling process which is marketed
throughout the world. Tire Recycling has licensed its technology for use in
two operating recycling plants in South Korea.
3. Property and Equipment and Accumulated Depreciation
Depreciation is provided using straight-line and accelerated methods over
economic lives of five to seven years.
4. Amortization
Trade secrets are amortized using the straight-line method over ten years.
5. Income Taxes
The Company provides for deferred income taxes relating to carryforwards and
temporary differences between the bases of certain assets and liabilities for
financial and tax reporting purposes.
Tire Recycling has elected to deduct research and development expenses in the
year paid or incurred. All companies file separate income tax returns.
6. Revenue Recognition
Revenue from the license of technology for plants is recognized when all
material services relating to the contract have been substantially performed
by the Company. On contracts where the Company acts only as technical adviser
during the construction, substantial performance is generally defined as
installation of the catalyst. Any amounts received under the contracts prior
to the installation of the catalyst are treated as deferred revenue and are
not recognized as revenue until substantial performance under the contract
has occurred.
Direct expenses under contracts are deferred and are matched against contract
revenue when substantial performance occurs. The deferred expenses are
evaluated periodically under the contract terms to ensure they are
recoverable under the contract.
7. Cash
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses
in such accounts and believes it is not exposed to any significant credit
risk on cash.
8. Net Loss Per Common Share
Net loss per common share is calculated using the weighted average number of
shares outstanding during each year. Common stock equivalents are included in
periods where such effects are dilutive.
9. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures; accordingly, actual
results could differ from those estimates.
10. Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"), which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the
assets' carrying amounts. SFAS 121 also addresses the accounting for
long-lived assets for which disposal is expected. The Company will adopt SFAS
121 in the first quarter of the year ended July 31, 1997; however, the effect
of adoption has not been determined.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"). Application of SFAS 123 will require the Company to make an
election to value stock options under a fair value based method as prescribed
by SFAS 123 or continue using the method as prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees". Initial adoption is required in
the Company's fiscal year beginning August 1, 1996. The Company has not yet
decided on which valuation method will be elected.
NOTE B - SALE OF LICENSES AND MARKETING RIGHTS
During the year ended July 31, 1996, the Company granted tire recycling
license rights for Europe, Australia, New Zealand, and South Africa to a
company. The agreement requires the payment of license fees of $1,500,000 to
$2,500,000 to the Company for each plant constructed and royalties of 3.5% of
the gross sales price of by-products from the plants. No plants are scheduled
for construction at July 31, 1996.
Marketing agreements with current marketers for North American and Asian
rights require, among other things, the marketers to sell certain numbers of
plants per year, and require payment to the Company, by the owner of the
plant, of a 7.5% royalty on the net sales of by-products. Unless other
arrangements are negotiated, the plants will be constructed by the Company
and sold to the marketer at cost of the plant, plus a one-third markup on
plant and installation cost. As a result of the repurchase of marketing
rights from a previous marketer, the Company must pay $400,000 to the former
owner of the rights for any plant sale or license of technology made to any
one of approximately sixty-seven specifically-identified corporations.
An agreement with the developer of the recycling process provides for the
payment of consulting fees of approximately $150,000 on every completed plant
by the Company. A liability of $150,000 is reflected at July 31, 1996 and
1995 for commissions relating to the year ended July 31, 1994 (Note L).
NOTE C - RELATED PARTY TRANSACTIONS
Land rental of $5,500 and $6,000 for a research site was paid to a
stockholder during the years ended July 31, 1996 and 1995, respectively.
NOTE D - TRADE SECRETS
In November, 1990, Tire Recycling acquired certain assets, including all
proprietary rights to a process for the conversion of scrap tire rubber into
its component elements. Tire Recycling gave 2,400,000 shares of its common
stock with no determinable value and $100,000 in cash for these assets and
approximately $18,000 was allocated to technology received. In October, 1991,
Tire Recycling acquired certain trade secrets by issuing a
noninterest-bearing note with a face value of $200,000 and a present value of
approximately $110,000. These agreements have no terminable life, and are
being amortized on a straight-line basis over a period of ten years (Note L).
NOTE E - INCOME TAXES
The income tax provision is reconciled to the tax computed at statutory rates
as follows:
July 31,
------------------------
1996 1995
--------- ---------
Tax expense (benefit) at statutory rates ......... $(125,477) $ 7,120
State income taxes ............................... -- 1,096
Change in valuation allowance, net of
effect of subsidiary sold ...................... 123,866 48,390
Other ............................................ 1,611 (8,216)
--------- ---------
$ -- $ 48,390
========= =========
Income tax expense was comprised of the following for the years ended July
31:
1996 1995
------- -------
Current
Federal ............................ $ -- $ --
State .............................. -- --
Foreign ............................ -- 48,390
------- -------
-- 48,390
Deferred
Federal ............................ -- --
State .............................. -- --
Foreign ............................ -- --
------- -------
------- -------
------- -------
$ -- $48,390
======= =======
The companies report and incur income tax liabilities on a separate basis. At
July 31, 1996, the Company and Tire Recycling have loss carryforwards of
approximately $3,000 and $963,000, respectively, which can be used to reduce
their taxable income and will expire in 2005 through 2011. The companies have
elected under Internal Revenue Code section 1561(a) to apportion all taxable
income brackets to Tire Recycling.
At July 31, 1996, Tire Recycling has a "research credit" of $49,076 available
to offset income tax liabilities through 2006 and a "foreign tax credit" of
$145,179 available to offset income tax liabilities through 2000.
Amounts of deferred tax assets and valuation allowance are as follows at July
31:
1996 1995
-------- --------
Deferred tax assets
Net operating loss carryforwards ................. $376,819 $229,429
Research credit .................................. 49,076 49,076
Foreign tax credit ............................... 145,179 145,179
Excess tax bases of accounts receivable
over financial accounting bases ................ -- 23,524
-------- --------
571,074 447,208
Less valuation allowance ..................... 571,074 447,208
-------- --------
Net deferred tax asset ................. $ -- $ --
======== ========
Due to a change in controlling ownership of Tire Recycling in 1991, the use
of net operating losses arising prior to the change in controlling ownership
of approximately $445,000 will be limited in any year to an amount determined
by multiplying the value of the respective company's equity just prior to the
ownership change by the federal long-term exempt rate. Any unused limitation
may be carried forward and added to the next year's limitation.
NOTE F - NOTE PAYABLE TO STOCKHOLDER
Note payable to stockholder consists of the following at July 31:
1996 1995
------- -------
To a patent developer, repayable in
monthly installments of 1% of gross
revenues of Titan Technologies, Inc. .............
or $1,000, whichever is greater;
collateralized by rights in technology ........... $82,334 $83,227
Less current maturities ........................ 10,651 5,542
------- -------
$71,683 $77,685
======= =======
The note to a patent developer is a noninterest-bearing note with an original
face amount of $200,000, which is reflected at its estimated present value
using an effective interest rate of 8% (Note L).
Aggregate maturities of long-term debt for fiscal years subsequent to July
31, 1996 are as follows:
1997 $ 10,651
1998 6,500
1999 7,040
2000 7,624
2001 8,257
Thereafter 42,262
---------
$ 82,334
=========
NOTE G - RESEARCH AND DEVELOPMENT ARRANGEMENTS
The Company has an arrangement with a research company owned by a director of
the Company whereby that company will research a waste plastics recycling
process using the Company's technology. In return, the Company will get the
findings and developments of the research company. Although the research
company receives money under government and private grants, the Company is
not a party to the grant contracts, conducts no research under the contracts,
and has no obligation to repay any amounts under the contracts. No amounts
were paid to the research company for the years ended July 31, 1996 and 1995.
NOTE H - SALE OF SUBSIDIARY
On July 7, 1995, the Company sold all of the common stock of Aegis which
resulted in a gain of $15,920. Aegis had no significant assets or business
activity. The loss of Aegis from August 1, 1994 through the date of sale of
$2,477 is included in the consolidated statement of operations for the year
ended July 31, 1995.
NOTE I - COMMON STOCK AND OPTIONS
On October 3, 1995, the Company sold 1,111,111 shares of common stock for
$500,000 and received proceeds of $450,000 after deduction of commissions and
expenses. The shares were sold under an exemption of Regulation S and have
not been registered under the United States Securities Act of 1933.
During the year ended July 31, 1996, the Company granted options for
1,000,000 shares of common stock at $.75 per share and 1,000,000 shares of
common stock at $1.00 per share to a marketer of recycling plants. The
options expire on February 12, 1997 if not exercised.
NOTE J - FINANCIAL INSTRUMENTS
The following table includes information about estimated fair values as of
July 31, 1996 as required by Statement of Financial Accounting Standards No.
107, "Disclosure About Fair Value of Financial Instruments" ("SFAS 107").
Such information, which pertains to the Company's financial instruments, is
based on the requirements set forth in SFAS 107 and does not purport to
represent the aggregate net fair value of the Company.
None of the financial instruments are held for trading purposes.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
Cash. The carrying amount approximates fair value because the Company has
the contractual right to receive immediate payment on the deposit accounts.
Note Payable to Stockholder. This note has no fixed maturity and it is
not practicable to estimate fair value.
The estimated fair values of the Company's financial instruments as of July
31, 1996 are as follows:
Carrying Estimated
amount fair value
of assets of assets
(liabilities) (liabilities)
----------- -----------
Cash ................................................ $ 272,714 $ 272,714
Note payable to stockholder for which it is not
practicable to estimate fair value ................ (82,334) --
NOTE K - LITIGATION
The Company has filed suit against several individuals for fraud and/or
negligent misrepresentation seeking the return of approximately 2,264,000
shares of Company stock issued to these individuals for technology and
license rights. Certain of these individuals subsequently filed counterclaims
against the Company. In the opinion of management, the ultimate resolution of
these matters will not have a materially adverse effect on the Company's
consolidated financial position or consolidated results of operations;
however, due to the uncertainty of the matters, it is at least possible that
management's view of the outcome will change in the near future.
NOTE L - SUBSEQUENT EVENTS
On May 15, 1996, the Company filed suit against a stockholder who was the
developer of the recycling process seeking, among other things, rescission of
all liabilities relating to the developer. Subsequent to July 31, 1996, an
agreement was reached between the Company and the developer in which certain
rights and patents of the Company with a net book value of approximately
$76,000 were transferred to the developer in exchange for notes payable,
accrued interest, and other accrued liabilities to the developer totaling
approximately $238,000.
The Company was named as a defendant in a lawsuit involving an automobile
accident of an employee. Subsequent to July 31, 1996, the court found that
the Company was not liable in this case; however, the plaintiff is allowed to
appeal the decision. Management believes that the ultimate outcome of this
suit will not result in any material adverse effect on the Company's
consolidated financial condition or consolidated results of operations.
Subsequent to July 31, 1996, the Company borrowed $112,000 and received
$100,000 after deduction of expenses and fees. The loan is collateralized by
200,000 shares of previously reacquired Company common stock which are held
by the creditor. The loan is unconditionally guaranteed by a stockholder of
the Company and accrues interest at 12% with principal and accrued interest
payable September 24, 1997.
EXHIBIT 10-n
TIRE RECYCLING TECHNOLOGIES CORPORATION, a wholly owned subsidiary of TITAN
TECHNOLOGIES, INC. (hereinafter referred to as Licensor), is holder of patents,
patent applications and technical experience based on the TRTM-60 Technology
which it has invented and developed to operating standard as the TIRE RECYCLING
PLANT/TRTM-60. For the purposes of this agreement, Licensor shall also be used
to refer to any Foreign Sales Corporation formed hereafter by Tlre Recycling
Technologies Corporation and/or Titan Technologies, Inc. for the purpose of
marketing and sublicensing the TRTM-60 technology pursuant to the terms hereof
and will stand in the place of full successor in interest to Tire Recycling
Technologies Corporation and/or Titan Technologies Inc. with respect to all
its/their rights and obligations hereunder.
THE ENVIRONMENTAL SOLUTION AGENCY, on the other hand is interested in
participating in this development and exploitation of LicensorOs inventions and
designs using the experience and rights to be made available by the Licensor.
On this basis the firms
TITAN TECHNOLOGIES, INCORPORATED and TIRE RECYCLING TECHNOLOGIES CORPORATION
3206 Candelaria NE
Albuquerque, New Mexico 87107
(Licensor) on the one hand
and
ENVIRONMENTAL SOLUTION AGENCY
9131 College Pkwy.
B-13, Box 218
Ft. Myers, Florida 33919
(Licensee) on the other hand
conclude the following
LICENSE AGREEMENT
1. Subject of the agreement, definitions.
- -----------------------------------------
The subject of this agreement is:
a) the domestic and foreign patent rights granted to or applied for in the name
of the Licensor or assigned to Licensor (hereinafter referred to as agreement
patent rights and listed in Schedule 1 attached to this agreement, which is to
be completed concurrently by the Licensor);
b) the technical and economic experience, knowledge, development results and
designs (hereinafter referred to as "Know-How" and listed in part in Schedule 2
attached to this agreement, which is to be completed concurrently by the
Licensor);
gained before and during the term of this agreement within the material field of
agreement.
Material field of agreement shall for the purposes of this agreement be taken to
mean the development, design and the constructing of TRTM-60 plant according to
the system as explained by the patent (s) applications attached as Schedule 1
and the material annexed hereto in Schedule 2.
2. Scope of the license.
- ------------------------
The Licensor hereby grants to the Licensee the exclusive right under agreement
patent rights and Know-How:
TO CONSTRUCT IN EUROPE AND SOUTH AFRICA TIRE RECYCLING PLANTS, TYPE TRTM-60.
TO GRANT SUBLICENSES OF THE AGREEMENT PATENT RIGHTS AND KNOW- HOW AFTER HAVING
RECEIVED THE PRIOR WRITTEN CONSENT OF THE LICENSOR.
Licensor moreover grants the nonexclusive right to construct and grant
sublicenses with respect to the aforesaid rights in Saudi Arabia and the United
Arab Emirates.
Transfer and assignment of the license right by the Licensee is excluded and
requires a special agreement between the parties.
3. Liability and guarantee for the agreement patent rights.
- -----------------------------------------------------------
The Licensor declares that it has the entire disposal and full ownership of the
agreement patent rights and that it knows of no facts that could prejudice the
legal validity of the agreement patent rights.
The Licensor is in no event liable should such facts arise after the coming into
force of this agreement.
The Licensor does not accept any liability or guarantee for the industrial
exploitability of the invention on which the agreement patent rights are bases.
4. Fixed License Fee.
- -----------------------
For the grant of the license in respect of the agreement patent rights and the
Know-How, Licensee will pay to the Licensor a fixed license fee as a lump sum at
the amount of USD $5,500,000.00.
This amount is payable 30 days after the order of a TRTM-60 plant by Licensee.
The fixed license fee in the aforesaid amount also has to be paid by the
Licensee in the event of any sales by it involving the grant of sublicenses.
5. Royalty on turnover.
- -----------------------
The Licensee shall pay to the Licensor a royalty calculated according to the
turnover or gross sales of byproducts which the Licensee or Sublicensees
achieve.
The royalty on gross sales of the byproducts from all plants licensed hereunder
will be in the amount of 5%. The annual turnover will be determined on the basis
of the calendar year.
The aforesaid royalty will be computed by the Licensee twice yearly, once at
close of the six month period ending June 30 and once at the close of the six
month period ending December 31st for each such plant licensed or sublicensed
hereunder. This computation shall be completed no later than thirty days from
the close of each such period, and payment of the royalty over to the Licensor
shall be made no later than ninety days from the close of each such period.
6. Right of Audit.
- ------------------
The Licensor is authorized to have examined once annually by a certified public
accountant or auditing company chosen by Licensor all documents which are
necessary for computing the royalties.
7. Secrecy and exchange of Know-How.
- ------------------------------------
The parties to this agreement are bound to observe strict secrecy in respect of
all Know-How in the material field of the agreement. This also applies after
termination of this agreement.
The parties to this agreement agree to the reciprocal exchange of Know-How in
the material field of the agreement for their own use. For this purpose, each
party to this agreement can send after prior agreement up to 5 employees monthly
to the development, test, design, and constructing departments of the other, in
order to obtain information on questions which interest each such party
concerning the state of development, innovations and improvements developed by
the other party, and concerning other Know-How in the material field of the
agreement. Other possibilities of exchange of KnowHow remain reserved.
8. Period of validity and termination of the agreement.
- -------------------------------------------------------
Subject to the following provisions this agreement remains in force until
expiration of the last agreement patent right or until terminated by mutual
consent of the parties hereto.
The Licensor can terminate the agreement at its sole option after 12 months from
the date of execution hereof, if the Licensee has not delivered a binding order
for one TRTM-60 plant, including acceptable proof of funding.
The Licensee can terminate the agreement at its sole option one year's notice as
of the end of the second calendar year following execution of this agreement.
Either party to this agreement can terminate the agreement without notice if the
conduct of the other party substantially undermines the basis of trust necessary
for this agreement. Further, the Licensor can terminate without notice, if the
Licensee is more than two months in arrears with the payment of License fees or
royalties.
9. Additional Conditions.
- -------------------------
Place of performance is Albuquerque, New Mexico
Declarations of intention of legal nature such as notices, statements, demands,
approvals, consents or other communications must be sent by registered post to
be valid in law.
All communications are to be addressed to:
Licensor 3206 Candelaria Northeast
Albuquerque, New Mexico 87107
Licensee 9131 College Parkway
BD13, Box 218
Ft. Myers, Florida 33919
This is the entire integrated test of this agreement. No oral agreements or
representations have been made. Any set-off or retention against the claim for
license fees or royalties is excluded.
The ineffectiveness of one or more provisions of this agreement does not affect
the validity of the others. Each party to this agreement can demand that a new
valid provision be substituted which best achieves the economic purpose of the
ineffective provision.
All conditions of this agreement apply also to the legal successors, if any, to
the full rights of the parties to this agreement.
10. State Approval.
- --------------------
Each party to this agreement will endeavor to the best of its ability to bring
about the granting of any government permits which in accordance with the laws
of its country may be required for this agreement.
11. Law to be applied and arbitration.
- ---------------------------------------
The law of the State of New Mexico shall be applied as regards interpretation of
this agreement and to the resolution of any disputes arising hereunder or from
the negotiation hereof.
Any disputes arising hereunder will be adjudicated in the courts of competent
jurisdiction, state and federal, of the State of New Mexico.
12. Binding version and coming into force.
- -------------------------------------------
This agreement is drawn up and signed in English language.
For the rights and obligations of the parties to this agreement as well as for
the resolution of all ambiguities and interpretation of the provisions hereof,
the English version is exclusively binding.
This agreement comes into force after execution by the parties to the agreement
and granting of the necessary permits, if any, by the authorities.
Licensor TITAN TECHNOLOGIES, Licensee ENVIRONMENTAL SOLUTION
INC. and TIRE RECYCLING AGENCY
TECHNOLOGIES CORPORATION
- --------------------------- -------------------------------
Ronald L. Wilder, President
Signed this 12th day of February 1996.
AMENDMENT
TO LICENSE AGREEMENT
dated February 12, 1996
entered into between
Titan Technologies, Inc.
hereinafter referred to as "Titan" and
ESA World Trade, Ltd.
hereinafter referred to as "ESA" as follows:
In amendment of the license Agreement on certain patent rights for the
construction and sublicensing for the Tire Recycling Plant Type TRTM 60, the
parties hereto agree that
1) The scope of the exclusive license agreed in the License Agreement (Paragraph
2) and in the side letter to License Agreement (Paragraph 5) shall be expanded
to North America and South America with the exception of any agreements or
negotiations executed or begun by Titan prior to October31, 1996.
2) For the construction of all TRTM-60 plants to be sited in North America and
South America the lump-sum license payment in the amount of US $5,500,000.00
shall be divided and paid as follows.
a) an amount of US $2,500,000.00 as license fee for the certain patents
proprietary to Titan and a marketing markup to TitanOs FSC, to be allocated as
$2,000,000.00 for the license fee and $500,000.00 as the marketing markup, the
full sum of which is to be paid to TitanOs FSC for any sales of plants outside
the United States and otherwise directly to Titan.
b) an amount of US $2,500,000.00 to ESA World Trade, Ltd, IBC, as a marketing
fee.
c) an amount of US $500,000.00 to Strauss Investor Services, Inc., as an
Incentive Fee.
3) The Royalty on turnover as agreed in the License Agreement (Paragraph 5)
amounts to 7.5% (seven and one-half percent) of the gross sales of the
byproducts. The Royalty shall be split as follows:
a) FSC 5.0 % (five percent) of the gross sales of by-products,
b) ESA World Trade, Ltd., 2.5% (two and one-half percent) of the gross sales of
by-product.
4) All other terms and conditions of the License Agreement and the side Letter
to the License Agreement remain unchanged and in full force and effect.
ESA World Trade, Ltd Titan Technologies, Inc.
--------------------- ---------------------------
Dr. Josef Steiner, VP Ronald L. Wilder, President
776-95-1-2.doc
SIDE LETTER
TO THE LICENSE AGREEMENT
dated February 12, 1996
entered into between
Titan Technologies Corp.
hereinafter referred to as "TITAN" and
Environmental Solution Agency
hereinafter referred to as "ESA" as follows:
In amendment, alteration and/or modification of the license agreement on certain
patent rights for the construction and sub-licensing for the Tire Recycling
Plant Type TRTM-60, the parties hereto agree that
1) The lump-sum license payment at the amount of US$ 5,500.000,Dfor the first
plant in Austria (Pilot Plant) shall be shared and paid as follows:
a) an amount of US$ 500.000,- as license fee for that certain patents
proprietary to TITAN, to through its wholly owned foreign sales subsidiary to be
formed (hereinafter referred to as ,,FSCO),
b) an amount of US$ 1,000.000,- as marketing mark-up to FSC,
c) an amount of US$ 4,000.000,- to ESA World Trade Limited, IBC, as marketing
fee.
2) For the construction of all other TRTM-60 plants to be sited in Europe,
Australia, New Zealand and South Africa the lump-sum license payment at the
amount of US$ 5,500.000,- shall be divided and paid as follows:
a) an amount; of US$ 1,500.000, as license fee for the certain patents
proprietary to TITAN to FSC,
b) an amount of US$ 1,000.000, as marketing mark-up to FSC,
c) an amount of US$ 3,000.000, to ESA World Trade Limited, IBC, as marketing
fee.
3) The royalty on turn over as agreed in the license agreement (paragraph 5.)
amounts to 5% (five percent) of the gross sales of the by-products. The royalty
shall be split as follows:
a) FSC 3,5% (three point five percent) of the gross sales of by-products
b) ESA World Trade Limited, IBC, 1,5 % (one point five percent) of the gross
sales of by-products
4) For the efforts connected with the implementation of the TRTM-60 project in
Europe the President of World Trade Limited, IBC, Mr. Josef Strauss, and his
Austrian executive Vice-President, Mr. Josef Steiner, is herewith granted the
option to buy 1,000.000 shares each of Titan Technologies Corp. at a price of
US$ .75 per share and an option to buy 1,000.000 shares of Titan Technologies
Corp. at a price of US$ 1 per share. This option is assignable to any corporate
body or natural person nominated by Mr. Josef Strauss and Mr. Josef Steiner.
This option will expire on February 12, 1997, if not exercised in writing.
5) The scope of the exclusive license as agreed in the license agreement
(Paragraph 2.) shall be Europe, Australia, New Zealand and South Africa.
6) The license agreement shall be renewable on a yearly basis by giving written
notice six month before end of the year.
The licensor, TITAN, waives its right to termination of the licensee agreement
for five years go that the agreement can be terminated at December 31, 2001, the
earliest.
In any event, the license agreement becomes permanent, i.e. until expiration of
the last agreement patent right, if licensee, ESA, has solicited three binding
orders for TRTM-60 plants.
- ----------------------------- --------------------------
Environmental Solution Agency Titan Technologies, (TRTC)
Josef Steiner, vice-President Ron Wilder, President
EXHIBIT 10-o
EXCLUSIVE MARKETING AND LICENSING AGREEMENT
BY AND BETWEEN DOWON COMPANY, LTD.,
AND TIRE RECYCLING TECHNOLOGIES CORPORATION
THIS EXCLUSIVE MARKETING AND LICENSING AGREEMENT (hereinafter referred to as the
Agreement) is entered into by and between DOWON COMPANY, LTD., (hereinafter
referred to as DOWON), a corporation of the Republic of Korea, and TIRE
RECYCLING TECHNOLOGIES CORPORATION (hereinafter referred to as TRTC), a
corporation of the State of New Mexico, USA.
WITNESSETH:
WHEREAS, TRTC is the exclusive proprietor and holder of certain tire recycling
technology named the TRTM-60 Tire Recycling Process;
WHEREAS, TRTC and DOWON, for their mutual benefit intends to enter into an
exclusive marketing and licensing agreement and a covenant to joint venture;
NOW THEREFORE, with mutual valuable consideration which is contained in this
agreement and is acknowledged by both parties, the parties hereto agree as
follows:
DEFINITION:
A. EXCLUSIVE MARKETING RIGHT: A right which only the DOWON herein can exercise
and from which ALL OTHERS, including the TRTC, are prohibited directly or
indirectly from exercising.
B. SALES AND MARKETING: The act or process of selling and merchandising the
machine known as the TRTM-60 Tire Recycling Process(hereinafter referred to as
TRTM-60), which is inclusive of all related equipment and or products derived by
the TRTC from TRTM-60.
C. PRODUCT: Any or all material and substances produced by or derived from
machine, inclusive of but not limited to the following: (1) CARBON BLACK, (2)
OIL, (3) OIL PRODUCTS, (4) STEEL, and to the EXCLUSIVE RIGHT of any other
substances or materials that the machine may now or during the life of this
Agreement produce through research and development.
1 EXCLUSIVE MARKETING RIGHTS AND LICENSING AGREEMENT:
TRTC hereby grants and DOWON is hereby granted both exclusive marketing and
manufacturing rights to manufacture, market, sell, maintain repairs and other
necessary services, and distribute TRTM-60, including all related equipment,
which includes, but is not limited to, catalysts, starters, and subsequent
modifications thereof.
A. TERRITORY: This right and agreement shall comprise the continent of Asia,
which shall include the list of countries attached hereto as Exhibit A.
B. CONSIDERATION: DOWON shall deliver and pay to TRTC a one time licensing fee
in the amount of FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00 U.S.) per
each TRTM-60 sold. The amount shall be paid in accordance with Section 6 of this
Agreement. This license fee may be renegotiated at two (2) year intervals from
the date hereof. In addition, a yearly use fee will be payable directly to TRTC
by each purchaser of a plant from DOWON, and TRTCs duty to provide and replenish
Starter and Catalyst for each such purchaser will be made contingent upon
payment of such use fee. The amount of use fee will be negotiated by DOWON and
TRTC on a transaction by transaction basis. The aforesaid license and use fees
are in payment for the right to use TRTCs technology in plant sales by DOWON
within the scope of its territorial grant of marketing and manufacturing rights
and not in consideration for any business activities conducted in the Republic
of Korea. TRTC maintains no business or physical presence in the Republic of
Korea, and all sums received by TRTC from DOWON hereunder are merely in
furtherance of this Agreement and its purposes. Each party shall bear and be
liable of its own taxes due against them under the laws of the Republic of
Korea. If required, DOWON shall be responsible for withholding and paying over
to the appropriate tax authorities any and all withholding taxes which are
assessed on TRTC. In this case, DOWON shall provide proof to TRTC of its
withholding and payment of any such taxes.
C. REPORTING. DOWON will report to TRTC on a regular basis and at least
quarterly as to the status of all current negotiations and material transactions
and will provide TRTC with copies of all sales contracts in their original
language and in English translation.
2 COVENANT TO JOINT VENTURE When TRTC has executed. agreements to sell the first
five (5) TRTM-60s, DOWON and TRTC shall form a new corporation (hereinafter
referred as the NEWCORP), which shall have the exclusive marketing rights to the
rest of the world, SPECIFICALLY EXCLUDING ASIA. NEWCORPs outstanding shares
shall be equally held by the parties and all shares distributed shall be issued
equally between the parties.
A. BOARD OF DIRECTORS. NEWCORP shall have a Board of Directors consisting of
five (5) directors, three (3) of whom shall be appointed by TRTC and two (2) of
whom shall be appointed by DOWON.
B. INITIAL PRINCIPAL OFFICE. The initial principal place of NEWCORP shall be the
offices of TRTC.
C. DISTRIBUTION OF GROSS INCOME. Upon formation of NEWCORP, all marketing income
derived from TRTM-60 purchases will be payable to NEWCORP. From each such
transactions, a sum of no less than FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($500,000.00) will allocated to NEWCORP as a mark up in consideration for its
marketing activities, and, if the negotiated price warrants an increase, it is
the intention of the parties hereto to increase the marketing mark up allocation
to NEWCORP.
D. TERMINATION OF TRTCS MARKETING RIGHTS. Immediately upon the full execution
the agreements to sell first five (5) TRTM-60s, TRTC shall stop any and all
marketing and sales activities.
3. DISTRIBUTION OF INCOME FROM FIVE (5) TRTM-60S SOLD BY TRTC. The parties
hereto acknowledge that TRTC has been engaged in the marketing of TRTM-60 on an
independent basis during the period the arrangement embodied in this Agreement
was being negotiated. TRTC does hereby agree that it will share all income
inuring to it from the first five (5) TRTM-60s sales derived from the aforesaid
marketing activity on an equal basis after deduction of all marketing expenses
heretofore incurred by TRTC. As a matter of confirmation, TRTC shall provide and
disclose any contracts, agreements, financial documents, and credit history of
any purchasers, if available.
A. CONDITIONS PRECEDENT. As conditions precedent to TRTCs obligations hereunder,
DOWON agrees that it will dedicate all sums received pursuant to this Subsection
to the payment of certain operating expenses, including but not limited to FIFTY
PERCENT (50%) of all marketing expenses incurred by TRTC from the date hereof,
which expenses will include THIRTY PERCENT (30%) of TRTCs operating overhead to
a maximum amount of FORTY-FIVE THOUSAND AND NO/100 DOLLARS ($45,000.00) per
annum and such additional direct marketing expenses as DOWON and TRTC jointly
agree are reasonable and necessary to effectuate the terms of this Agreement.
All additional operating expenses to be paid hereunder will be more fully set
out in a separate protocol which is incorporated by reference herein. Until
DOWON has paid all the aforesaid expenses in full, TRTC will pay FIFTY PERCENT
(50%) of all marketing income inuring to it from the first five (5) TRTM- 60s
sales into an Escrow Account to be administered by a third party from which
funds can be disbursed upon notification by TRTC to the Escrow Agent in order to
enable DOWON to make payments of the operating expenses payable hereunder.
4. TERMINATION. Provided that the parties continue to meet all obligations as
set out hereunder, this Agreement shall continue indefinitely. In the event
either party to this Agreement fails to meet its obligations hereunder, the
other party at its sole discretion may declare a default by providing written
notice hereof to the defaulting party who will have sixty (60) days from receipt
of such notice to cure said default. If such default is not cured within the
prescribed time period, all marketing and manufacturing rights shall revert back
to TRTC and the affairs of NEWCORP shall be wound up. Termination shall not
cancel any existing and accrued though unpaid obligations of any of the parties
hereto.
5. ASSIGNMENT. Any rights, agreements, and conditions of this Agreement is not
assignable or transferrable by either party directly or indirectly without the
written consent of the other party, which shall not be unreasonably withheld.
6. LICENSING FEE. For each payment received by DOWON from its customer for
TRTM-60 sold, DOWON shall remit the corresponding proportion of the License Fee
to TRTC within thirty (30) days of receipt of such payment from the customer.
The License Fee payment to TRTC shall strictly adhere to the contract entered
into by and between DOWON and the customer. As a matter of example, when DOWON
receives one hundred percent (100%) of the total price of TRTM-60 on the date of
the execution of the contract from the customer, DOWON shall be obligated to pay
one hundred percent (100%) of the License Fee within thirty (30) days of the
date of contract. If DOWON receives fifty percent (50%) of the total contracted
price on the date of the execution of the contract, then DOWON shall be
obligated to only pay fifty percent (50%) of the total price with thirty (30)
days of the date of the contract. The remaining fifty percent (50%) of the
Licensing Fee shall be paid within thirty (30) days of completion and full
operation of TRTM-60. In any case, the final payment of the initial license fee
payable to TRTC hereunder will be made by no later than thirty (30) days from
the date of completion and full operation of TRTM-60 by DOWON pursuant to a
sales contract. DOWON shall promptly disclose documents on all sales of TRTM-60,
including payment schedule provisions and any other information requested by
TRTC on the payment terms of each sale of TRTM-60.
7. WARRANTIES. TRTC warrants that it is the sole and exclusive and the
originator of TRTM-60.TRTC agrees to indemnify and hold DOWON harmless from any
claim arising from alleged infringements by TRTC or from DOWONs use of the
TRTM-60 technology.
All TRTC's warranties provided to purchasers of TRTM-60 from DOWON under Section
1 hereof shall be the sole responsibility of DOWON which shall indemnify and
hold TRTC harmless from any liability arising from any alleged breaches of
warranty. TRTC shall indemnify DOWON for any liabilities incurred by DOWON as a
result of any damages caused by any design, construction, equipment defects and
any other defects manufactured or supplied by TRTC, specifically, but not
limited to, Catalyst and Starter, in the TRTM-60 tire recycling process.
All modifications to the existing design of TRTM-60 made by either party hereto
will be disclosed to the other party, and the right to patent such modnification
will automatically be vested in the party to whom the modification has been
disclosed for any country within the territorial scope of its manufacturing
rights.
8. CONFIDENTIALITY. All information of whatever nature, whether technical or
business, provided by one party to this Agreement to the other party shall be
held in the strictest confidence and shall not be divulged to any other person
or entity without the prior written consent of the party providing the
information. Disclosure of such information to a third party without consent of
both parties shall be a breach of this Agreement. Should either party hereto
divulge such information to a stranger to this Agreement without the partys
prior written consent, the party at fault shall pay liquidated damages to the
other party in the amount of TWENTY MILLION AND NO/100 DOLLARS ($20,000,000.00)
and such other damages as may be proven thereafter. The parties hereto agree to
insert similar penalties in all sales contracts negotiated by them hereafter.
9. ENTIRE AGREEMENT. This Agreement is the complete and exclusive statement of
mutual promises and consideration of the parties and supersedes and cancels any
previous written and oral agreements and communications relating to any matter
which is the subject matter of this Agreement.
10. FORCE MAJEURE. Neither party shall be liable to the other party for
nonperformance or delay in performance of any of its obligation under this
Agreement due to causes reasonably beyond its control including fire, flood,
strikes, labor troubles or other industrial disturbances, unavoidable accidents,
governmental regulations, riots, and insurrections. Upon the occurrence of such
a force majeure condition the affected party shall immediately notify the other
party with as much detail as possible and shall promptly inform the other party
of any further developments. Immediately after the causes is removed, the
affected party shall perform such obligations with all due speed.
11. FULL FORCE AND EFFECT. In the case where any of the provisions of this
Agreement is held by a court or other tribunal of competent jurisdiction to be
unenforceable, the remaining portions of the Agreement shall remain in full
force and effect.
12. ATTORNEYS FEES. In the event of any litigation arising hereunder or from the
negotiation hereof, the losing party shall pay to the prevailing party its
attorney fees and all expenses in presenting or defending any claim submitted.
13. MODIFICATION. This agreement may not be modified in any manner except by a
written agreement duly executed by the persons authorized to execute agreements
on behalf of the parties.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Mexico.
15. ARBITRATION. Any dispute arising or by virtue of this Agreement or any
difference of opinion between the parties hereto concerning their rights and
obligations under this Agreement, shall be finally resolved by arbitration. Such
arbitration proceedings shall be in accordance with the applicable rules of
arbitration of the American Arbitration Association. The arbitration shall be
conducted by a panel of three arbitrators, one of whom will be chosen by each
party and the third by mutual agreement of the arbitrators selected by the
parties. The decision of the arbitration proceedings shall be final and binding
upon both parties, provided, however, that any dispute subject to final and
binding arbitration does not affect TRTCs rights to its proprietary technology.
16. NON-WAIVER. The parties hereto agree that failure to exercise or delay in
exercising any right, power, or privilege under this Agreement on the part of
either party shall not operate as a waiver of any right, power or privilege
under this Agreement. The parties also agree that no single or partial exercise
of any right under this Agreement shall preclude further exercise of such a
right.
17. NOTICE. All notices shall be delivered via certified mail to the following
addresses of each party:
Manufacturer:
Tire Recycling Technologies Corporation
3206 Candelaria Northeast
Albuquerque, New Mexico 87107
Marketer:
DOWON Company, Ltd.
246-1, Hakpyung-Ri
Bukil-Myun, Cheongwon-Gun
Chung-Buk, Korea 363-930
copy to:
Ronald J. Pak
Attorney at Law
11220 W. Jewell Drive
Denver, Colorado 80227
[THIS SPACE INTENTIONALLY LEFT BLANK.]
[EXECUTION ON THE FOLLOWING PAGE.]
Witnessed and executed this the ______ day of March, 1996.
TIRE RECYCLING TECHNOLOGIES CORPORATION:
By:
-----------------------------------
Ronald L. Wilder
President
Sworn to and subscribed before me this
______ day of March, 1996.
- --------------------------------------
Notary Public
My commission expires:
DOWON COMPANY, LTD.:
By:
-----------------------------------
Y. J. Chung
President
Sworn to and subscribed before me this
______ day of March, 1996.
- --------------------------------------
Notary Public
My commission expires:
EXHIBIT 10-p
776-95-1-l.doc Final Version
MEMORANDUM OF AGREEMENT
-----------------------
entered into this day..25..of...April...1996
between
Titan Technologies Corp.,
3206 Candelaria, Albuquerque, New Mexico 87107, United States
hereinafter referred to as "TITAN" and
Environmental Solution Agency,
1243 Plumosa, Fort Myers, Florida 33901, United States
hereinafter referred to as "ESA" on the one side and
SKODA Klatovy S.R.O.,
Domazlicka, 33901 Klatovy, Czech Republic
hereinafter referred to as "SKODA" on the other hand:
Recitals
WHEREAS, TITAN is the holder of patents, patent applications as listed in
Schedule ./1 and technical experience based on the TRTM-60 TECHNOLOGY which it
has invented and developed to operation standard as the "Tire Recycling Plant
TRTM-60".
WHEREAS, TITAN has gained technical and economic experience, knowledge,
development results and designs as listed in Schedule ./2 (hereinafter referred
to as "Know-How").
WHEREAS, ESA is the holder of the exclusive master-license for Europe,
Australia, New Zealand and South-Africa under which license ESA is entitled to
use and exploit the above mentioned patent rights and Know-How to construct Tire
Recycling Plants, type TRTM-60, and to grant sub-licenses for the construction
and for the operation of Tire Recycling Plants, Type TRTM-60;
WHEREAS, experts and delegates of TITAN, ESA and SKODA have examined two Tire
Recycling Plants, Type TRTM-60, already operating in South Korea to their full
contentment as to readiness and fitness for operation;
WHEREAS, TITAN, ESA and SKODA intend to further develop the patents and Know-How
and redesign the Tire Recycling Plant TRTM-60, to meet and comply with all
relevant standards of the European Community (hereinafter referred to
,,E.C.Standard) and national standards of those countries where plants will be
sited, construct a Tire Recycling Pilot Plant, ,,Type TRTM-60 E.C.-Standard, and
market and distribute the Tire Recycling Plant TRTM-60 E.C.-Standard in Europe
and South Africa.
WHEREAS, SKODA is an internationally renown and well-reputed constructor of
plants and civil engineering specialist.
NOW THEREFORE, the parties to this Agreement for the mutual benefits and
considerations contained herein have agreed as follows:
I.
Description of Works and Services of SKODA
------------------------------------------
1) For the works and services to be rendered under this Agreement, SKODA shall
act as General Contractor according to the Conditions of Contract for Works of
Civil Engineering Construction (,,FIDIC-Red Book) and the Conditions of Contract
for Electrical and Mechanical Works (,,FIDIC-Yellow Book) fully liable for
defects in the works, services, equipment, materials or other supplies or
inaccuracies or insufficiencies in technical documents even such defect result
from acts or omissions on part of itS sub-contractors.
2) SKODA as General Contractor shall
2.1) Redesign and improve the Tire Recycling Plant TRTM-60 as to meet and
conform to E.C.-Standard and comply with national regulation and standards
imposed by the national legislator of the country where the Tire Recycling Plant
will be constructed and operated;
2.2) Develop and construct a Tire Recycling Pilot Plant (E.C.-Standard) in
Austria under a FIDIC Contract to be concluded with the owner and/or operator
(employer) of the pilot plant. This Pilot Plant is intended to be sited in
Traiskirchen, Lower Austria, and shall comply with all applicable regulation and
statutes necessary for the continued operation of the Tire Recycling Plant
including, but not limited to, environmental laws, air pollution regulation,
employee protective ordinances, etc. SKODA shall liase with the competent
authorities and agencies and follow their advice and instructions so that the
Pilot Plant will be operated with all necessary permits and required approvals.
2.3) Assist in the obtaining and procurement of all necessary permits, approvals
and licenses for the construction and test-operation of the Tire Recycling Pilot
Plant, particularly provide the technical documentation and technical support as
required by the relevant Austrian Authorities and Agencies and thereafter SKODA
shall test-operate the Tire Recycling Pilot Plant for a period of one month.
2.4) Assist in the obtaining and procurement of all necessary permits, approvals
and licenses for the continued operation of the Tire Recycling Pilot Plant,
particularly provide the technical documentation and technical support as
required by the relevant Austrian Authorities and Agencies.
2.5) After taking-over to and acceptance of the Pilot Plant by the owner and/or
operator (employer), which shall not take place and will not be accepted until
all necessary permits and approvals for the continued operation of the Pilot
Plant have been obtained from the relevant Austrian authorities, maintain and
service the Pilot Plant on terms to be agreed upon.
II.
Support of Titan/ESA
--------------------
1) TITAN shall provide SKODA with and submit to SKODA all drawings,
specifications and technical documents in its possession referring to the two
Tire Recycling Plants in operation in South Korea as basis for the redesigning
and development to E.C.-Standard.
2) TITAN and ESA shall appoint and send two civil engineers, employed and paid
by TITAN and ESA, to the SKODA research and development site to assist SKODA in
the redesigning and development work and to guarantee continuity of development
and Know-How of the Tire Recycling Plant, Type TRTM-60 (E.C. Standard). All
costs, such as, but not limited to, salaries, travel-expenses, accommodation and
disbursement for the two TITAN/ESA appointed civil engineers shall be born by
TITAN/ESA.
3) TITAN and ESA shall assist SKODA and the owner and/or operator of the Tire
Recycling Pilot Plant in the application, obtaining and procurement of all
required permits, approvals and licenses or the construction, test operation and
continued operation under all relevant Austrian and E.C. Law, Statutes,
Ordinances, Regulations and other provisions to be obeyed.
III.
Patents and Right of Ownership
------------------------------
1) TITAN declares that it has the entire disposal and ownership for the patent
rights as listed in Schedule ./1 and and that it knows of no facts that could
prejudice the legal validity of those patent rights. In no event TITAN and ESA
shall be liable for facts arising after coming into force of this agreement
prejudicing the legal validity of those patent rights.
2) The final results of the redesign to and development of the Tire Recycling
Plant TRTM-60 E.C. Standard, including, but not limited to, copyright,
drawings,technical specifications and documentation, know-how and patentable
inventions shall become the exclusive property of TITAN.
3) All proprietary rights to designs, know-how, copyright, patentable inventions
or innovations, improvements, etc. shall be transferred and assigned to TITAN
without special payment, royalty or consideration other than agreed upon in this
Contract. TITAN shall be exclusively entitled to apply for and register any
patents or patent improvements or innovations resulting from the redesigning and
development of the Tire Recycling Plant Type TRTM-60 (E.C.- Standard). SKODA
shall sign all necessary applications and give its approval to the registration
of such patents or patent improvements on behalf of TITAN. SKODA shall assist
TITAN that its proprietary rights will be protected and registered as well as
defended against other claimants
IV.
Development and Construction Costs
----------------------------------
1) SKODA shall submit to TITAN and ESA an accurate and binding cost
account(FIDIC-tender) for each stage of redesigning and development as described
in II.2.1) - 2.5) (above) within 30 days after receipt of all technical
documentation on the Tire Recycling Plant TRTM-60 at disposal of TITAN and ESA.
2) The parties shall agree on general specifications and conditions of contract
for those works and services to be rendered by SKODA in the construction of all
Tire Recycling Plants Type TRTM-60 (E.C.-Standard) for which SKODA will act as
general contractor for the planning and construction for the Tire Recycling
Plants.
3) Furthermore, the parties shall agree on a fix sum to be paid to SKODA by the
owner and/or operator (employer) for the construction and works and services of
the general contract or SKODA. SKODA agrees to render the works and services
agreed upon between the parties to this agreement to any owner and/or operator
(employer) of a Tire Recycling Plant Type TRTM-60 (E.C.-Standard) nominated by
TITAN and ESA in Europe and South-Africa under the terms and conditions of the
FIDIC-Red Book and FIDIC-Yellow Book.
4) The fixed sum agreed for the works and services of SKODA according IV. 2) and
3) shall be indexed (price-adjusted) according the following formula:
V.
Time Schedule
-------------
The parties to this Agreement and the owner and/or operator of the Tire
Recycling Pilot Plant shall agree on a time and delivery schedule for each stage
of redesigning, development, construction and test operation according II. 2.1)
- - 2.5) (above) within 30 days after receipt of the SKODA cost account according
IV. (above) by TITAN and ESA.
VI.
Service and Maintenance
-----------------------
1) SKODA shall enter into a Service and Maintenance Agreement with the operator
of the Tire Recycling Pilot Plant at fair market conditions and according
international service standards after completion of construction and test
operation of the pilot plant.
2) During service and maintenance, SKODA shall continue to suggest appropriate
improvements, innovations and alterations of the pilot plant in order to
increase machine reliability, product quality and cost efficiency of the Tire
Recycling Plant TRTM-60 (E.C. Standard). For such improvements, developments and
know-how, the provisions of III. (above) shall apply mutatis mutandis.
VII.
Warranty
--------
SKODA warrants remedy of all defects, insufficiencies, flaws etc. appearing
within one year after taking-over and acceptance of the Pilot Plant by the
operator at the sole expense of SKODA unless such defect directly results from
the evident mishandling or misoperation of the plant and/or its machines or
equipment by the operator.
VIII.
Retention money
---------------
Under the FIDIC-construction contract between SKODA and the owner and/or
operator of the Pilot Plant, the employer shall be entitled to retain 5 % of the
total price for the construction of the Pilot Plant during the warranty period
(defects liability period). SKODA can redeem the retention money by submitting
an abstract bank guarantee of an international top-rated bank institute in like
amount and with expiration date not prior to the end of the warranty period.
IX.
Consideration for SKODA
-----------------------
1) It is agreed between the parties that SKODA will not charge and invoice TITAN
and ESA or the owner and/or operator of the Tire Recycling Pilot Plant for
redesigning, development to E.C.-Standard, improvement and pertinent inventions
and/or innovations of the Tire Recycling Plant TRTM-60.
2) It is further agreed that SKODA as general contractor shall construct the
Tire Recycling Pilot Plant according the cost account as agreed under IV. and
under the FIDIC- construction contract to be concluded between SKODA and the
employer (owner and/or operator).
3) For the development work and services rendered by SKODA under this Agreement,
TITAN and ESA grant SKODA the exclusive right of first refusal to be employed as
general contractor for the construction of all Tire Recycling Plants, Type
TRTM-60 (E.C.-Standard) in Europe, Australia, New Zealand and South Africa, if
the SKODA redesigned and improved Tire Recycling Plant meets ,,E.C.-Standard and
relevant national standards, ordinances, regulations, etc. and contingent
E.C.-Rule is not contravened.
4) Furthermore, SKODA has shown interest to construct and operate a Tire
Recycling Plant, Type TRTM-60, in the Czech Republic. The parties will consider
licensing SKODA for the construction and operation of this Czech sited plant and
setting-off the fixed license fee and the royalty on the turn-over against SKODA
works and services for the redesigning and development to E. C.-Standard.
5) Finally, the parties consider future cooperation in the material field of
plastic recycling technology. TITAN has gained specific technical and economic
experience, knowledge and know-how and considers to cooperate with SKODA in the
further development and construction of a Plastic Recycling Pilot Plant on terms
similar to this Contract but still to be negotiated and agreed upon.
X.
Secrecy
-------
The parties to this agreement shall observe strict secrecy in respect to all
know-how and other proprietary information of the parties that might be of value
or interest to a third party not involved in the present contract unless the
express prior written approval of the other parties has been obtained. This
secrecy obligation remains in full forth after termination or expiration of this
agreement.
XI.
Period of validity of Agreement
-------------------------------
1) This agreement remains in force until expiration of the last patent right (as
listed in Schedule ./1) or until terminated by mutual consent of the parties
hereto.
2) Either party can terminate the agreement with immediate effect by a written
notice to all other parties to this agreement, if:
a) The conduct of a party to this agreement substantially undermines the basis
of trust necessary for the future cooperation under this agreement.
b) One party to this agreement is in breach of contract and, notwithstanding a
written notice to remedy the breach of contract situation within one month after
dispatch, continues to be in breach of contract.
XII.
Entirety
--------
This Agreement constitutes the entire agreement between the parties. Any
agreement, statements or any other circumstances of legal relevance made or
occurred before or at the conclusion of this Agreement, loose any effect with
the conclusion of this Agreement.
XIII.
Waiver
------
No act or omission by a party may be deemed to be a waiver of any rights, if
such a waiver is not declared explicitly and in writing.
XIV.
Nature of this Agreement
------------------------
1) This Agreement does neither constitute a company nor a similar relationship
nor an employment relationship.
2) None of the parties may act in the name or for the account of the other
party.
XV.
Form and Time-Limits
--------------------
1) No modification or amendment of this Agreement, including this clause, shall
be effective unless made in writing and at least signed by the party against
whom the modification or amendment shall be enforced.
2) Any communication to be given under this Agreement or according to the law
applicable shall be made in writing and by registered mail. The calculation and
the meeting of deadlines is determined by the post stamp of an Austrian or U.S.
post office.
3) All communication under this contract are to be addressed to:
TITAN: 3206 Candelaria, Albuquerque, New Mexico 87107, United States
ESA: 1243 Plumosa, Fort Myers, Florida 33901, United States
SKODA: Domazlicka, 33901 Klatovy, Czech Republic
XVI.
Schedules
---------
The schedules to this Agreement constitute an integral part of this Agreement,
if this Agreement does not explicitly provide for otherwise.
XVII.
Severability
------------
1) Should any provision of this Agreement be or become illegal or unenforceable,
the remainder of this Agreement shall not be affected.
2) These provisions are automatically replaced by valid and enforceable
provisions, which achieve the intended effect as good as possible.
XVIII.
Governing Law
-------------
This Agreement including the issue of its valid conclusion and its pre- and
post-contractual effects is governed by the laws of Austria, except the Rules on
Private International Law (Conflict of Laws) and thereby any renvoi to other
jurisdiction or law shall be excluded.
Furthermore, the Conditions of Contract for Works of Civil Engineering
Construction (FIDIC-Red-Book) and Conditions of Contract for Electrical and
Mechanical Works (FIDIC-Yellow Book) of the Federation International des
Ingenieurs-Conseils apply unless this contract provides for otherwise. In case
of discrepancies between this agreement and the FIDIC-conditions of contract,
this agreement shall prevail.
XIX.
Place of Performance/Jurisdiction/Arbitration
---------------------------------------------
1) The place of performance is the site of the Pilot Plant in Austria.
2) Any disputes concerning this Agreement including the issue of its valid
conclusion and its pre- and post-contractual effects are exclusively and finally
decided and settled by an arbitration tribunal constituted and ruling under the
Rules of Conciliation and Arbitration of the International Chamber of Commerce
composed of three arbitrators appointed in accordance with the said Rules. Place
of arbitration shall be Paris. The language of the arbitration proceedings shall
be English language.
XX.
Binding version and Coming into Force
-------------------------------------
1) This contract - except for the mutual obligations and rights of II. 2.2) -
2.5) comes into force with execution by the parties to this agreement. The
mutual rights and obligation of II. 2.2) - 2.5) come into force with acceptance
of the SKODA tender according IV. 1) and agreement on the time-schedule V.by the
owner and/or operator of the Tire Recycling Pilot Plant.
2) This agreement is drafted and signed in English language. A German version is
attached for convenience only. In case of ambiguity and for interpretation of
this Agreement, the English version is exclusively binding and authentic.
XXI.
Drafting of Subsequent Agreements
---------------------------------
To safeguard continuity of this Memorandum of Agreement with all subsequent
contracts to be drawn up and signed between the parties and the owners and/or
operators of Tire Recycling Plants Type TRTM-60 (E.C.- Standard) in Europe and
South-Africa, the parties appoint Dr. Helmut Steiner (attorney at law) and Dr.
Friedrich Bubla, LL.M. (attorney at law), or the drafting and further handling
of all subsequent agreements between the parties and prospective and future
owners and/or operators (employers) of the Tire Recycling Plant TRTM-60 (E
.C.-Standard).
_________________________ __________________________
TITAN ESA
________________________
SKODA
EXHIBIT 10-q
Addendum to Memorandum of Agreement
dated on 25th April, 1996
Ad Pkt IV/1
SKODA shall submit the binding cost account describe more fully in sub part
"IV/l" within 45 days.
Ad Pkt IV/4
The fixed sum cost account shall be denominated in US-Dollars.
The fixed price of the pilot plant shall be the basis for this calculation.
SKODA may inrease this price according the inflation rate of the Czech Republic,
but not more than 10 % (ten percent) annually.
Ad Pkt VII
SKODA warrants remedy of all mechanical defects .................
results form the principles of the technical solution, experience, knowledge and
development results and designes gained by TITAN and evident mishandling
............
Ad Pkt IX/5
5.
Furthermore, SKODA on base of this Memorandum of Agreement is sole producer and
supplier of technological equipment manufactured according to the documentation
of TITAN and redesigned by SKODA for territory mentioned in this Memorandum.
Point 5 was changed to point 6.
Ad Pkt X
This secrecy obligation remains in full forth after termination or expiration of
this agreement as long as the aforesaid patents are in effect or for a period of
twenty years, whichever period is longer.
_____________________ _______________________
TITAN ESA
_____________________
SKODA
EXHIBIT 10-r
IRREVOCABLE OPTION AGREEMENT
This Agreement is made and entered into this 10th day of June, 1996, by and
between ABTECH INDUSTRIES, L.L.C., and Arizona limited liability company
(AbTech), and TIRE RECYCLING TECHNOLOGIES CORPORATION, a New Mexico corporation
(TRTC).
RECITALS:
A. AbTech is the owner of certain technology (including patents pending)
and possesses certain know-how, trade secrets, methods and concepts relating to
the recovery of oil and other chemical-based spills which, when applied, cause
the absorption or adsorption of such spills (the Technology);
B. TRTC possesses certain technology, know-how, trade secrets, methods and
concepts enabling TRTC to construct equipment to enable the recycling of
absorbent and adsorbent materials and oil or other chemicals involved in a spill
(the Equipment) which Equipment must be specially designed and manufactured for
use in conjunction with AbTech's Technology and which can also be utilized to
recycle used motor oil when not engaged in spill related recycling; and
C. AbTech desires TRTC to develop and manufacture Equipment for use in
conjunction with the Technology on an exclusive basis, with the limitations set
out below and TRTC desires to grant to AbTech and its successors or affiliates
an irrevocable option to purchase the Equipment from it on such basis, all upon
the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and promises contained herein
the parties do hereby agree as follows:
1. Incorporation of Recitals. The Recitals hereinabove set forth are
incorporated by reference as if fully rewritten herein.
2. Grant of Perpetual Option. Provided that AbTech issues its purchase
order to TRTC no later than December 15, 1997, for the purchase of one unit of
TRTCs Equipment designed to meet AbTechs needs for the price and upon the terms
set forth in Exhibit A, TRTC grants to AbTech or its assigns the option to
hereafter purchase such additional Equipment (including that which may
incorporate any modifications or improvements which may be developed by TRTC
and/or AbTech or their affiliates) on an exclusive basis upon the same terms and
conditions provided, however, that in the event that TRTC desires to build and
operate a unit in an area which has not been designated as the exclusive
territory of AbTech or an affiliate or licensee of AbTech, and AbTech determines
in its sole and absolute discretion that it would be beneficial for TRTC or one
of its affiliates to operate a unit in such area, AbTech may permit such
operation of a unit upon such terms as may be mutually acceptable to the
parties. TRTC hereby covenants on behalf of itself, its successors, and its
assigns that it will not sell units or enter into any disposal or recycling
agreements with any competitor of AbTechs or other manufacturer of absorptive or
adsorptive materials used or intended to be used in the recovery of oil spills
without AbTechs consent in writing. All equipment manufactured by TRTC for use
in connection with the Technology shall comply with all state, federal or local
rules, regulations and codes, and TRTC shall be responsible for facilitating the
granting of any licenses or permits which may be necessary in order for AbTech
or its assigns to operate the unit(s).
3. Entire Agreement. This Agreement contains the entire understanding among
the parties and supersedes any prior understanding or written or oral agreements
among them respecting the subject matter hereof; provided, however, that neither
this Agreement nor the actions of the parties pursuant hereto shall in any way
affect nor diminish the scope or application of that certain Agreement dated
March 26, 1996, by and between the parties concerning, among other things the
disclosure and use of confidential information.
4. Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Arizona.
5. Attorneys Fees. If either party institutes a suit against the other in
connection with this Agreement or its enforcement, the successful party to any
such action shall be entitled to recover from the other party reasonable
attorneys fees (not to exceed the actual attorneys fees incurred), witness fees
and expenses and court costs in connection with said suit, both at the trial and
appellate levels.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ABTECH INDUSTRIES, L.L.C., TIRE RECYCLING TECHNOLOGIES
an Arizona limited liability company CORPORATION, a New Mexico corp.
By:_______________________________ By:_____________________________
Its:_______________________________ Its:_____________________________
EXHIBIT A
ABTECH COST ANALYSIS
A. PROCESS MATERIAL AND EQUIPMENT
Process Pipe Material .......... 82,000.00
Insulation ..................... 4,500.00
Specialty Sheet Cost ........... 9,000.00
Tank-Condenser #1 ...... 300 gal 1,560.00
Tank-Condenser #2 ...... 300 gal 1,560.00
Tank-Feeder Storage .... 300 gal 1,560.00
Tank-Burner Fuel Strge.. 300 gal 1,560.00
Tank-Gas Storage ............... 1,560.00
Feed Conveyor .................. 18,000.00
Reactor Chamber ................ 190,000.00
Hydraulic Unit ................. 65,000.00
Condenser #1 ................... 29,800.00
Condenser #2 ................... 29,800.00
Process Chiller ................ 20,000.00
Burner ......................... 32,500.00
1st Storage Transfer Pump ...... 1,950.00
2nd Storage Transfer Pump ...... 1,950.00
Seal Oil Transfer Pump ......... 1,950.00
Process Gas Pump ............... 36,800.00
Discharge Tank ................. 5,000.00
Shredders ...................... 250,000.00
Oil/Water Separator-Centrifuge . 20,000.00
Catalyst Feeder ................ 5,000.00
Conveyor-Feed .................. 3,000.00
Conveyor-Discharge ............. 3,000.00
Subtotal A ....... $ 817,050.00
B. SUBCONTRACTORS
Controls - PLC & Engineering 169,000.00
Controls - Hardware ........ 87,100.00
Reactor Construction ....... 124,000.00
Electrical - Power ......... 95,000.00
Electrical - Controls ...... 102,000.00
Project Development Cost ... 32,500.00
Engineering Cost ........... 100,000.00
Subtotal B ................. $ 709,600.00
C. LABOR
Fitter (Field)
Insulator ................. 6,000.00
Millwright ................ 9,000.00
Quality Control - Start Up 3,120.00
Project Supervisor - Piping 4,485.00
General Supervisor ........ 2,579.00
Project Manager ........... 24,000.00
Detailing ................. 4,500.00
Subtotal C ................ $ 101,624.00
D. LABOR RELATED
COST COST/MM TOTAL
Taxes & Insurance (Plbg/Pipe/lns) ....... 48,120.00 20% 9,624.00
Taxes & Insurance (PM/Eng/Sup) .......... 25,004.00 15% 3,751.00
Taxes & Insurance (Clerk/Detailer) ...... 4,500.00 13% 585.00
Safety Programs ..............1% of Labor 1,016.00
Fringes ......................9% of Labor 9,146.00
Small Tools ............................ 3,262.00 0.65 2,120.00
Rental Equipment ....................... 3,262.00 0.48 1,569.00
Detail Burden .......................... 160 HOURS 8.39 1,342.00
Subtotal D .............................. $ 29,153.00
E. MISCELLANEOUS
QUANTITY RATE COST
Trucks ........................ 8 Months 650.00 5,200.00
Car ........................... 1 Month 780.00 780.00
Job Shack ..................... 4 Months 1,950.00 7,800.00
Per Diem ...................... 58,968.00
Travel Expenses ............... 21 Months 1,300.00 27,300.00
Telephone ..................... 4 Months 975.00 3,900.00
Outside Rental ................ (Taxable) 10,602.00
Delivery Expense .............. 11,050.00
Subtotal E ............ $ 125,600.00
F. BID SUMMARY
Process material & Equipment 817,050.00
Subcontractors ............. 709,600.00
Labor ...................... 101,624.00
Labor Related .............. 29,153.00
Miscellaneous .............. 125,600.00
Total All Items .... $ 1,783,027.00
Mark-up ............ 1,200,000.00
Total Price ........ $ 2,983,027.00
The Total Price shall be payable one third upon the execution and delivery of
AbTechs purchase order, one third upon delivery and installation of the Unit(s)
and one third 30 days following the date upon which the Unit(s) becomes fully
operational.
In addition to the Total Price, TRTC shall also receive an on going royalty with
respect to each unit sold equal to 50% of the royalties received by AbTech from
its assigns from the recycling revenues generated by the use of such unit(s) to
recycle spill remediation products.
The Total Price set forth above shall also include all necessary technical
support and expertise to ensure successful construction, installation and
operation of the unit including site supervision, consultation and technical
training of the operational crews responsible for manning and operating the
unit. TRTC shall also provide at its sole cost and expense during the operating
lifetime of the Units all maintenance, service, and adjustments to maintain the
Units in operating condition. TRTC represents and warrants that the price
allocated above for components integrated into the unit shall not exceed the
cost of same charged or allocated with respect to TRTCs sale of tire recycling
units, except for specialized processed pipe material and steel used in
fabrication of the Reactor Chambers.
All manufacturers warranties on the component parts of the Unit(s) shall be
assignable and assigned to AbTech and/or its assignees. TRTC warrants that the
catalyst will process spill remediation products and the proper functioning of
the main processing chamber(s). The obligations of TRTC under this provision
will terminate in the event of improper operation of the Unit(s) by AbTech or
its assigns to the extent such improper operation adversely impacts the proper
operation of the Unit(s). Seller represents and warrants that each Unit shall be
capable of processing not less than __50__ tons of material per ___Day____.
EXHIBIT 10-s
OPTION AGREEMENT
THIS OPTION AGREEMENT is made as of the __4__ day of September, 19 96 (the
Effective Date) by and between Tire Recycling Technology Corporation, Inc., with
principal place of business at 3206 Candelaria, N.E., Albuquerque, New Mexico
87107 (TRTC), Adherent Technologies, Inc., with principal place of business at
11208 Cochiti SE, Albuquerque, New Mexico 87123 (Adherent) and Fiberite, Inc.,
with principal place of business at 2055 East Technology Circle, Tempe, Arizona
85284 (Fiberite).
RECITALS
A. TRTC is engaged in the business of manufacturing and selling commercial
plants which recycle waste tires, using a proprietary process and methodology
developed by TRTC (the TRTC Core Technology). TRTC licenses the TRTC Core
Technology to the operators of these plants, subject to a payment of a royalty
relating to the sale from the plant of the various products produced and sold.
As of the Effective Date, TRTCs business is to manufacture large capacity
recycling plants incorporating the TRTC Core Technology and capable of
processing 100 tons or more of tires per day, and to sell those plants to be
operated by governments or individuals.
B. TRTC is also engaged in ongoing research and development of the TRTC
Core Technology for the purpose of modifying and enhancing the TRTC Core
Technology such that it may establish a technology for the commercial recycling
of the organic matrix composite materials in the Field, defined in Section 1.2
below (the TRTC Enhanced Technology). The TRTC research on plastics and other
composite recycling is being conducted through an arrangement with Adherent, a
research laboratory operated by Ronald Allred. Mr. Allred is also a director of
TRTC.
C. Adherent has received contracts from the Department of the Army and from
the U.S. Air Force to apply to research and development of the TRTC Enhanced
Technology, including without limitation research on plastic and other composite
technology directed toward the depolymerization of carbon fiber reinforced
composite materials. In addition, Adherent has received a contract from the
Advanced Research Project Agency of the Department of Defense for research on
recycling scrap electronic components such as used computers, fax machines and
copiers.
GT\5537768-6
D. Fiberite is in the business of manufacturing, producing and distributing
pre-impregnated organic matrix composite materials (i) to the aerospace, marine
and leisure industry, (ii) to the industrial, electrical and automotive
industries, and (iii) to the military and commercial printed circuit board
industries.
E. Fiberite is interested in conducting market and other research for the
purpose of determining whether the TRTC Core Technology, as further developed
through the arrangement with Adherent into the resulting TRTC Enhanced
Technology, would be useful to Fiberite for the purpose of providing recycling
of certain organic matrix composite materials which may or may not be used by
Fiberite in its business. TRTC is interested in working with Adherent to
determine whether the TRTC Core Technology, as improved by Adherent into the
resulting TRTC Enhanced Technology under the contracts described above, would be
so useful in Fiberites business.
F. The parties desire to enter into an exclusive option arrangement, on the
terms and conditions described in this Option Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto agree as follows:
Article 1
Option
------
1.1 Grant of Option. TRTC hereby grants to Fiberite the exclusive right to
enter into good faith negotiations with TRTC for the purpose of establishing a
definitive business relationship or transaction, including, but not limited to,
a joint venture or license.
1.2 Field. The field (the "Field") of organic matrix composite materials
which are the subject of this Agreement is defined as follows:
a. composite materials manufactured and distributed to the aerospace,
marine and leisure industry, primarily reinforced with continuous fiber
materials (including but not limited to carbon, fiberglass and aramid),
including both thermoset and thermoplastic materials, but expressly excluding
non-preimpregnated unidirectional and woven fiberglass materials (including
without limitation wet filament winding or hand layup or sprayed parts);
GT\553776B- 6
b. short fiber and sheet molding compounds manufactured and distributed to
the industrial, electrical and automotive industries, primarily consisting of
graphite, glass, cotton and aramid; and
c. other composite materials and resins, manufactured and distributed to
the military and commercial printed circuit board industries.
1.3 Term of Option.
1.3.1 Option Period. The term of this option shall begin upon the Effective
Date and end on the date sixty (60) days after the Process Milestone Date, as
defined in Section 1.4.3 (the Option Period).
1.3.2 Negotiation Period. If the option is exercised pursuant to Article 2
below during the Option Period, the parties shall have a period of up to sixty
(60) days in which to negotiate in good faith to consummate a mutually
acceptable business relationship and/or transaction (the Negotiation Period).
1.4 Consideration for Option. TRTC grants this option to Fiberite in
consideration of the following mutual covenants:
1.4.1 TRTC Consideration. TRTC, and by execution hereof Adherent, hereby
agree to diligently conduct further research and development during the Option
Period for the purpose of enhancing the TRTC Core Technology such that it will
effectively operate to recycle organic matrix composite materials in the Field,
resulting in the TRTC Enhanced Technology.
1.4.2 Fiberite Consideration. Fiberite agrees during the Option Period (i)
to conduct marketing analysis and studies for the purpose of determining whether
a market exists for the recycled materials which result from recycling composite
materials in the Field using the TRTC Enhanced Technology, and the extent, if
any, to which a customer is willing to pay for such recycling services and/or
recycled materials, (ii) to conduct a technical evaluation of the quality
requirements of the recycled material, (iii) to determine the cost of starting
up such a recycling business and the negative carry required to be funded during
the start- up phase, and (iv) such other business analysis as Fiberite in its
discretion deems necessary or appropriate for the purpose of determining the
terms on which such a business can be operated effectively.
GT\5537768-6
1.4.3 Success Payment. Fiberite shall pay TRTC a success fee of $25,000 on
the later of (i) February 28, 1997, or (ii) such date (the Process Milestone
Date) that it demonstrates, to Fiberites reasonable satisfaction, the ability to
recycle 100 pounds of composite material per hour using the TRTC Enhanced
Technology.
Article 2
Exercise of Option
------------------
2.1 Results of Option Period Research. On or before February 28, 1997, TRTC
shall deliver to Fiberite evidence satisfactory to Fiberite that TRTC, through
research conducted by Adherent or otherwise, has developed the TRTC Enhanced
Technology. Without limiting the foregoing, TRTC shall provide Fiberite with the
following:
a. the functional specifications of the Equipment developed by TRTC,
through Adherent, embodying the TRTC Enhanced Technology;
b. he testing parameters and testing protocol employed by TRTC, through
Adherent, for the purpose of determining the efficacy of the TRTC Enhanced
Technology in recycling organic matrix composite materials in the Field,
together with the results of such tests;
c. samples of the recycled material resulting from the TRTC Enhanced
Technology;
d. cost of the Equipment embodying the TRTC Enhance Technology; and
e. such other information as TRTC shall deem necessary or appropriate and
such other information as Fiberite shall reasonably request. Without limiting
the foregoing, Fiberite may request TRTC to conduct demonstrations of the TRTC
Enhanced Technology and the Equipment.
2.2 Exercise of Option. On or before the expiration of the option, and
after reviewing the information and demonstrations (if any) described in Section
2.1, Fiberite in its sole discretion, shall deliver written notice to TRTC
either (i) terminating this Agreement, effective immediately upon delivery of
such written notice, or (ii) providing notice of intent to exercise option and
to commence the negotiations described in Section 1.1. In the event Fiberite
elects to
GT\553776-6
exercise the option, Fiberite shall accompany such written notice of intent to
exercise with a copy of the results of the marketing analysis which Fiberite
conducted during the Option Term, as described in Section 1.4.2.
2.3 Good Faith Negotiations. Promptly upon receipt of notice of intent to
exercise the option and the information described in Section 2.2 above, TRTC
shall meet with Fiberite. The parties agree to negotiate in good faith during
the Negotiation Period the final terms and conditions of a definitive business
relationship and/or transaction.
The parties shall have the Negotiation Period during which to finalize the final
terms and conditions in principle of definitive agreements. TRTC and Fiberite
shall thereafter additionally execute, acknowledge and deliver any and all other
documents necessary or appropriate to carry out the terms and conditions of such
definitive agreements. If the parties are unable to reach agreement mutually
satisfactory to both parties after good faith negotiations by the expiration of
the Negotiation Period, this Option will automatically and immediately terminate
(except for the provisions of Article 5), unless extended expressly in writing
by document executed by both parties.
Article 3
Failure to Exercise Option
--------------------------
3.1 Termination. Upon delivery by Fiberite of notice of termination of this
Agreement or upon the failure of Fiberite to elect to exercise the option on or
before the expiration of the Option Period, this option and the rights of
Fiberite shall automatically and immediately terminate without further notice.
Thereafter, Fiberite agrees that it will execute, acknowledge and deliver to
TRTC, within ten (10) days from request therefor, release of option or any other
document reasonably requested by TRTC to verify the termination of this option.
Notwithstanding the foregoing, the provisions contained in Article 5 shall
survive the termination of the other provisions of this Option Agreement.
Article 4
No Shop and Confidentiality
---------------------------
4.1 No Shop From the Effective Date through the expiration of the Option
Period, and if Fiberite exercises the option as set forth in Section 2.2, then
through the expiration of the Negotiation Period, TRTC and Adherent, and each of
them, agree that neither
GT\553776-6
they, nor any of their affiliates, nor any of their respective officers,
directors, employees, representatives or agents, shall discuss with any other
party (other than Fiberite and other than for the purpose of developing the
information more particularly described in Section 2.1 above), the concept of
forming a corporation or other entity as a joint venture for the purposes of
exploiting the TRTC Core Technology in the Field; the licensing of the TRTC Core
Technology (or the TRTC Enhanced Technology, or any component thereof) in the
Field; the development of equipment, the sale or leasing or other use of
equipment, using the TRTC Enhanced Technology, or any component of the TRTC Core
Technology in the Field; or otherwise discussions of any nature for the purpose
of granting any such third party the ability to recycle organic matrix composite
materials in the Field.
4.2 Confidentiality. No announcement concerning the transactions
contemplated by this Option Agreement may be made by either Fiberite, on the one
hand, or TRTC or Adherent, on the other, without the prior approval of the
other, except as may be required by law. The definitive agreements more
particularly described in this Option Agreement will contain similar
confidentiality restrictions. Nothing in this paragraph, however, is to be
construed as precluding the parties to this Option Agreement from commencing and
conducting the research and analysis described in Section 1.4.
Article 5
Right of First Refusal
----------------------
If at any time following the termination of this Option Agreement, TRTC or
Adherent shall enter into a written agreement providing for the license, sale,
joint venture, further development or other action with the intent to further
exploit the TRTC Core Technology or the TRTC Enhanced Technology within the
Field, then Fiberite shall have a right of first refusal to enter into such
transaction with TRTC and/or Adherent on the same terms and conditions. Fiberite
must give TRTC and/or Adherent notice of its election to exercise this right of
first refusal within thirty (30) days of receipt of written notice of the
proposed transaction accompanied by copies of the executed definitive agreements
and additional technical and/or marketing data provided to the prospective party
to the transaction. In the event Fiberite does not elect to exercise the right
of first refusal, TRTC and/or Adherent shall have a period of sixty (60) days to
consummate the transaction on the same terms and conditions contained in the
documents delivered to Fiberite. If such transaction is not consummated within
such sixty (60) day period, any proposed transaction must be once again offered
to Fiberite as set forth above.
GT\5537768-6
Article 6
Miscellaneous
-------------
6.1 Assignment. Fiberite, Adherent or TRTC may not assign this option
without the prior written consent of the other, which consent shall not be
unreasonably withheld; provided, however, that Fiberite shall have the right, in
its sole discretion, to assign this Agreement in connection with the sale of
substantially all of the assets of its business.
6.2 Notices. Unless otherwise specifically provided herein, all notices,
demands or other communications given hereunder shall be in writing and any and
all such items or payments shall be deemed to have been duly delivered upon
personal delivery or as of the third business day after mailing by United States
mail, certified, return receipt requested, postage prepaid, addressed as
follows:
If to TRTC, to: Tire Recycling Technology Corporation
3206 Candelaria, N.E.
Albuquerque, New Mexico 87107
If to Fiberite, to: Fiberite, Inc.
2055 East Technology Circle
Tempe, Arizona 85284
With a copy to: Elisabeth Eisner, Esq.
Gray Cary Ware & Freidenrich
4365 Executive Drive, Ste. 1600
San Diego, California 92121
If to Adherent, to: Adherent Technologies, Inc.
11208 Cochiti SE
Albuquerque, New Mexico 87123
or to such other address or to such other person as any party shall designate to
the others for such purpose in the manner hereinabove set forth.
6.3 Time of Essence. TRTC and Fiberite hereby acknowledge and agree that in
light of the market conditions, the importance to the parties of the
consummation of the transaction contemplated herein, TIME IS STRICTLY OF THE
ESSENCE with respect to each and every
GT\553768-6
term, condition, obligation and provision herein and the option relating hereto,
and the failureto TIMELY AND FULLY perform or satisfy any of the terms,
conditions, obligations or provisions of this Agreement shall constitute a
default hereunder.
6.4 Entire Agreement. This Agreement contains the entire agreement between
the parties relating to the transactions contemplated hereby and all prior or
contemporaneous agreements, understandings, representations and statements, oral
or written, are merged herein.
6.5 Attorneys Fees. Should any party hereto employ an attorney for the
purpose of enforcing or construing this Agreement, or any judgment based on this
Agreement, in any legal proceeding whatsoever, including insolvency, bankruptcy,
arbitration, declaratory relief or other litigation, including appeals and
rehearings, the prevailing party shall be entitled to receive from the other
party or parties thereto reimbursement for all attorneys fees and all costs,
including but not limited to service of process, filing fees, court and court
reporter costs, investigative costs, expert witness fees, and the cost of any
bonds, whether taxable or not. The prevailing party shall be entitled to include
such reimbursement in any judgment or final order issued in that proceeding, or
to maintain a separate action therefor. The prevailing party means the party
determined by the court to most nearly prevail and not necessarily the one in
whose favor a judgment is rendered.
6.6 Binding Effect. Subject to any provisions concerning assignment
contained in this Agreement, this Agreement shall be binding upon and inure to
the benefit of the respective heirs, personal representatives, successors and
assigns of the parties hereto.
6.7 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Arizona.
6.8 Counterparts. This Agreement may be signed in counterparts.
GT\553768-6
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written.
TRTC:
TIRE RECYCLING TECHNOLOGY
CORPORATION
By:
----------------------
Its:
---------------------
Adherent:
ADHERENT TECHNOLOGIES, INC
By:
----------------------
Its:
---------------------
Fiberite:
FIBERITE, INC.
By:
----------------------
Its:
---------------------
GT\553768-6
EXHIBIT 10-t
PROMISSORY NOTE
$112,000.00 Date: September 24. 1996
For value received, the undersigned Titan Technologies, Inc. and TRTC
(collectively the Promisor) each as principal, jointly and severally, promise to
pay to the order of ESA World Trade, Ltd. (the Payee.), at 284 Bay Street 2nd
Floor, Suite 200 P.O. Box N 9306, Nassau, Providence N 9306, Bahamas, (or at
such other place as the Payee may designate in writing) the sum of $112,000.00
with interest from September 24, 1996, on the unpaid principal at the rate of
12.00 percent annually.
Unpaid principal after the Due Date shown below shall accrue interest at a rate
of 12.00 percent annually until paid.
The unpaid principal and accrued interest shall bc payable in full on September
24, 1997 (the Due Date). All payments on this Note shall be applied first in
payment of accrued interest and any remainder in payment of principal.
The Promisor promises to pay a late charge of $3,000.00 for each installment
that remains unpaid more than 7 day(s) after its due date. This late charge
shall be paid as liquidated damages in lieu of actual damage, and not as a
penalty.
If any of the following events of default occur, this Note and any other
obligations of the Promisor to the Payee. shall become due immediately, without
demand or notice
1) the failure of the Promisor to pay the principal and any accrued interest in
full on or before the Due Date;
2) the death of the Promisor (s) or Payee(s);
3) the filing of bankruptcy proceedings involving the Promisor as a Debtor;
4) the application for appointment of a receiver for the Promisor;
5) the making of a general assignment for the benefit of the Promisors
creditors;
6) the insolvency of the Promisor, or
7) the misrepresentation by the Promisor to the Payee for the purpose of
obtaining or extending credit.
In addition, the Promisor shall be in default if there is a sale, transfer,
assignment. or any other disposition of any assets pledged as security for the
payment of this Note, or if there is a default in any security agreement which
secures this Note. If any of the above defaults apply to one Promisor, all
Promisors shall be deemed in default of this Note regardless of whether all
Promisors are directly involved in the default.
This Note is secured by a collateral of two hundred thousand common shares of
the Titan Technologies, Inc (NASDAQ) transferred to ESA World Trade, Ltd. on
receipt of Funds., dated September 24, 1996. The Payee is not required to rely
on the above security for the payment of this Note in the case of default, but
may proceed directly against the Promisor.
If any one or more of the provisions of this Note arc determined to be
unenforceable, in whole or in part. for any reason, the remaining provisions
shall remain fully operative.
All payments of principal and interest on this Note shall bc paid in the legal
currency of the United States. Promisor waives presentment for payment, protest,
and notice of protest and nonpayment of this Note.
No renewal or extension of this Note, delay in enforcing any right of the Payee
under this Note, or assignment by Payee of this Note shall affect the liability
of the Promisor. All rights of the Payee under this Note are cumulative and may
bc exercised concurrently or consecutively at the Payees option.
This Note shall be construed in accordance with the laws of the State of New
Mexico.
Signed this 22 day of September, 1996 at
- ------------------------------------------------
Titan Technologies, Inc.
By:
---------------------------------------------
Mr. Ron Wilder
President
TRTC
By:
---------------------------------------------
TRTC
GUARANTY
Mr. Ron Wilder unconditionally guarantees all the obligations of the Promisor
under this Promissory Note.
Date: 22 September, 19 96
By:
---------------------------------------------
Mr. Ron Wilder
