As filed with the Securities and Exchange Commission April 15, 1998
Registration No. 333-37037
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3/A
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
ECOTYRE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-3234026
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
895 Waverly Avenue EcoTyre Technologies, Inc.
Holtsville, New York 11742 895 Waverly Avenue
(Address, including zip code and telephone Holtsville, New York 11742
number, including area code, of registrant's (516) 289-4500
principal executive offices) (Name address and telephone
number, including area code, of
agent for service)
Copy to:
Dennis Brovarone, Esq.
Attorney And Counselor At Law
11249 W. 103rd Drive
Westminster, Colorado 80021
(303) 466-4092
Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box [ ].
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box [ ].
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering [ ].
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering [ ].
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box [ ].
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
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Title of Each Class of Securities Amount to be Proposed Maximum Offering Proposed Maximum Amount of
to be Registered Registered Price Per Share (1) Aggregate Offering Price (1) Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, par value $.001 3,018,131 shs. $0.4375 $1,320,432 $1,661
per share
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Common Stock, par value $.001 616,632 shs. $.35-24.50 $1,458,997 $ 370
per share, reserved for issuance
upon the exercise of Common
Stock Purchase Warrants (2)
Total $2,031
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<FN>
(1) Estimated solely for the purpose of calculating the registration fee, based on the closing price of the Common Stock reported
in the consolidated reporting system on March 25. 1998
(2) Pursuant to Rule 416, this Registration Statement also covers any additional shares of Common Stock which may become issuable
by virtue of the anti-dilution provisions of such securities.
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</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<TABLE>
ECOTYRE TECHNOLOGIES, INC.
Cross Reference Sheet
Showing location in Prospectus of Information Required by Items on Form S-3
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Item No. Prospectus Caption
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<S> <C> <C>
1. Forepart of the Registration Outside Front Cover
Statement and Outside Front Cover Page Page of Prospectus
of Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside
Pages of Prospectus Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and Certain Investment
Ratio of Earnings to Fixed Charges Considerations
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page;
Selling Securityholders
6. Dilution *
7. Selling Security Holders Selling Securityholders
8. Plan of Distribution Outside Front Cover Page;
Plan of Distribution
9. Description of Securities to be *
Registered
10. Interests of Named Experts and Counsel Legal Opinion;
Experts
11. Material Changes *
12. Incorporation of Certain Information Incorporation of
by Reference Certain Documents
By Reference
13. Disclosure of Commission Position on *
Indemnification for Securities Act
Liabilities
*Omitted since answer to item is negative or inapplicable
</TABLE>
<PAGE>
ECOTYRE TECHNOLOGIES, INC.
3,634,763 Shares of Common Stock, $.001 par value
The 3,634,763 shares of Common Stock, $.001 par value per share (the
"Shares"), of EcoTyre Technologies, Inc. (the "Company") being covered by this
Prospectus represent 3,018,131 shares issued by the Company in recent private
offerings of securities pursuant to Regulation D of the Securities Act of 1933,
as amended, and 616,632 shares issuable upon the exercise of Common Stock
Purchase Warrants. They are being offered by an aggregate of eighty-five (85)
selling stockholders and any pledgees, transferees, donees or other successors
in interest thereof (the "Selling Stockholders"). The Shares may be offered by
the Selling Stockholders from time to time in transactions on the NASDAQ, in
privately negotiated transactions, or by a combination of such methods of sale,
at fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. The Selling Stockholders may effect such transactions by selling the
Shares to or through broker-dealers and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholder or the purchaser of the Shares for whom such broker-dealers
may act as agent or to whom they sell as principal or both (which compensation
to a particular broker-dealer might be in excess of customary commissions). See
"Selling Stockholders" and "Plan of Distribution."
None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company, except to the extent that the
Common Stock Purchase Warrants are exercised. If all the Common Stock Purchase
Warrants are exercised at current exercise prices, the net proceeds to the
Company from this offering would be approximately $1,459,000. The Company will
bear the expenses in connection with the offering, including filing fees and the
Company's legal and accounting fees, estimated at $15,000.
The Company's Common Stock is traded on the NASDAQ Small-Cap Issues market
(Symbol: ETTI). On April 7, 1998, the last reported sale price of the
Company's Common Stock as reported by NASDAQ was $0.4375 per share.
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AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS", PAGE 4.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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The date of this Prospectus is April 8, 1998
<PAGE>
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offer
contained herein, and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company or by any
agent, dealer or underwriter. This Prospectus does not constitute an offer of
any securities other than those to which it relates or an offer to sell, or a
solicitation of an offer to buy, those to which it relates in any state to any
person to whom it is not lawful to make such offer in such state.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Available Information. . . . . . . . . . . . . . . 3
Incorporation of Certain Documents by Reference. . 3
The Company. . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . 4
Use of Proceeds. . . . . . . . . . . . . . . . . . 7
Description of Capital Stock . . . . . . . . . . . 7
Selling Stockholders . . . . . . . . . . . . . . . 9
Plan of Distribution . . . . . . . . . . . . . . . 11
Indemnification of Directors and Officers. . . . . 12
Legal Matters. . . . . . . . . . . . . . . . . . . 12
Experts . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement under the Securities
Act of 1933, as amended (the "Act"), with respect to the Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits relating thereto. For further
information with respect to the Company and the shares of Common stock offered
by this Prospectus, reference is made to such Registration Statement and the
exhibits thereto. Statements contained in this Prospectus as to the contents of
any contract or other document are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement for a full statement of the provisions
thereof; each such statement contained herein is qualified in its entirety by
such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained at the office
of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Commission's Regional Offices at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, New York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the Commission, Washington, D.C. 20549, at
prescribed rates, and from the Securities and Exchange Commission's web site at
the address http://www.sec.gov. Copies of such material can also be obtained at
the offices of the National Association of Securities Dealers, Inc. at 1735 K
Street, Washington, D.C.
20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
(File No. 0-18105) pursuant to the Exchange Act, are incorporated by reference
in this Prospectus and shall be deemed to be a part hereof:
(1) The Company's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1997.
(2) The Company's Proxy Statement dated April 24, 1997.
(3) The Company's Quarterly Report on Form 10-QSB for the three months
ended June 30, 1997.
(4) The Company's Quarterly Report on Form 10-QSB for the six months ended
September 30, 1997.
(5) The Company's Quarterly Report on Form 10-QSB for the nine months ended
December 31, 1997.
All documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Prospectus and prior to the termination of
this offering of Common Stock shall be deemed to be incorporated by reference in
this Prospectus and to be part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document that also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the documents incorporated by reference (except for
exhibits thereto unless specifically incorporated by reference therein).
Requests for such copies should be directed to the Secretary, EcoTyre
Technologies, Inc., 895 Waverly Avenue, Holtsville, New York 11742 (516)
289-4545.
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<PAGE>
THE COMPANY
EcoTyre Technologies, Inc. (the "Company") is a manufacturer in the United
States that recycles used tires by utilizing European remolding technology to
manufacture and distribute a comprehensive line of replacement automobile tires.
This differs from the traditional retreading process in which new tread is
simply placed over the tread portion of a used casing. The Company applies new
sidewall and tread rubber to a completely buffed casing and permanently bonds
the rubber to the casing from sidewall to sidewall in high temperature
vulcanizing presses. The result is a superior quality tire which is virtually
"indistinguishable" from a new tire in appearance and performance, but sells for
substantially less than leading brands. The remolded tires manufactured by the
Company are created by manufacturing a previously used high-quality passenger or
light truck casing of a name brand manufacturer.
The Company commenced limited manufacturing operations in December 1995.
During the fiscal year ending March 31, 1997, the Company operations reflect the
full transition from a distribution company to a manufacturing distributor of
remanufactured tires.
The Company's executive offices are located at 895 Waverly Avenue,
Holtsville, New York 11742, and its telephone number is (516) 289-4545.
RISK FACTORS
The following information, in addition to other information in this
Prospectus and in the documents incorporated herein by reference, should be
considered carefully by potential purchasers in evaluating the Company, its
business and an investment in shares of the Common Stock offered hereby.
1. Need for Additional Funds. Management believes that its working capital
position will make it possible for the Company to support its internal overhead
expenses through at least April 30, 1998. Any proceeds from the exercise of
warrants will be used as additional working capital. The Company has no existing
line of credit and is not actively seeking any debt financing. The Company will
be required to secure additional capital through equity financing for future
cash requirements and there is no assurance that the Company will be successful
in these efforts. If the Company is unsuccessful in achieving positive cash
flow from its operations or generating additional working capital, its business
will be materially and adversely affected.
2. Historical and Anticipated Losses. The Company was incorporated in May,
1994 and, to date, has had limited revenues. For the nine months ended
December 31,1997 and the years ended March 31, 1997 and 1996, the Company sus-
tained net losses attributable to common stockholders of $3,344,755, $3,599,928
and $2,786,383, respectively. The Company recognized $2,452,934, $2,938,565
and $314,024 in revenues for the nine months ended December 31, 1997 and the
years ended March 31, 1997 and 1996, respectively. As of December 31, 1997, the
Company had total assets of $4,692,916, working capital of $277,834 and stock-
holders' equity of $2,139,731. The Company is subject to all the general
risks inherent in, and the problems, expenses, difficulties, complications and
delays frequently encountered in connection with establishing any new business
and manufacturing operation. There is no assurance that the Company will
operate at a level sufficient to achieve profitability.
3. Going Concern Opinion. As indicated in the Company's annual report on
Form 10-KSB, the Company's financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has sustained losses
since inception and requires additional working capital. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
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<PAGE>
4. Nasdaq Small Cap Market Listing Requirements. The Company's Common Stock
is presently listed on the Nasdaq Small Cap market. The Company does not
currently meet the continued listing requirements of this market since its bid
price is less than $1.00 per share. In the event this bid price does not
increase to at least $1.00 per share within the time requirements for continued
listing, the Company's Common Stock may be deleted from the Nasdaq Small Cap
market. Such delisting could have a material adverse effect upon the Company.
5. Contingent Liability. In connection with the sale of 600,000 shares of
the Company's Common Stock to an Investor in March, 1998, the Company may not
have established an adequate basis to claim the Section 4(2) private placement
exemption from the registration requirements of the Securities Act of 1933 due
to the fact that the sales of these securities were made after the filing of the
initial filing on the S-3 Registration Statement. If the Company is unable to
establish such a basis, this sale and the public offering could be considered
integrated together, subjecting the Company to potential liability for the sale
of unregistered securities. If such an assertion were made and upheld, the
Company would otherwise be required to rescind the issuance of the securities
and be liable for any additional damages as well as the costs of litigation.
The investor has not asserted any claim for recision or damages and the
company is not aware that the investor intends to do so.
6. Limited Manufacturing History. The Company commenced limited remolded
tire manufacturing operations in December, 1995, but no assurance can be given
that the Company will be able to successfully manufacture remolded tires of
sufficient quality to permit the successful sale thereof, that the Company will
be able to manufacture a sufficiently complete line of products to satisfy the
demands of its customers or that the Company will be able to produce quantities
of remolded tires sufficient to achieve profitability. In this regard, the
Company will be purchasing new machinery and equipment in order to manufacture a
greater percentage of recreational vehicle and high performance tires which
historically sell at greater profit margins. There is no assurance that this
machinery and equipment will operate efficiently and manufacture sufficient
numbers of such tires to increase the Company's profit margins.
7. Manufacturing with Used Machinery and Equipment. A majority of the
machinery and equipment which the Company is using in its manufacturing
operations is approximately nine years old and was used for approximately four
years. The equipment sat idle for four years prior to its use by the Company.
The Company has no warranty or service contract with respect to such equipment,
and bears the sole risk of such equipment failing to operate effectively.
Accordingly, no assurance can be given that this equipment will function
properly and some amount of repairs, refurbishings and delays already have been
experienced. There also can be no assurance that the Company's manufacturing
facility will not experience additional delays.
8. Uncertainty of Market Acceptance; Failure of Prior Tire Remolders. In
April, 1993, the Company began distributing remolded automobile passenger tires
in the United States manufactured by third parties and believes there will be
market acceptance of its own manufactured remolded passenger tires based on its
experience as a distributor. Remolded passenger automobile tires historically
have not accounted for a significant portion of the United States passenger
automobile replacement tire market. Since the Company's remolded tires compete
with new replacement tires, there can be no assurance that consumers will be
willing to purchase remolded tires notwithstanding the price differential and
the Company's belief that its remolded tires will be comparable in quality and
appearance to new tires. In this regard, the Company believes that at least
three previous businesses which attempted to manufacture, market and sell
remolded passenger automobile tires in the United States, including the previous
owner of the Company's machinery and equipment, failed to successfully do so and
such previous owner has ceased business operations. There is no assurance that a
U.S. market for the Company's products will develop and grow. There also is no
assurance that the U.S. market will provide sufficient revenue and earnings to
satisfy the cash requirements of the Company.
9. Competition. There are inherent difficulties for any new business
seeking to continue limited manufacturing operations and market a new product,
particularly in a very competitive market such as that for replacement
automobile tires. There are numerous manufacturers and/or distributors of new
tires, previously used tires and retreaded tires. The replacement tire market is
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<PAGE>
quite mature, and is serviced by a large number of competitors, several of which
dominate the marketplace. The Company anticipates that its primary competition
will be from lower-priced, lesser-known associated brands of major
manufacturers, and private-label manufacturers of new tires, both imported and
domestic, such as Coronet (Armstrong Tire Company), Summit (General Tire
Company), Hankock, Hercules (Cooper Tire & Rubber Co.), Ohtsu and others. The
Company would also compete with manufacturers and distributors of retreaded
tires such as Les Schwab Tire Centers. Many of these competitors have been in
existence for many years, have extensive marketing budgets, established market
shares, wide name recognition and existing franchise, dealer or other
distribution networks. They also have greater financial, personnel and
administrative resources than the Company and have the capability of value
pricing their products to deter or eliminate competition. Assuming the Company
does gain significant market share, there is no assurance that other U.S. or
foreign tire manufacturers, including those with experience in the foreign
remolded tire markets, will not begin manufacturing and marketing remolded tires
in direct competition with the Company in the United States. New entrants in
this industry could have an adverse impact on the Company's potential revenues
and profit margins. While the Company believes that the primary areas of
competition in its industry are price, warranty, service, appearance and quality
and that its products should compete favorably in these regards, there is no
assurance that the Company will be able successfully to compete against
established manufacturers or any new entrants into its industry.
10. Possible Adverse Impact of Unavailability of, or Higher Prices for, Raw
Materials. The primary raw materials used by the Company in its manufacturing
operations are previously used tire casings and rubber. The Company believes
that rubber is readily available from several sources, though the price thereof
has fluctuated. The Company also believes that suitable tire casings are readily
available from a wide variety of sources, including several distributors of
automobile tire casings and directly from tire distribution centers. Given the
nature of the market for tire casings, the Company believes that it will be
necessary to obtain casings from many sources to meet its anticipated needs.
While the Company does not anticipate any difficulties in obtaining sufficient
quantities of automobile tire casings and rubber to be used in its operations,
no assurance can be given in this regard. In the event that sufficient
quantities of raw materials are not available, or if the prices thereof become
uneconomical, the Company's business operations and financial condition could be
materially adversely affected.
11. Risks Relating to Environmental and Other Governmental Regulation. As a
manufacturer of remolded automobile tires, the Company's products are subject to
regulation by the United States Department of Transportation and other
government agencies relating to the safety and performance of its products. In
addition, as a manufacturer of rubber products with a manufacturing facility
located in the ecologically sensitive eastern region of Long Island, the Company
may be subject to various environmental regulations imposed by federal, state
and local authorities. While the Company believes that its manufacturing
operations are not environmentally sensitive, are in compliance with all
applicable environmental laws and regulations and that all necessary permits and
approvals will be obtained, no assurance can be given that compliance with
environmental laws, regulations or other restrictions, including any new laws or
regulations, will not impose additional costs on the Company which could
adversely affect its financial performance and results of operations.
12. Importance of and Risks Relating to Intellectual Property Rights. The
automobile tire industry is characterized by extensive use of intellectual
property protected by patent and trademark laws. The Company utilizes tire tread
designs and a manufacturing process which it has not patented and which it
believes are lawfully in the public domain. While the Company believes that it
does not infringe on the intellectual property rights of any third parties in
the conduct of its business, allegations of any such infringement, or disputes
or litigations relating thereto, could have a material adverse affect on the
Company's financial condition and results of operations.
13. Risk of Seasonality. While there is a year-round demand for automobile
tires, automobile tire sales in the Northeastern United States are generally
strongest during the second and third calendar quarters of the year. Seasonality
may have an impact on the Company's operations including cash flow, insofar as
the Company is required to control inventory levels to reflect projected
quarterly sales. However, since the Company anticipates that approximately 50%
of its sales will be in the Western United States and other regions where all
purpose automobile tires are used year round, it does not believe that
seasonality will adversely impact its operations.
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<PAGE>
Forward-Looking Statements
All statements other than statements of historical fact included in this
Prospectus regarding the Company's financial position, business strategy and
plans and objectives of management of the Company for future operations, are
forward-looking statements. When used in this Prospectus, words such as
"anticipate," "believe," "estimate," "expect," "intend" and similar expressions,
as they relate to the Company or its management, identify forward-looking
statements. Such forward-looking statements are based on the beliefs of the
Company's management, as well as assumptions made by and information currently
available to the Company's management. Actual results could differ materially
from those contemplated by the forward-looking statements as a result of certain
factors such as those disclosed under "Risk Factors," including but not limited
to, competitive factors and pricing pressures, changes in legal and regulatory
requirements, technological change or difficulties, product development risks,
commercialization and trade difficulties and general economic conditions. Such
statements reflect the current views of the Company with respect to future
events and are subject to these and other risks, uncertainties and assumptions
relating to the operations, results of operations, growth strategy and liquidity
of the Company. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by this paragraph.
USE OF PROCEEDS
The Company will not receive any proceeds from this offering, except to the
extent that the Common Stock Purchase Warrants are exercised. If all the Common
Stock Purchase Warrants are exercised at current exercise prices, the net
proceeds to the Company from this offering would be approximately $1,454,000.
Such proceeds, if received, are intended to be used to support further
manufacturing activities and for general working capital.
DESCRIPTION OF CAPITAL STOCK
Capital Stock
The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock, $.001 par value per share, 2,000,000 shares of Class A Convertible
Preferred Stock, 675,000 shares of Class B Convertible Preferred Stock and
1,325,000 shares of Preferred Stock, $.001 par value per share.
Common Stock
------------
Holders of the Common Stock do not have subscription, redemption,
conversion or preemptive rights. The shares of Common Stock sold by the Company
in this offering will be, when issued and paid for, fully paid and
non-assessable. Each share of Common Stock is entitled to participate pro rata
in distribution upon liquidation, subject to the rights of holders of Preferred
Stock, and to one vote on all matters submitted to a vote of stockholders. The
holders of Common Stock may receive cash dividends as declared by the Board of
Directors out of funds legally available therefor, subject to the rights of any
holders of Preferred Stock. Holders of the Common Stock are entitled to elect
all directors. The Company's Board consists of three classes each of which
serves for a term of three years. At each annual meeting of the stockholders the
directors in only one class will be elected. The holders of the Common Stock do
not have cumulative voting rights, which means that the holders of more than
half of the shares voting for the election of a class of directors can elect all
of the directors of such class and in such event the holders of the remaining
shares will not be able to elect any of such directors.
Class A Convertible Preferred Stock
Each issued and outstanding share of Class A Convertible Preferred Stock
("Class A Preferred") entitles the holder to receive dividends when, as and if
declared by the Board of Directors, at the annual rate of 10%, payable
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<PAGE>
semi-annually in either cash or common stock at the option of the Company.
Additionally, these preferred shareholders have the right to receive
preferential payments in the event of liquidation, dissolution or winding up of
the affairs of the Company. The holders of Class A Preferred have the right to
convert all or any part of their shares into Common Stock of the Company. The
Conversion Rate shall be (A) the sum of (1) $1.00 plus (2) all accrued and
unpaid dividends on a single share of Class A Convertible Preferred Stock
divided by (B) the Conversion Price (as hereinafter defined). The "Conversion
Price" shall be the lesser of (a) $21.00 per share ("fixed conversion price") or
(b) seventy-five (75%) percent of the Closing Bid Price of one share of the
Company's Common Stock for the five trading day period immediately prior to the
conversion date. For the purposes hereof, the "Closing Bid Price" shall mean the
closing bid price of the Company's Common Stock as reported by NASDAQ (or, if
not reported by NASDAQ, as reported by such other exchange or market where
traded).
Holders of shares of Class A Convertible Preferred Stock shall be permitted
to convert such shares as follows:
(a) commencing July 15, 1997, for such month and for each calendar
month thereafter, each holder of Class A Convertible Preferred Stock shall be
entitled to convert up to twenty-five (25%) percent of the shares of Class A
Convertible Preferred Stock held by such holder as of July 15, 1997.
(b) commencing October 15, 1997 all of the shares of Class A
Convertible Preferred Stock shall be convertible into Common Stock.
The number of shares of Common Stock into which each share of Class A
Convertible Preferred Stock is convertible also shall be subject to adjustment
from time to time under certain situations including reclassification or
recapitalization of the Common Stock.
Class B Convertible Preferred Stock
- -----------------------------------
Each issued and outstanding share of Class B Convertible Preferred Stock
("Class B Preferred") entitles the holder to receive dividends when, as and if
declared by the Board of Directors, at the annual rate of 10%, payable
semi-annually in either cash or common stock at the option of the Company.
Additionally, these preferred shareholders have the right to receive
preferential payments in the event of liquidation, dissolution or winding up of
the affairs of the Company. The holders of Class B Preferred have the right to
convert all or any part of their shares into Common Stock of the Company. The
conversion rate shall be (A) the sum of (1) $1.00 plus (2) all accrued and
unpaid dividends on a single share of Class B Convertible Preferred Stock
divided by (B) the Conversion Price (as hereinafter defined). The "Conversion
Price" shall be $2.45 per share. Notwithstanding the foregoing, in no event
shall the shares of Common Stock issued on conversion have a market value of
less than $450,000 in the aggregate.
The number of shares of Common Stock into which each share of Class B
Convertible Preferred Stock is convertible shall also be subject to adjustment
from time to time under certain situations including reclassification or
recapitalization of the Common Stock.
Preferred Stock
---------------
The Company's certificate of incorporation, as amended, authorizes the
issuance of up to 1,325,000 shares of additional preferred stock, par value
$.001 per share.
The issuance of additional Series A Preferred Stock or Preferred Stock by
the Board of Directors could adversely affect the rights of holders of shares of
Common Stock by, among other things, establishing preferential dividends,
liquidation rights or voting power. The issuance of Series A Preferred Stock or
Preferred Stock could be used to discourage or prevent efforts to acquire
control of the Company through the acquisition of shares of Common Stock.
- 8 -
<PAGE>
Certain Provisions of the Certificate of Incorporation
The Company's Certificate of Incorporation contains certain provisions
which may be deemed to be "anti-takeover" in nature in that such provisions may
deter, discourage or make more difficult the assumption of control of the
Company by another entity or person. In addition to the ability to issue
Preferred Stock, these provisions are as follows:
A vote of 66-2/3% of the stockholders is required by the Certificate of
Incorporation in order to approve certain transactions including mergers and
sales or transfers of all or substantially all of the assets of the Company.
The Company's Certificate of Incorporation also provides that the members
of the Board of Directors of the Company have been classified into three
classes. The term of each class will run for three years and expire at
successive annual meetings of stockholders. Accordingly, it is expected that it
would take a minimum of two annual meetings of stockholders to change a majority
of the Board of Directors.
The Delaware General Corporation Law further contains certain anti-takeover
provisions. Section 203 of the Delaware General Corporation Law provides, with
certain exceptions, that a Delaware corporation may not engage in any of a broad
range of business combinations with a person who owns 15% or more of the
corporation's outstanding voting stock (an "interested stockholder") for a
period of three years from the date that such person became an interested
stockholder unless: (i) the transaction resulting in a person's becoming an
interested stockholder, or the business combination is approved by the board of
directors of the corporation before the person becomes an interested
stockholder; (ii) the interested stockholder acquires 85% or more of the
outstanding voting stock of the corporation (excluding shares owned by persons
who are both officers and directors of the corporation, and shares held by
certain employee stock ownership plans); or (iii) the business combination is
approved by the corporation's board of directors and by the holders of at least
66 2/3% of the corporation's outstanding voting stock at an annual or special
meeting, excluding shares owned by the interested stockholder.
SELLING STOCKHOLDERS
The following table sets forth the ownership of the Selling Security
Holders and, the number of shares of Common Stock beneficially owned by each of
the Selling Security Holders, and the number of shares which may be offered for
resale pursuant to this Prospectus. Except as otherwise disclosed herein, none
of the Selling Security Holders has had any position, office or other material
relationship with the Company or its predecessors or affiliates within the past
three years.
The information included below is based upon information provided by the
Selling Security Holders. Because the Selling Security Holders may offer all,
some or none of their shares, no definitive estimate as to the number of shares
that will be held by the Selling Security Holders after such offering can be
provided.
<TABLE>
<CAPTION>
Number of Shares
Number of Shares Number of Shares of Common Stock
Number of Shares of Common Stock of Common Stock Remaining After
of Class A Preferred Beneficially Owned Sold Under the Sale of Common
Selling Security Holder Stock Owned (1) Prior to Closing Offering Stock Hereunder
- ----------------------- -------------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Barbara Banach 35,000 35,000 0
Richard Banach (Trustee)
Profit Sharing Plan
Pershing Division of DLJSC 3,500 3,500 0
Sally Banach 14,000 14,000 0
Daniel L. Beach 14,000 14,000 0
George and Barbara Billings 23,880 31,069 (2) 18,776 (11) 12,293
- 9 -
<PAGE>
Charles Cantore 7,000 7,000 0
James Costello 3,500 3,500 0
J. Healey Country Village
Realty, Inc. 7,000 7,000 0
Island Foreclosure Resale
Co., Inc. 7,000 7,000 0
Maslee Mallette 3,500 3,500 0
Rudy J. & Evelena Ann
Rosado 7,000 7,000 0
Louis P. Solferino 129,071 125,500 3,571
Gregory Thomas 7,000 7,000 0
Michael and Alana Verderosa 1,586 9,266 (2) 7,634 (11) 1,632
Karen Antos 7,436 19,600 (2) 19,600 0
Art Beroff 97,500 97,500 0
Annette Cantor 74,054 162,697 (2) 88,400 74,297
Claire Cohn 16,250 16,250 0
Ronald & Lorraine Fehr 10,400 10,400 0
Gerdaneu, Inc. 65,000 65,000 0
Marilyn Henderson 65,000 65,000 0
Susan Hindes 10,400 10,400 0
Jerry Holmes 15,222 30,625 (2) 30,625 0
Keith Jackson 45,771 98,000 (2) 98,000 0
Steven & Jill Lander 6,370 6,370 0
Gerald & Eugenia Mercadante 65,000 65,000 0
Anthony Giambrone 19,500 19,500 0
Gerald Mercadante, Jr. 32,500 32,500 0
Michael Assoc. 97,500 97,500 0
Charles L. Rankin 65,000 65,000 0
Joseph Reges 32,500 32,500 0
Judd Rothman 74,421 71,850 2,571
Ernest Ruberto 32,500 32,500 0
Ruritania Ltd. 97,500 97,500 0
Swarthmore, S.A. 97,500 97,500 0
Trafalgor Strategic Investment
Fund, Ltd. 65,000 65,000 0
Alvin Wichard 26,000 26,000 0
Arthur Wu 32,240 32,240 0
Rosalind Wunderlin 23,578 23,578 0
Howard Schwartz 54,000 54,000 (3) 0
Steve Finkelstein 54,000 54,000 (3) 0
Salvatore Marasa 46,500 46,500 (4) 0
Anthony Imbo 46,500 46,500 (4) 0
David Ganz 46,500 46,500 (4) 0
Michael Ploshnick 27,500 27,500 (5) 0
BayTree Associates 5,714 5,714 (6) 0
Continental Capital and Equity
Corp. 5,714 5,714 (7) 0
Phoenixcor, Inc. 10,714 10,714 (7)
Srotnac Group, LLC 320,000 320,000 0
Optimum Fund 229,677 229,677 (8) 0
Capital Fund 386,989 386,989 (8) 0
Arlene Mari 2,923 16,294 11,569 (11) 4,725
Kenneth Barton 27,750 27,750 (9) 0
Anna Crispino 22,836 22,836 (10)(11) 0
David H. Lieberman,P.C., PSP 27,750 27,750 (9) 0
- 10 -
Barbara and Gilbert Halpin 3,799 3,799 (11) 0
Frank Ferrara 2,219 2,219 (11) 0
Margaret Brennan 633 633 (11) 0
Charles Mitchell 668 668 (11) 0
Jeanne and Roman Zebrowski 4,785 4,785 (11) 0
Ann Marie Evans 1,916 1,916 (11) 0
Richard Mitchell 607 607 (11) 0
Jean and Raymond Preston 636 636 (11) 0
Kevin Stiles 3,582 3,582 (11)
Jerry Schwabe 639 639 (11) 0
John Kehlenbeck 381 381 (11) 0
Kenneth and Elizabeth McGill 7,654 7,654 (11) 0
William Betta 1,276 1,276 (11) 0
Alfred Salah, Trustee 639 639 (11) 0
Steve Lott 639 639 (11) 0
Bruce Handelman, Trustee 639 639 (11) 0
Bruce Handelman, MD 1,916 1,916 (11) 0
Paula M. Lomer 634 634 (11) 0
Susan Thomas 1,267 1,267 (11) 0
Richard C. Smith 629 629 (11) 0
Diane w. Seminer 1,278 1,278 (11) 0
Antoinette Weber 639 639 (11) 0
Michael P. Jones, Defined Benefit
Pension Plan 12,625 12,625 0
Four L. Realty 11,575 11,575 0
Price Rubber 43,652 43,652 0
Hub Group, Inc. 15,000 15,000 0
Avalon Capital, Ltd. 216,667 216,667 (12) 0
Settondown Capital International, Ltd. 216,667 216,667 (12) 0
Manchester Asset Management 216,666 216,666 (12) 0
Goldstein, Goldstein and Reis, LLP 15,000 15,000 0
-----------------
<FN>
(1) See page 8 for explanation of Class A Convertible Preferred Stock.
(2) Does not include Common Stock issuable upon the conversion of the
Class A Convertible Preferred Stock currently held by selling
securityholder.
(3) Represents 22,500 shares issuable upon the exercise of Warrants at
an exercise price of $.35 per share and 31,500 shares issuable upon
the exercise of Warrants at an exercise price of $1.25.
(4) Represents 15,000 shares issuable upon the exercise of Warrants at
an exercise price of $.35 per share and 31,500 shares issuable upon
the exercise of Warrants at an exercise of $1.25.
(5) Represents 10,000 shares issuable upon the exercise of Warrants at
an exercise price of $.35 per share and 17,500 shares issuable upon
the exercise of Warrants at an exercise price of $1.25.
(6) Represents shares issuable upon exercise of Warrants at an
exercise price of $24.50 per share.
(7) Represents shares issuable upon exercise of Warrants at an exercise
price of $2.45 per share.
(8) Includes 200,000 shares issuable upon exercise of Warrants,
100,000 of which are exercisable at a price of $3.00 per share and
100,000 of which are exercisable at a price of $4.00 per share.
(9) Includes 9,000 shares issuable upon exercise of Warrants, 4,500 of
which are exercisable at a price of $3.00 per share and 4,500 of
which are exercisable at a price of $4.00 per share.
(10) Includes 7,200 shares issuable upon exercise of Warrants, 3,600 of
which are exercisable at a price of $3.00 per share and 3,600 of
which are exercisable at a price of $4.00 per share.
(11) Represents shares issuable upon exercise of warrants at a price of
$4.50 per share.
(12) Represents shares issuable upon exercise of warrants at a price of
$0.75 per share.
</FN>
</TABLE>
- 11 -
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby may be offered for resale by the
Selling Security Holders (or their donees, transferees or successors in
interest) from time to time in transactions for their own account (which may
include block transactions) on any national securities exchange or quotation
service on which the Common Stock may be listed or quoted at the time of sale,
in the over-the-counter market, in transactions otherwise than on such exchanges
(including privately negotiated transactions) or in the over-the-counter market,
through the writing of options, or a combination of such methods of sale, at
fixed prices (which may be changed), at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. The Selling Security Holders may effect such transactions by selling the
shares of Common Stock to or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Security Holders and/or the purchasers of shares for whom such
broker-dealers may act as agent or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). From time to time the Selling Security Holder may engage
in short sales, including short sales against the box, puts and calls and other
transactions in securities of the Company or derivatives thereof, and may sell
and deliver the Common Stock in connection therewith. Further, except as set
forth herein, the Selling Security Holders are not restricted as to the number
of shares which may be sold at any one time, and it is possible that a
significant number of shares could be sold at the same time, which may have a
depressive effect on the market price of the Company's Common Stock. The Selling
Security Holders may also pledge shares of Common Stock as collateral for margin
accounts, and such shares could be resold pursuant to the terms of such
accounts. The Selling Security Holders and any dealers or agents participating
in the distribution of the Common Stock may be deemed to be "underwriters" as
defined in the Securities Act and any profit on the sale of the Common Stock by
them and any discounts, commissions or concessions received by any such dealers
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act. The Company will not receive any proceeds of the sales of the
Common Stock by the Selling Security Holders.
To comply with the securities laws of certain jurisdictions, if applicable,
the Common Stock will be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain jurisdictions
the Common Stock may not be offered or sold unless they have been registered or
qualified for sale in such jurisdictions or an exemption from registration or
qualification is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Common Stock may not simultaneously engage in
market-making activities with respect to such securities for a period of two to
nine business days prior to the commencement of such distribution. In addition
to and without limiting the foregoing, each Selling Security Holder and any
other person participating in a distribution will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including without limitation Rules 10b-6 and 10b-7, which provisions may limit
the timing of purchases and sales of any of the securities by the Selling
Security Holders or any such other person. All of the foregoing may affect the
marketability of the Common Stock and the brokers' and dealers' ability to
engage in market-making activities with respect to these securities.
Pursuant to the Registration Agreement, all expenses of the registration of
the Common Stock will be paid by the Company, including, without limitation,
Commission filing fees and expenses of compliance with state securities or "blue
sky" laws; provided, however, that the Selling Security Holders will pay all
underwriting discounts and selling commissions, if any.
-12-
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under provisions of the By-Laws of the Company, each person who is or was a
director or officer of the Company shall be indemnified by the Company as of
right to the full extent permitted or authorized by the General Corporation Law
of Delaware, including against liabilities under the Securities Act of 1933.
Under such law, to the extent that such person is successful on the merits
of defense of a suit or proceeding brought against him by reason of the fact
that he is a director or officer of the Company, he shall be indemnified against
expenses (including attorneys' fees) reasonably incurred in connection with such
action. If unsuccessful in defense of a third-party civil suit or a criminal
suit is settled, such a person shall be indemnified under such law against both
(1) expenses (including attorneys' fees) and (2) judgements, fines and amounts
paid in settlement if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Company, and
with respect to any criminal action, had no reasonable cause to believe his
conduct was unlawful.
If unsuccessful in defense of a suit brought by or in the right of the
Company, or if such suit is settled, such a person shall be indemnified under
such law only against expenses (including attorneys' fees) incurred in the
defense or settlement of such suit if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Company except that if such a person is adjudged to be liable in such suit for
negligence or misconduct in the performance of his duty to the Company, he
cannot be made whole even for expenses unless the court determines that he is
fairly and reasonably entitled to indemnity for such expenses.
The officers and directors of the Company are covered by officers and
directors liability insurance. The policy coverage is $1,000,000, which includes
reimbursement for costs and fees. There is a maximum deductible for officers and
directors under the policy of $75,000 for each claim (except $150,000 for
securities claims). The Company has entered into Indemnification Agreements with
each of its officers and directors. The Agreements provide for reimbursement for
all direct and indirect costs of any type or nature whatsoever (including
attorneys' fees and related disbursements) actually and reasonably incurred in
connection with either the investigation, defense or appeal of a Proceeding,
as defined, including amounts paid in settlement by or on behalf of an
Indemnitee.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed upon
for the Company by Dennis Brovarone, Esq. Mr. Brovarone owns options to purchase
15,000 shares of EcoTyre Common Stock at an exercise price of $0.75.
- 13 -
<PAGE>
EXPERTS
The financial statements incorporated by reference in this Prospectus have
been audited by BDO Seidman, LLP, independent certified public accountants, to
the extent and for the periods set forth in their report incorporated herein by
reference (which report contains an explanatory paragraph regarding the Com-
pany's ability to continue as a going concern), and are incorporated herein in
reliance upon such report given upon the authority of said firm as experts in
auditing and accounting.
-14-
<PAGE>
No dealer, salesperson, or other person has been authorized by the Company
to give any information or to make any representations other than those
contained in this Prospectus and, if given or made, such other information or
representations must not be relied upon as having been so authorized by the
Company. This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, any securities other than the securities to which it
relates, or an offer to or solicitation of any person in any jurisdiction in
which such offer or solicitation would be unlawful. Neither delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information herein is correct as of any time subsequent
to the date hereof.
ECOTYRE TECHNOLOGIES, INC.
3,634,763 Common Shares
PROSPECTUS
Dated: April 8, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee . . . $ 1,600
Legal Fees. . . . . . . . . . . . . . . . . . . . . 7,500
Accounting Fees . . . . . . . . . . . . . . . . . . 2,500
Miscellaneous . . . . . . . . . . . . . . . . . . . 3,400
-------
Total . . . . . . . . . . . . . . . . . . . . $15,000
=======
</TABLE>
The Company will pay all of these expenses.
Item 15. Indemnification of Directors and Officers
Under provisions of the By-Laws of the Company, each person who is or was a
director or officer of the Company shall be indemnified by the Company as of
right to the full extent permitted or authorized by the General Corporation Law
of Delaware.
Under such law, to the extent that such person is successful on the merits of
defense of a suit or proceeding brought against him by reason of the fact that
he is a director or officer of the Company, he shall be indemnified against
expenses (including attorneys' fees) reasonably incurred in connection with such
action. If unsuccessful in defense of a third-party civil suit or a criminal
suit is settled, such a person shall be indemnified under such law against both
(1) expenses (including attorneys' fees) and (2) judgments, fines and amounts
paid in settlement if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Company, and
with respect to any criminal action, had no reasonable cause to believe his
conduct was unlawful.
If unsuccessful in defense of a suit brought by or in the right of the
Company, or if such suit is settled, such a person shall be indemnified under
such law only against expenses (including attorneys' fees) incurred in the
defense or settlement of such suit if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Company except that if such a person is adjudged to be liable in such suit for
negligence or misconduct in the performance of his duty to the Company, he
cannot be made whole even for expenses unless the court determines that he is
fairly and reasonably entitled to indemnity for such expenses.
The officers and directors of the Company are covered by officers and
directors liability insurance. The policy coverage is $1,000,000, which includes
reimbursement for costs and fees. There is a maximum deductible for officers and
directors under the policy of $75,000 for each claim (except $150,000 for
securities claims). The Company has entered into Indemnification Agreements
with each of its officers and directors. The Agreements provide for reimburse-
ment for all direct and indirect costs of any type or nature whatsoever (in-
cluding attorneys' fees and related disbursements) actually and reasonably in-
curred in connection with either the investigation, defense or appeal of a
Proceeding, as defined, including amounts paid in settlement by or on behalf
of an Indemnitee.
Item 16. Exhibits
5 Opinion of Blau, Kramer, Wactlar & Lieberman, P.C.*
5.1 Opinion of Dennis Brovarone, Esq.
23.1 Consent of BDO Seidman, LLP*
23.2 Consent of Dennis Brovarone, Esq.
(included in Exhibit 5.1 hereof)
23.3 Consent of BDO Seidman, LLP
24 Power of Attorney*
99.1 Press Release dated June 3, 1997
99.2 Press Release dated July 17, 1997
99.3 Press Release dated August 20, 1997
99.4 Private Place Memorandum dated April 14, 1997
99.5 Private Place Memorandum dated June 18, 1997
99.6 Private Place Memorandum dated September 25, 1997
99.7 Private Place Subscription Agreement dated March 24, 1998
* previously filed
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes that, for purposes of
II-1
<PAGE>
determining any liability under the Securities Act of 1933, as amended (the
"Act"), each filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement;
(2) that, for the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf thereunto duly authorized, in Holtsville,
New York on the 14th day of April 1998.
</R.
ECOTYRE TECHNOLOGIES, INC.
By: /s/ Vito V. Alongi
-------------------------------------------
Vito F. Alongi
President, Treasurer (Principal Executive
Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Vito F. Alongi and Robert E. Munyer, Jr., and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
indicated on April 14, 1998.
Signatures Title
- ---------- -----
/s/ Marc de Logeres Chairman of the Board
- -----------------------
Marc de Logeres
/s/ Vito F. Alongi
- ----------------------- President, Treasurer and Director
Vito F. Alongi (Principal Executive Officer)
/s/ Robert E. Munyer, Jr.
- ------------------------ Vice President, Secretary and Director
Robert E. Munyer, Jr.
/s/ Theresa Mari
- ----------------------- Director
Theresa Mari
II-3
EXHIBIT 5.1
DENNIS BROVARONE
ATTORNEY AND COUNSELOR AT LAW
11249 W. 103RD DRIVE
WESTMINSTER, COLORADO 80021
Phone 303 466 4092 / Fax 303 466 4826
April 14, 1998
EcoTyre Technologies, Inc.
895 Waverly Avenue
Holtsville, New York 11742
Gentlemen:
As counsel to EcoTyre Technologies, Inc., a Delaware corporation (the
"Company"), in connection with Amendment No. 1 to the Registration
Statement on Form S-3 of the Company, SEC file No. 333-37037 to be filed
with the Securities and Exchange Commission on or about March 24, 1998 (the
"Registration Statement"), relating to the registration under the
Securities Act of 1933, as amended, of 2,541,219 shares of the Company's
Common Stock, par value $.001 per share (the "Shares"), including 566,632
shares issuable upon the exercise of Common Stock Purchase Warrants.
In this connection, I have reviewed: (i) the Restated Certificate of
Incorporation and By-Laws of the Company, as currently in effect; (ii) the
Registration Statement; (iii) certain resolutions adopted by the Board of
Directors of the Company; and (iv) such other documents, records and other
matters as I have deemed necessary or appropriate in order to give the
opinions set forth herein. I am familiar with the actions of by the
Company in connection with the sale and registration of the Shares. I have
relied as to factual matters on information and documents furnished by the
Company or its officers and upon such other documents and data that I have
deemed appropriate. I have assumed the authenticity of all documents
submitted to me as originals and the conformity to original documents of
all documents submitted to me as copies.
I am a member of the Bar of the State of Colorado and the foregoing
notwithstanding I have reviewed the General Corporation Law of the State of
Delaware as it relates to the matters opined to herein.
Based on such examination and review I am of the opinion that the
Shares issued, or issuable upon exercise of Warrants, when sold in the
manner set forth in the Registration Statement, have been and will be
legally issued, fully paid and non-assessable.
I also consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the Prospectus that is a part of the Registration Statement.
Sincerely,
/s/ DENNIS BROVARONE
Dennis Brovarone
EXHIBIT 23.3
Consent of Independent Certified Public Accountants
EcoTyre Technologies, Inc.
Holtsville, New York
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated July
10, 1997 relating to the financial statements of EcoTyre Technologies, Inc.
("EcoTyre") (which contains an explanatory paragraph regarding EcoTyre's
ability to continue as a going concern) appearing in the Company's Annual
Report on Form 10-KSB for the year ended March 31, 1997.
We also consent to the reference to us under the caption "Experts" in
the prospectus.
/s/ BDO Seidman, LLP
BDO SEIDMAN, LLP
Nitobel Field, New York
April 13, 1998
EXHIBIT 99.1
PRESS INFORMATION
ECOTYRE TECHNOLOGIES APPROVED TO RECYCLE AND RESELL TIRES
TO THE UNITED STATES POSTAL SERVICE
HOLTSVILLE, NY - (BUSINESSWIRE) - JUNE 3, 1997 - EcoTyre Technologies,
Inc. (NASDAQ:ETTICD) announced today that it has successfully completed a
test program with a New York Maintenance Facility of the United States
Postal Service. The test provided for the USPO to deliver used tire
casings from local postal vehicles to the Company for recycling by way of
the EcoTyre's remolding technology. The Company, in turn, resells the same
tires back to the USPO at retail prices.
Vito Alongi, President and CEO of EcoTyre, stated, "This new relationship
provides for a mutually beneficial arrangement between area post offices
and EcoTyre. The post offices recognize relative cost savings over
traditional brand tires while doing their part to be environmentally
responsible. Conversely, EcoTyre benefits by having access to an
additional source of tire casing while entering a huge market formerly
untapped by us. The market for postal tires, alone, could represent annual
revenues of approximately $500,000 in New York State and $3 million
nationally.
EcoTyre recently completed a similar test in the State of Florida and
received clearance to being actively marketing to post offices in that
state through an established distribution network.
Based in Holtsville, New York, EcoTyre Technologies, Inc. is a manufacturer
in the United States that recycles old tires by utilizing European
remolding technology to manufacture and distribute a comprehensive line of
replacement automobile tires. Differing from the traditional retreading
process in which new tread is simply placed over the tread portion of a
used casing, EcoTyre applies new sidewall and tread rubber to a completely
buffed casing and permanently bonds the rubber to the casing from sidewall
to sidewall in high temperature vulcanizing presses. The result is a
superior quality tire which is virtually "undistinguishable" from a new
tire in appearance and performance, but sells substantially less than
leading brands.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: THE STATEMENTS WHICH ARE NOT HISTORICAL FACTS CONTAINED IN THIS
PRESS RELEASE ARE FORWARD-LOOKING STATEMENTS THAT INVOICE CERTAIN RISKS AND
UNCERTAINTIES INCLUDING BUT NOT LIMITED TO RISKS ASSOCIATED WITH THE
UNCERTAINTY OF FUTURE FINANCIAL RESULTS, ADDITIONAL FINANCING REQUIREMENTS,
DEVELOPMENT OF NEW PRODUCTS, REGULATORY APPROVAL PROCESSES, THE IMPACT OF
COMPETITIVE PRODUCTS OR PRICING, UNPREDICTABILITY OF PATENT PROTECTION,
TECHNOLOGICAL CHANGES, THE EFFECT OF ECONOMIC CONDITIONS AND OTHER
UNCERTAINTIES DETAILED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Vito Alongi, President/CEO, EcoTyre Technologies, 516-289-4545 or
www.insidewallstreet
EXHIBIT 99.2
ECOTYRE TECHNOLOGIES, INC. ANNOUNCES AN 836% INCREASE
IN NET SALES FOR ITS FISCAL YEAR END
HOLTSVILLE, NY - (BUSINESSWIRE) - JULY 17, 1997 - EcoTyre Technologies,
Inc. (NASDAQ:ETTI) announced today that net sales for the fiscal year ended
March 31, 1997 increased 836% to $2,938,565, as compared to net sales of
$314,024 for the previous fiscal year ended March 31, 1996. Net losses for
the current period were $3,411,743, or $5.98 loss per share, a 29% increase
over losses of $2,637,312, or $10.24 loss per share, posted in the prior
year.
According to Vito F. Alongi, President and CEO, "1997 was both a
challenging and demanding year for EcoTyre during which time several
hurdles were overcome and critical objectives were achieved. It took three
full quarters to effectively make the transition over to a full
manufacturing operation, and the fourth quarter has confirmed our efforts
were very successful. Approximately 46% of Fiscal 1997's total net sales
were achieved in the final quarter of the year, AND we also showed a gross
profit for this last quarter - the first since manufacturing has been on-line.
EcoTyre is now firmly positioned to begin aggressively enhancing its
domestic and international sales and marketing efforts while increasing
production output. With the plant currently operating at 40% capacity, we
now have the infrastructure in place to meet order flow demands and
generate additional inventory to reduce product backorders. The management
of EcoTyre certainly appreciated the patience and on-going support of our
shareholders through this rather difficult year and now look forward to
making a profitable company a firm reality.
Based in Holtsville, New York, EcoTyre Technologies, Inc. is a manufacturer
in the United States that recycles old tires by utilizing European remolded
technology to manufacture and distribute a comprehensive line of
replacement automobile tires. Differing from the traditional retreading
process in which new tread is simply placed over the tread portion of a
used casing, EcoTyre applies new sidewall and tread rubber to a completely
buffed casing and permanently bonds the rubber to the casing from sidewall
to sidewall in high temperature vulcanizing presses. The result is a
superior quality tire which is virtually "indistinguishable" from a new
tire in appearance and performance, but sells for substantially less than
leading brands.
TABLE FOLLOWS
<PAGE>
ECOTYRE TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS FOR FISCAL YEAR ENDED MARCH 31, 1997 AND 1996
AUDITED FINANCIALS
1997 1996
---- ----
NET SALES $2,938,565 $ 314,024
COST OF SALES 4,335,447 925,914
Gross Loss (1,396,882) (611,890)
OPERATING AND OTHER EXPENSES
Selling and Shipping 745,529 336,956
General and Administrative 1,242,416 916,988
Interest (including amortization of
original issue discount of $0 and
$283,328 and net of interest
income of $57,652 and $29,503) 22,080 364,892
Write-off of original issue discount 0 389,216
Total Operating and Other Expenses 2,010,025 2,008,052
LOSS BEFORE TAXES (3,406,907) (2,619,942)
PROVISIONS FOR TAXES 4,836 17,371
NET LOSS (3,411,743) (2,637,313)
PREFERRED STOCK DIVIDENDS 188,185 149,070
NET LOSS ATTRIBUTABLE TO COMMON
SHAREHOLDERS (3,599,928) (2,786,383)
NET LOSS PER SHARE $ (5.98) $ (10.24)
WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK OUTSTANDING 602,367 272,196
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: THE STATEMENTS WHICH ARE NOT HISTORICAL FACTS CONTAINED IN THIS
PRESS RELEASE ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE CERTAIN RISKS AND
UNCERTAINTIES INCLUDING, BUT NOT LIMITED TO, RISKS ASSOCIATED WITH THE
UNCERTAINTY OF FUTURE FINANCIAL RESULTS, ADDITIONAL FINANCING REQUIREMENTS,
DEVELOPMENT OF NEW PRODUCTS, REGULATORY APPROVAL PROCESSES, THE IMPACT OF
COMPETITIVE PRODUCTS OR PRICING, UNPREDICTABILITY OF PATENT PROTECTION,
TECHNOLOGICAL CHANGES, THE EFFECT OF ECONOMIC CONDITIONS AND OTHER
UNCERTAINTIES DETAILED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION.
FOR FURTHER INFORMATION, PLEASE CONTACT:
VITO F. ALONGI, PRESIDENT/CEO, ECOTYRE TECHNOLOGIES, INC., (516) 289-4545
or
www.insidewallstreet.com
EXHIBIT 99.3
ECOTYRE TECHNOLOGIES, INC.
QUADRUPLES SALES IN FIRST QUARTER 1998
HOLTSVILLE, NY - (BUSINESSWIRE) - AUGUST 20, 1997 - EcoTyre Technologies,
Inc. (NASDAQ:ETTI) today reported that for the three month period ended
June 30, 1997, the Company posted $1,121,261 in net sales, a 413% increase
over the $218,802 reported for the same period in the previous year. Net
losses from operations for the current period were $436,464 as compared to
net losses of $873,230 for the three months ended June 30, 1996. Net
losses attributable to common stockholders were $913,657, or $.92 loss per
share for the current three month period, as compared to losses of $967,240
or $2.17 loss per share, for the same period ended June 30, 1996. Included
in the net losses attributable to common stockholders for the current
period were preferred stock dividends of $336,275 and a loss of $93,783 on
the sale of marketable securities.
The substantial increase in net sales is attributable to the Company's
operation of its manufacturing facility for the entire quarter versus
limited operations during the previous comparable quarter. According to
Vito F. Alongi, President and CEO of EcoTyre Technologies, Inc., "Following
a year of streamlining internal operations, enhancing sales and marketing
efforts and overseeing the dramatic conversion from a third party
distributor to a full manufacturing and distribution operation, the Company
has most certainly endeavored and ultimately succeeded in achieving several
critical growth objectives. The Company has strengthened its balance sheet
by converting its preferred stockholders from debt to equity, thereby
eliminating a payment of $1,325,000 which would have been due on January 1,
1998. In looking ahead, the Company is excited about its increased
production capabilities and expanded product line directly resulting from
the Butler Retreading, Inc. acquisition. EcoTyre will further target
compatible companies for possible acquisitions in order to continue to
increase sale and enhance operations."
At its Holtsville, New York facility, EcoTyre Technologies, Inc. utilizes
European remolding technology to manufacture and distribute a comprehensive
line of replacement automobile and light truck tires. Differing from the
traditional retreading process in which new tread is simply placed over the
tread portion of a used casing, EcoTyre applies new sidewall and tread
rubber to a completely buffed casing and permanently bonds the rubber to
the casing from sidewall to sidewall in high temperature vulcanizing
presses. The result is a superior quality tire which is virtually
"indistinguishable" in appearance and comparable in performance to a new
tire, but sells for as much as 30% - 50% less than leading brands.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: THE STATEMENTS WHICH ARE NOT HISTORICAL FACTS CONTAINED IN THIS
PRESS RELEASE ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE CERTAIN RISKS AND
UNCERTAINTIES INCLUDING, BUT NOT LIMITED TO, RISKS ASSOCIATED WITH THE
UNCERTAINTY OF FUTURE FINANCIAL RESULTS, ADDITIONAL FINANCING REQUIREMENTS,
DEVELOPMENT OF NEW PRODUCTS, REGULATORY APPROVAL PROCESSES, THE IMPACT OF
COMPETITIVE PRODUCTS OR PRICING, UNPREDICTABILITY OF PATENT PROTECTION,
TECHNOLOGICAL CHANGES, THE EFFECT OF ECONOMIC CONDITIONS AND OTHER
UNCERTAINTIES DETAILED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION.
TABLE FOLLOWS
<PAGE>
ECOTYRE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
June 30,
--------------------------
1997 1996
---- ----
(Unaudited) (Unaudited)
--------------------------
NET SALES $1,121,261 $ 218,802
COST OF SALES 1,104,190 640,653
---------- ----------
GROSS PROFIT 17,071 (421,851)
---------- ----------
OPERATING EXPENSES:
Selling and shipping 162,340 168,310
General and administrative 291,195 283,069
---------- ----------
TOTAL OPERATING EXPENSES 453,535 451,379
---------- ----------
LOSS FROM OPERATIONS (436,464) (873,230)
---------- ----------
OTHER EXPENSES (INCOME):
INTEREST EXPENSE, NET OF INTEREST INCOME 36,678 (1,753)
LOSS ON MARKETABLE SECURITIES 93,783 -
---------- ----------
TOTAL OTHER EXPENSES (INCOME) 130,461 (1,753)
---------- ----------
LOSS BEFORE TAXES (566,925) (871,477)
INCOME TAXES 10,457 3,749
---------- ----------
NET LOSS $ (577,382) $ (875,226)
PREFERRED STOCK DIVIDENDS $ (336,275) $ (92,014)
---------- ----------
NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS $ (913,657) $ (967,240)
========== ==========
NET LOSS PER SHARE $ (0.92) $ (2.17)
========== ==========
WEIGHTED NUMBER OF OUTSTANDING SHARES 993,105 445,732
FOR FURTHER INFORMATION, PLEASE CONTACT:
VITO F. ALONGI, PRESIDENT/CEO, ECOTYRE TECHNOLOGIES, INC., (516) 289-4545
or
www.insidewallstreet.com
Confidential
PRIVATE PLACEMENT MEMORANDUM
ECOTYRE TECHNOLOGIES, INC.
2,428,571 Shares of Common Stock
in Units of 70,000 Shares
April 14, 1997
Copy No. _______
<PAGE>
CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM
Best Efforts Offering - Up to 2,428,571 Shares of Common Stock, par value $.001
per share at $.35 per share in Units of 70,000 Shares
OFFERING PRICE: $24,500 PER UNIT
The Company Reserves the Right to
Accept or Reject Subscriptions
These Securities Involve a High Degree of Risk (See "Risk Factors")
---------------
The Company's Common Stock is traded on the NASDAQ SmallCap market (symbol:
ETTI). On April 10, 1997, the closing price of the Company's Common Stock on
NASDAQ was $.72 per share. The offering price of this Common Stock ("Common
Stock") has been arbitrarily determined by the Company based, among other
things, on the closing price of its Common Stock, the Company's assets, net
worth, operations and other recognized criteria of value.
<TABLE>
<CAPTION>
Price to Sales Proceeds to
Investors Commissions (1)(2) Company (3)
--------- ----------------- -----------
<S> <C> <C> <C>
Per Unit $24,500 $2,450 $ 22,050
Maximum Offering $850,000 $85,000 $765,000
- --------------
<FN>
(1) The Shares are being offered by the Company on "best efforts, no minimum,
maximum 2,428,571 shares basis." All proceeds of the offering will be
utilized by the Company as it is received. The subscription price is
payable upon submission to the Company of a fully completed and executed
Subscription Agreement and Qualified Purchaser Questionnaire. This offering
will terminate forty-five (45) days from the date of this Private Placement
Memorandum, unless extended by the Company for an additional period of time
not exceeding thirty (30) days, or such earlier date as may be determined
by the Company. See "Private Placement."
(2) Registered broker-dealers may receive a commission of 10% of the aggregate
gross sales price of the Units sold by them.
(3) Before deducting expenses payable by the Company in connection with this
offering estimated at $25,000.
</FN>
</TABLE>
----------------------------
THE SECURITIES BEING OFFERED HEREBY HAVE NOT BEEN REGISTERED OR APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
REGULATORY AUTHORITY OF ANY STATE, NOR HAS THE COMMISSION OR ANY SUCH AUTHORITY
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
---------------------------
April 14, 1997
<PAGE>
INTRODUCTION
This Confidential Private Placement Memorandum has been prepared by EcoTyre
Technologies, Inc., a Delaware corporation (the "Company"), and will be
delivered to a limited number of potential investors who may be interested in
purchasing from the Company Common Stock at $.38 per share. By accepting this
Private Placement Memorandum, each recipient agrees that it will keep the
information contained herein confidential and will not copy, reproduce or
distribute any of it to others without the prior written consent of the Company.
This Private Placement Memorandum is being delivered by the Company to
prospective investors for use in connection with their consideration of the
purchase of the Common Stock with the understanding that all prospective
investors will conduct their own independent investigation of those matters
which they deem appropriate in order to evaluate the merits and risks of
purchasing the Common Stock.
Except where otherwise indicated, this Private Placement Memorandum speaks
as of the date hereof. Neither the delivery of this Private Placement Memorandum
nor any sale of Common Stock shall, under any circumstances, create any
implication that the information contained herein is correct or complete as of
any time subsequent to the date hereof.
The Common Stock is being offered when, as and if issued, subject to prior
sale or withdrawal, cancellation or modification of the offer without notice,
subject to the rights of the Company to reject any subscription for the Common
Stock in whole or in part, for any reason, and subject to the approval of
certain legal matters by counsel and certain other conditions. The Common Stock
offered hereby may not be sold without delivery of this Private Placement
Memorandum.
The Common Stock offered hereby is offered for a period not exceeding
forty-five (45) days, subject to extension by the Company.
The Common Stock subject hereto has not been registered with or approved by
the Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "Securities Act"), and may not be offered or sold within
the United States, except pursuant to an exemption from the registration
requirements of the Securities Act. The Common Stock subject hereto also has not
been registered with or approved by any securities regulatory authority of any
state or other jurisdiction, nor has the SEC or any such authority passed upon
the adequacy or accuracy of this Private Placement Memorandum. Any
representation to the contrary is unlawful. This Private Placement Memorandum
does not constitute an offer or solicitation in any state or other jurisdiction
in which such offer to sell or solicitation is not authorized. Each purchaser of
the Common Stock described in this Private Placement Memorandum must acquire the
Common Stock for its own account for investment purposes and may have to bear
the full economic risk of its investment. Each such purchaser must complete and
deliver to the Company a Qualified Purchaser's Questionnaire in the form
attached as Exhibit B to this Private Placement Memorandum.
<PAGE>
The Subscription Agreement to be executed and delivered by purchasers of
the Common Stock will contain restrictions applicable to subsequent dispositions
thereof designed to require compliance with the Securities Act. The form of this
Subscription Agreement is attached as Exhibit A to this Private Placement
Memorandum. The certificates representing shares of Common Stock will bear a
legend to the effect that such securities have not been registered under the
Securities Act and that the transfer thereof is restricted.
The statements in this Private Placement Memorandum do not constitute legal
or tax advice and recipients should consult their own legal and tax advisers
regarding any such matters.
The Company reserves the right to request the return of this Private
Placement Memorandum at any time and each recipient agrees, by accepting this
Private Placement Memorandum, to promptly return it as well as all other
material received in the course of evaluating this financing.
Inquiries relating to the Company should be directed confidentially to Mr.
Vito Alongi at EcoTyre Technologies, Inc., 895 Waverly Avenue, Holtsville, New
York 11742, Telephone No.: (516) 289-4545; Fax No.: (516) 289-4722.
<PAGE>
WHO SHOULD INVEST
An investment in the Common Stock offered hereby involves a high degree of
financial risk and is therefore suitable only for persons who have substantial
income or net worth and are capable of evaluating the merits and risks of
investing in the Common Stock. Only prospective investors who are also able to
bear indefinitely the economic risk of their investment and who otherwise
satisfy the suitability standards described herein will be permitted to purchase
any of the Common Stock offered hereby.
This offering of Common Stock has not been registered or qualified with,
nor has the adequacy or accuracy of this Memorandum been reviewed or passed upon
by, the Securities and Exchange Commission or by any state securities
administrator. The offering is being made in reliance on certain exemptions from
such registration and qualification requirements. The availability of these
exemptions is dependent upon, among other things, the investment intent and
qualifications of each prospective investor. The Common Stock will only be sold
to "accredited investors," as such term is defined in Rule 501(a) of Regulation
D under the Securities Act of 1933, as amended (the "Securities Act"). An
"accredited investor" includes any person or entity who the Company reasonably
believes comes within any one of the following categories:
(i) An individual having a net worth with spouse (including automobiles,
principal residence and furnishings) at the time of purchase,
individually or jointly, in excess of $1,000,000; or
(ii) An individual whose individual income was in excess of $200,000 in
each of the two most recent years, or whose joint income with spouse
was in excess of $300,000 in each of those years, and who reasonably
expects his individual or joint income with such investor's spouse to
reach such level(s) in the current year; or
(iii)A corporation, partnership, Massachusetts or similar business trust,
or organization described in Section 501(c)(3) of the Internal Revenue
Code (tax exempt organization), not formed for the specific purpose of
acquiring the Common Stock, having total assets in excess of
$5,000,000; or
(iv) A bank, savings and loan association or other similar institution (as
defined in Sections 3(a)(2) and 3(a)(5)(A) of the Securities Act; or
(v) An insurance company (as defined in Section 2(13) of the Securities
Act); or
(vi) An investment company registered under the Investment Company Act of
1940; or
(vii)A business development company (as defined in Section 2(a)(48) of the
Investment Company Act of 1940) or a private business development
company (as defined in Section 202(a)(22) of the Investment Advisers
Act of 1940); or
<PAGE>
(viii) A Small Business Investment Company licensed by the U. S. Small
Business Administration under Sections 301(c) or (d) of the Small
Business Investment Act of 1958; or
(ix) A broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934; as amended; or
(x) A plan established and maintained by a state, its political
subdivision, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, which plan
has total assets in excess of $5,000,000; or
(xi) An employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974 ("ERISA"), if the investment decision is
made by a "Plan Fiduciary," as defined in Section 3(21) of such Act,
which is either a bank, savings and loan association, insurance
company or registered investment adviser; or
(xii)An employee benefit plan within the meaning of ERISA having total
assets in excess of $5,000,000; or
(xiii) A self-directed employee benefit plan within the meaning of ERISA,
with investment decisions made solely by persons who are accredited
investors as defined in Rule 501(a) of Regulation D; or
(xiv)A trust with total assets in excess of $5,000,000 not formed for the
specific purpose of acquiring Common Stock, whose purchase is directed
by a sophisticated person (i.e., a person who has such knowledge and
experience in financial and business matters that he is capable of
evaluating the merits and risks of an investment in the Common Stock);
or
Investors will be required to represent in writing that they meet the
requirements outlined above by completing and returning to the Company the
Subscription Agreement attached as an Exhibit hereto and the Purchaser
Questionnaire attached as an Exhibit hereto. In addition, each investor will be
required to represent that he or it is acquiring the Common Stock for investment
purposes only, with no intention of reselling or further distribution, and that
the Common Stock will not be transferred or otherwise resold except in
compliance with the Securities Act, and any applicable state acts. The Company
reserves the right to modify or extend the suitability requirements for
potential investors in order for the offering to comply with the requirements of
all applicable state laws and regulations.
Due to the risks inherent in an investment in the Common Stock offered
hereby, and in order to comply with the provisions of the exemption from the
registration and qualification requirements of the Securities Act and applicable
state securities laws, the Company has determined that Common Stock will be
<PAGE>
offered and sold only to prospective investors who, prior to purchase: (a)
represent that they are acquiring the Common Stock for their own account, for
investment purposes only and not with a view to or in connection with a further
resale or distribution; (b) represent that they are aware that the Common Stock
has not been registered or qualified under the Securities Act and applicable
state securities laws and therefore cannot be resold unless they are registered
and qualified under the Securities Act and applicable state securities laws or
an exemption therefrom is available; (c) have such knowledge and experience in
business and financial matters that they are capable of evaluating the merits
and risks of, and protecting their interests in connection with, this
investment; and (d) represent that they are able to bear the economic risk of a
complete loss of their investment.
The suitability standards referred to above represent minimum suitability
requirements for prospective investors. Accordingly, the satisfaction of such
standards by a prospective investor does not necessarily mean that the Common
Stock is a suitable investment for him or her or that his or her subscription
for Common Stock will be accepted.
The Company may reject the subscription of any prospective purchaser who
does not represent that he meets such standards. In addition, the Company, at
its sole discretion, or to the extent required by the laws of any applicable
state, may require that transferees comply with these standards as a condition
to substitute as a shareholder in the Company. In the event any Common Stock is
purchased by a person or entity in fiduciary capacity for any other person (or
for an entity in which each such person is deemed to be a "purchaser" of the
Common Stock), the suitability standards set forth above will be applicable to
such other person.
If any information furnished or representations made by a prospective
investor or others acting on their behalf mislead the Company as to the
financial or other circumstances of such investor or, if, because of any error
or misunderstanding as to such circumstances, a copy of this Memorandum is
delivered to a prospective investor who does not meet the suitability standards
set forth above, the delivery of this Memorandum to the prospective investor
will not be deemed to be an offer, and this Memorandum must be returned to the
Company immediately.
<PAGE>
HOW TO SUBSCRIBE
If, after carefully reviewing the information contained in this Private
Placement Memorandum and such other information as an investor may deem
relevant, an investor decides to invest in the Company, the investor should
complete and deliver to the Company copies of each of (1) the Subscription
Agreement, duly executed in the form attached hereto as Exhibit A, (2) a payment
equal to the amount of Common Stock subscribed for, by check payable to "EcoTyre
Technologies, Inc." and (3) the Qualified Purchaser's Questionnaire, duly filled
in and executed in the form attached hereto as Exhibit B.
The Subscription Agreement, the check and the Qualified Purchaser's
Questionnaire should be sent to:
EcoTyre Technologies, Inc.
895 Waverly Avenue
Holtsville, New York 11742
Attn: Mr. Vito Alongi
An investor's execution and delivery of the Subscription Agreement
constitutes a binding offer to subscribe for the Common Stock and such
subscription may not be withdrawn, except as specifically provided below.
Upon acceptance of the subscription by the Company (which the Company may
reject or accept, in whole or in part, in its sole discretion, within thirty
(30) days after receipt of such subscription), the Company will notify the
investor of such acceptance and of the date designated by the Company for the
closing of the offering.
<PAGE>
THE PURCHASE OF THE COMMON STOCK WILL ENTAIL A HIGH DEGREE OF RISK. NO PERSON
SHOULD INVEST IN THE SECURITIES WHO IS NOT IN A POSITION TO LOSE, AND CANNOT
AFFORD THE LOSS OF, HIS OR HER ENTIRE INVESTMENT. SEE 'RISK FACTORS." INVESTORS
WILL BE REQUIRED TO MAKE REPRESENTATIONS WITH RESPECT TO THEIR NET WORTH AND
INCOME AND TO REPRESENT, AMONG OTHER THINGS, THAT THEY ARE ABLE TO BEAR THE
ECONOMIC RISK OF LOSS OF THEIR INVESTMENT AND THAT THEY ARE FAMILIAR WITH AND
UNDERSTAND THE TERMS AND RISKS OF THIS OFFERING, INCLUDING THE SUBSTANTIAL
RESTRICTIONS ON THE TRANSFERABILITY OF THE SECURITIES OFFERED HEREBY.
-------------------------
THIS MEMORANDUM IS SUBMITTED IN CONNECTION WITH THE OFFERING OF THE COMMON STOCK
AND MAY NOT BE REPRODUCED OR USED FOR ANY OTHER PURPOSES. ANY ACTION CONTRARY TO
THESE RESTRICTIONS MAY INVOLVE A VIOLATION OF CERTAIN STATES' BLUE SKY LAWS.
-------------------------
MANAGEMENT HAS AGREED TO MAKE AVAILABLE, PRIOR TO THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREIN, TO EACH OFFEREE OF COMMON STOCK OR HIS
REPRESENTATIVE(S) OR BOTH, THE OPPORTUNITY TO ASK QUESTIONS OF, AND RECEIVE
ANSWERS FROM, MANAGEMENT OR ANY PERSON ACTING ON ITS BEHALF CONCERNING THE TERMS
AND CONDITIONS OF THIS OFFERING, AND TO OBTAIN ANY ADDITIONAL INFORMATION, TO
THE EXTENT MANAGEMENT POSSESSES SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT
UNREASONABLE EFFORT OR EXPENSE, NECESSARY TO VERIFY THE ACCURACY OF THE
INFORMATION SET FORTH HEREIN.
-------------------------
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OF SECURITIES TO ANYONE OTHER THAN
THE PERSON(S) WHOSE NAME(S) APPEAR(S) ON THE COVER. NO ONE, OTHER THAN SUCH
PERSON(S), RECEIVING A COPY OF THIS MEMORANDUM MAY TREAT THE SAME AS
CONSTITUTING AN OFFER TO PURCHASE AND NO SUBSCRIPTION AGREEMENT WILL BE ACCEPTED
OTHER THAN FROM SUCH PERSON(S).
-------------------------
<PAGE>
PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS MEMORANDUM OR ANY
PRIOR OR SUBSEQUENT COMMUNICATION FROM THE COMPANY, ITS AFFILIATES, DIRECTORS,
OFFICERS AND EMPLOYEES OR ANY PROFESSIONAL ASSOCIATED WITH THIS OFFERING AS
LEGAL OR TAX ADVICE. EACH INVESTOR SHOULD CONSULT HIS OR HER OWN PERSONAL
COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX , ECONOMIC, AND RELATED
MATTERS CONCERNING THE INVESTMENT DESCRIBED HEREIN AND ITS SUITABILITY FOR HIM
OR HER.
-------------------------
NEITHER THE DISTRIBUTION OF THIS MEMORANDUM, IN WHOLE OR IN PART, NOR THE
DIVULGENCE OF ANY OF ITS CONTENTS, IS PERMITTED UNLESS AUTHORIZED BY MANAGEMENT.
NO OFFERING LITERATURE OR ADVERTISING, IN WHATEVER FORM, SHALL BE EMPLOYED IN
THE OFFERING OF THESE SHARES, EXCEPT THE INFORMATION CONTAINED HEREIN OR
AUTHORIZED BY MANAGEMENT. NO PERSON HAS BEEN AUTHORIZED TO MAKE REPRESENTATIONS
OR GIVE ANY INFORMATION WITH RESPECT TO THESE SHARES EXCEPT THE INFORMATION
CONTAINED HEREIN.
-------------------------
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO ANYONE IN ANY
STATE OR IN ANY OTHER JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT
AUTHORIZED.
-------------------------
REFERENCE SHOULD BE MADE TO THE SUPPORTING DOCUMENTS AND OTHER INFORMATION
FURNISHED HEREWITH FOR THE COMPLETE INFORMATION CONCERNING THE RIGHTS AND
OBLIGATIONS OF THE PARTIES THERETO. CERTAIN PROVISIONS OF SUCH AGREEMENTS ARE
SUMMARIZED IN THIS MEMORANDUM, BUT IT SHOULD NOT BE ASSUMED THAT THE SUMMARIES
ARE COMPLETE.
-------------------------
THE SALE OF THE COMMON STOCK IS SUBJECT TO THE PROVISIONS OF A `SUBSCRIPTION
AGREEMENT (THE "SUBSCRIPTION AGREEMENT") CONTAINING CERTAIN REPRESENTATIONS,
WARRANTIES, TERMS AND CONDITIONS. ANY INVESTMENT IN THE COMMON STOCK SHOULD BE
MADE ONLY AFTER A COMPLETE AND THOROUGH REVIEW OF THE PROVISIONS OF THE
SUBSCRIPTION AGREEMENT AND THE OTHER SUBSCRIPTION DOCUMENTS.
<PAGE>
-------------------------
NOTICE TO FLORIDA RESIDENTS:
A SALE IS VOIDABLE BY THE PURCHASER IN SUCH STATE WITHIN 3 DAYS AFTER THE
FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER OR WITHIN
3 DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH
PURCHASER, WHICHEVER OCCURS LATER.
NOTICE TO PENNSYLVANIA RESIDENTS:
THE SECURITIES REPRESENTED BY THIS MEMORANDUM WILL HAVE BEEN ISSUED
PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION OR QUALIFICATION
PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS
OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXCEPTIONS
THEREFROM.
PURSUANT TO SECTION 207(m) OF THE PENNSYLVANIA SECURITIES ACT OF 1972, AS
AMENDED, EACH PENNSYLVANIA RESIDENT WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES
EXEMPTED FROM REGISTRATION UNDER SECTION 203(d) OF THE 1972 ACT, DIRECTLY FROM
AN ISSUER OR AN AFFILIATE OF AN ISSUER, SHALL HAVE THE RIGHT TO WITHDRAW HIS
ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE SELLER, UNDERWRITER (IF ANY)
OR ANY OTHER PERSON, WITHIN TWO BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE
ISSUER OF HIS WRITTEN BINDING CONTRACT OF PURCHASE OR, IN THE CASE OF A
TRANSACTION IN WHICH THERE IS NO WRITTEN BINDING CONTRACT OF PURCHASE, WITHIN
TWO BUSINESS DAYS AFTER HE MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING
OFFERED. TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER OR
TELEGRAM TO THE COMPANY AT THE ADDRESS SET FORTH IN THE TEXT OF THIS MEMORANDUM
INDICATING HIS OR HER INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM SHOULD BE
SENT AND POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED SECOND BUSINESS DAY.
IT IS PRUDENT TO SEND SUCH LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
TO ENSURE THAT IT IS RECEIVED AND ALSO TO EVIDENCE THE TIME WHEN IT WAS MAILED.
IF THIS REQUEST IS MADE ORALLY (IN PERSON OR BY TELEPHONE, TO THE COMPANY AT THE
NUMBER LISTED IN THE TEXT OF THIS MEMORANDUM), A WRITTEN CONFIRMATION THAT THE
REQUEST HAS BEEN RECEIVED SHOULD BE REQUESTED. EACH PENNSYLVANIA RESIDENT WHO
SUBSCRIBES FOR THE SECURITIES BEING OFFERED HEREBY MUST AGREE NOT TO SELL SUCH
SECURITIES FOR A PERIOD OF TWELVE (12) MONTHS AFTER THE DATE OF PURCHASE.
<PAGE>
NOTICE TO NORTH CAROLINA RESIDENTS:
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO THE RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
<PAGE>
EcoTyre Technologies, Inc.
Private Placement Memorandum
Table of Contents
-----------------
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Company . . . . . . . . . . . . . . . . . . . . . . . . 1
The Offering. . . . . . . . . . . . . . . . . . . . . . . . 2
Summary Financial Information . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . . . . 10
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 10
Incorporation of Certain Documents by Reference. . . . . . . . . 11
Description of Securities. . . . . . . . . . . . . . . . . . . . 11
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 11
Certain Provisions of the Certificate of
Incorporation. . . . . . . . . . . . . . . . . . . . . . 13
Transfer Restrictions . . . . . . . . . . . . . . . . . . . 14
Private Placement. . . . . . . . . . . . . . . . . . . . . . . . 15
Determination of Offering Price . . . . . . . . . . . . . . 15
Financial Statements . . . . . . . . . . . . . . . . . . . . . . 15
Exhibits
Exhibit A - Subscription Agreement
Exhibit B - Qualified Purchaser Questionnaire
Exhibit C - Report on Form 10-KSB for the fiscal year ended March 31, 1996
Exhibit D - Report on Form 10-QSB for the nine months ended December 31,
1996.
<PAGE>
SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the more detailed information and the financial statements
appearing elsewhere in, or incorporated by reference to, this Private Placement
Memorandum.
The Company
EcoTyre Technologies Inc., (the "Company") has marketed since 1993 remolded
automobile tires manufactured by third parties for sale in the United States
replacement automobile passenger tire market. The Company believes based on
published industry reports that in 1994, over $7 billion of replacement
automobile passenger tires were sold in the United States. During 1995, the
Company curtailed distribution operations, concentrating its efforts on
commencing manufacturing operations for its own line of remolded tires, which
limited manufacturing operations commenced in December 1995. The remolded tires
manufactured by the Company are created by remanufacturing a previously used
high-quality passenger automobile tire casing of a name brand manufacturer.
Through a process comparable to manufacturing a new tire, new rubber is attached
to the casing from sidewall to sidewall.
While remolded passenger automobile tires have for many years been used in
the United Kingdom and other parts of Europe, their use in the United States has
been primarily for commercial purposes such as in the airline industry. Based
upon its experience in distributing remolded passenger automobile tires in the
United States, and in order to exercise greater control over costs and product
quality, the Company acquired equipment to manufacture its own remolded tires
and leased a 65,000 sq. ft. manufacturing facility. The Company also hired
executive, management and engineering personnel with significant experience in
the automobile passenger automobile tire industry, including the manufacture of
remolded passenger automobile tires.
The Company was incorporated under the laws of the State of Delaware on May
20, 1994 as a successor to a predecessor New York corporation formed in April
1993 from which it acquired the assets used in connection with its business in
June 1994. The Company's executive offices, manufacturing facility and warehouse
are located at 895 Waverly Avenue, Holtsville, New York 11742, and its telephone
number is (516) 289-4545.
<PAGE>
The Offering
Securities Offered: The Company is offering hereby up to 2,428,571
shares of Common Stock in Units, each Unit consisting of
70,000 shares of Common Stock. The minimum subscription is
for one Unit, although the Company reserves the right to
accept subscriptions for less than one Unit.
Common Stock: The shares of Common Stock issuable in this
placement will have demand registration rights exercisable
no earlier than thirty (30) days after the completion of
this offering as well as piggyback registration rights
with respect to all other registration statements
filed by the Company with the SEC (other than on forms S-4
or S-8), subject to customary underwriter's or board of
director's rights to limit such participation.
In the event the shares of Common Stock issuable in
this placement are not registered within forty-five days
after demand, the Company shall be required to issue to
the subscribers hereof additional Common Stock of the
Company in an amount equal to 5% of Common Stock issued
hereunder for each month thereafter that the Common Stock
remains unregistered.
Use of Proceeds: Proceeds from this offering will be primarily
used for working capital to continue the development and
expansion of the Company's business operations at its
Holtsville, New York facility.
<PAGE>
Summary Financial Information
The unaudited summary financial information, other than the "as adjusted"
data, set forth below is derived from the financial statements appearing
elsewhere herein. This information should be read in conjunction with such
financial statements, including the notes thereto.
Balance Sheet Data:
<TABLE>
<CAPTION>
At March 31, 1997
-------------------------------
Actual As Adjusted(1)(2)(3)
-------------------------------
(unaudited) (unaudited)
--------- ---------
<S> <C> <C>
Working Capital. . . . . . $ 226,870 $1,772,148
Total Assets . . . . . . . 4,352,225 5,777,225
Total Liabilities. . . . . 2,585,390 2,465,112
Class A Redeemable Convertible
Preferred Stock . . . . 1,191,590 -
Stockholders' Equity
(Deficiency) . . . . . . 575,245 3,312,113
Statement of Operations Data:
Nine Months Ended December 31,
------------------------------
1996 1995
---- ----
(Unaudited) (Unaudited)
--------- ---------
Net Sales . . . . . . . . $ 1,598,351 $ 218,583
Net Income (Loss) . . . . $(2,910,424) $ (1,972,023)
Income (Loss) Per
Common Share . . . . . $(.83) $(1.39)
- --------------
<FN>
(1) Adjusted to reflect receipt of the maximum net proceeds from this
placement.
(2) Adjusted to give effect to (i) purchase of Butler Retreading machinery and
equipment for $889,000 paid by $700,000 in proceeds from Phoenixcor loan
and issuance of 300,000 shares of common stock valued at market ($189,000)
and (ii) the issuance of 100,000 shares of common stock in exchange for
debt.
(3) Adjusted to give effect to (1) conversion of redeemable convertible
preferred stock into convertible preferred stock including conversion of
$120,278 of accrued dividends and (ii) receipt of 300,000 shares of
publicly traded stock in exchange for 675,000 shares of convertible Series
B preferred stock.
</FN>
</TABLE>
<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk. Only those persons able to lose their entire investment should purchase
these securities. Prospective investors, prior to making an investment decision,
should carefully consider, along with other matters referred to herein, the
following risk factors:
Limited Operating History; Historical and Anticipated Operating Losses. The
Company has had limited sales and operations since the inception of its business
in April 1993. For the nine months ended December 31, 1996 and for its fiscal
years ended March 31, 1996 and 1995, the Company had net sales of $1,598,351,
$314,024 and $1,281,223, respectively, and net losses of ($2,910,424),
($2,637,313) and ($833,925), respectively. As of March 31, 1997 the Company had
total assets of $4,352,225, working capital of $226,870, and stockholders'
equity of $575,245, respectively. The Company is subject to all the general
risks inherent in, and the problems, expenses, difficulties, complications and
delays frequently encountered in connection with establishing any new business
and manufacturing operations. There is no assurance that the Company will
operate at a level sufficient to achieve profitability.
Limited Manufacturing History. The Company commenced limited remolded tire
manufacturing operations in December, 1995, but no assurance can be given that
the Company will be able to successfully manufacture remolded tires of
sufficient quality to permit the successful sale thereof, that the Company will
be able to manufacture a sufficiently complete line of products to satisfy the
demands of its customers or that the Company will be able to produce quantities
of remolded tires sufficient to achieve profitability. In this regard, the
Company will be purchasing new machinery and equipment in order to manufacture a
greater percentage of recreational vehicle and high performance tires which
historically sell at greater profit margins. There is no assurance that this
machinery and equipment will operate efficiently and manufacture sufficient
numbers of such tires to increase the Company's profit margins.
Manufacturing with Used Machinery and Equipment. A majority of the
machinery and equipment which the Company is using in its manufacturing
operations is approximately nine years old and was used for approximately four
years. The equipment sat idle for four years, except that it has been used for
the past twelve months by the Company. The Company has no warranty or service
contract with respect to such equipment, and bears the sole risk of such
equipment failing to operate effectively. Accordingly, no assurance can be given
that this equipment will function properly and some amount of repairs,
refurbishings and delays already have been experienced. There also can be no
assurance that the Company's manufacturing facility will not experience
additional delays.
Need for Additional Financing. This offering is on a "best efforts" basis
so that less than the maximum funds of $850,000 covered by this memorandum may
be received. In such event, the Company may need to secure additional financing
to continue its operations. The Company also may require additional funds to
expand its manufacturing facilities. Adequate funds for this purpose on terms
favorable to the Company, whether through equity financing, debt financing or
other sources, may not be available when needed. Furthermore, the Company has
granted a first priority security interest on its machinery and equipment to a
third party, which could adversely impact its ability to finance its operations.
<PAGE>
Uncertainty of Market Acceptance; Failure of Prior Tire Remolders. In
April, 1993, the Company began distributing remolded automobile passenger tires
in the United States manufactured by third parties and believes there will be
market acceptance of its own manufactured remolded passenger tires based on its
experience as a distributor. Remolded passenger automobile tires historically
have not accounted for a significant portion of the United States passenger
automobile replacement tire market. Since the Company's remolded tires will
compete with new replacement tires, there can be no assurance that consumers
will be willing to purchase remolded tires notwithstanding the price
differential and the Company's belief that its remolded tires will be comparable
in quality and appearance to new tires. In this regard, the Company believes
that at least three previous businesses which attempted to manufacture, market
and sell remolded passenger automobile tires in the United States, including the
previous owner of the Company's machinery and equipment, failed to successfully
do so and such previous owner has ceased business operations. There is no
assurance that a U.S. market for the Company's products will develop and grow.
There also is no assurance that the U.S. market will provide sufficient revenue
and earnings to satisfy the cash requirements of the Company.
Dependence on Large Customers. As a distributor of remolded tires
manufactured by third parties, two customers, Martino Tire Company and RPJ Tire
Company, accounted for 27% and 18%, respectively, of the Company's net sales for
the fiscal year ended March 31, 1995, and one of these customers accounted for
12% of the Company's net sales for the fiscal year ended March 31, 1996. The
Company has distribution agreements which grant each of these customers
exclusive territorial rights to sell the Company's products in their respective
territories based on certain minimum purchase requirements and provide that
these customers will not sell any other remolded tires. While the Company
intends to expand its customer base as a manufacturer of remolded tires, there
is no assurance that it will be successful in these efforts. Further, there is
no assurance that these customers will purchase large quantities of tires from
the Company since their minimum purchase requirements only effect the
exclusivity of their distributorships.
Competition. There are inherent difficulties for any new business seeking
to continue limited manufacturing operations and market a new product,
particularly in a very competitive market such as that for replacement
automobile tires. There are numerous manufacturers and/or distributors of new
tires, previously used tires and retreaded tires. The replacement tire market is
quite mature, and is serviced by a large number of competitors, several of which
dominate the marketplace. The Company anticipates that its primary competition
will be from lower-priced, lesser-known associated brands of major
manufacturers, and private-label manufacturers of new tires, both imported and
domestic, such as Coronet (Armstrong Tire Company), Summit (General Tire
Company), Hankock, Hercules (Cooper Tire & Rubber Co.), Ohtsu and others. The
<PAGE>
Company would also compete with manufacturers and distributors of retreaded
tires such as Les SchwabTire Centers. Many of these competitors have been in
existence for many years, have extensive marketing budgets, established market
shares, wide name recognition and existing franchise, dealer or other
distribution networks. They also have greater financial, personnel and
administrative resources than the Company and have the capability of value
pricing their products to deter or eliminate competition. Assuming the Company
does gain significant market share, there is no assurance that other U.S. or
foreign tire manufacturers, including those with experience in the foreign
remolded tire markets, will not begin manufacturing and marketing remolded tires
in direct competition with the Company in the United States. New entrants in
this industry could have an adverse impact on the Company's potential revenues
and profit margins. While the Company believes that the primary areas of
competition in its industry are price, warranty, service, appearance and quality
and that its products should compete favorably in these regards, there is no
assurance that the Company will be able successfully to compete against
established manufacturers or any new entrants into its industry.
Possible Adverse Impact of Unavailability of, or Higher Prices for, Raw
Materials. The primary raw materials anticipated by the Company to be used in
its manufacturing operations are previously used tire casings and rubber. The
Company believes that rubber is readily available from several sources, though
the price thereof may fluctuate. The Company also believes that suitable tire
casings are readily available from a wide variety of sources, including several
distributors of automobile tire casings and directly from tire distribution
centers. Given the nature of the market for tire casings, the Company believes
that it will be necessary to obtain casings from many sources to meet its
anticipated needs. While the Company does not anticipate any difficulties in
obtaining sufficient quantities of automobile tire casings and rubber to be used
in its operations, no assurance can be given in this regard. In the event that
sufficient quantities of raw materials are not available, or if the prices
thereof become uneconomical, the Company's business operations and financial
condition could be materially adversely affected.
Risks Relating to Environmental and Other Governmental Regulation. As a
manufacturer of remolded automobile tires, the Company's products are subject to
regulation by the United States Department of Transportation and other
government agencies relating to the safety and performance of its products. In
addition, as a manufacturer of rubber products with a manufacturing facility
located in the ecologically sensitive eastern region of Long Island, the Company
may be subject to various environmental regulations imposed by federal, state
and local authorities. While the Company believes that its manufacturing
operations are not environmentally sensitive, are in compliance with all
applicable environmental laws and regulations and that all necessary permits and
approvals will be obtained, no assurance can be given that compliance with
environmental laws, regulations or other restrictions, including any new laws or
regulations, will not impose additional costs on the Company which could
adversely affect its financial performance and results of operations.
Importance of and Risks Relating to Intellectual Property Rights. The
automobile tire industry is characterized by extensive use of intellectual
property protected by patent and trademark laws. The Company utilizes tire tread
designs and a manufacturing process which it has not patented and which it
believes are lawfully in the public domain. While the Company believes that it
does not infringe on the intellectual property rights of any third parties in
the conduct of its business, allegations of any such infringement, or disputes
or litigations relating thereto, could have a material adverse affect on the
Company's financial condition and results of operations.
<PAGE>
Risk of Seasonality. While there is a year-round demand for automobile
tires, automobile tire sales in the Northeastern United States are generally
strongest during the second and third calendar quarters of the year. Seasonality
may have an impact on the Company's operations including cash flow, insofar as
the Company is required to control inventory levels to reflect projected
quarterly sales. However, since the Company anticipates that approximately 50%
of its sales will be in the Western United States and other regions where all
purpose automobile tires are used year round, it does not believe that
seasonality will adversely impact its operations.
Risk of Inadequate Product Liability Insurance. The Company's business
exposes it to potential liability which is inherent in the production and
distribution of automotive equipment. The Company currently maintains
$15,000,000 of product liability, general and personal and advertising injury
insurance per occurrence and in the aggregate, subject to a $10,000 deductible.
There can be no assurance that the Company will be able in the future to obtain
any product liability insurance on an economic basis or that such coverage, if
obtained, will ultimately prove adequate or will be renewable for any period. If
any product liability claim is made and sustained against the Company and is not
covered by insurance, the Company's business and prospects could be materially
adversely affected.
Dependence on Key Personnel. The Company's continuation of manufacturing
operations and the implementation of its business expansion plan are dependent
in substantial part upon the abilities of Vito F. Alongi, its President and John
W. King, the Company's Vice President. Although each of Mr. Alongi and Mr. King
has entered into an employment agreement with the Company, there can be no
assurance that they will remain in the employ of or continue to provide services
to the Company. The loss of the services of either of such persons would likely
have a material adverse effect on the Company. The Company is the beneficiary
under a $1,000,000 life insurance policy with respect to the lives of Vito F.
Alongi and John King.
No Dividends on Common Stock. The Company has never declared or paid any
dividends on its shares of Common Stock. The Company intends to utilize its
earnings, if any, to facilitate the expansion of its business for the
foreseeable future. Accordingly, it has no intention of declaring or paying
dividends on its Common Stock for the foreseeable future. Any such dividends are
subject to the prior payment of dividends on the Class A Preferred Stock. See
"Dividend Policy".
Potential Adverse Impact on Market Price of Shares Offered Hereunder and
Other Shares Eligible for Future Sale. 2,000,000 shares of Common Stock were
sold in October, 1996 under Regulation S of the Securities Act. While the
Company believes that part of these shares have been sold, the remaining shares
are presently freely saleable. Additionally, 2,632,000 shares of the Company's
Common Stock owned by non-public shareholders, are "restricted securities" as
that term is defined under Rule 144 promulgated under the Securities Act of
<PAGE>
1933, as amended (the "Act") and may only be sold pursuant to a registered
offering or in accordance with applicable exemptions from the registration
requirements of the Act. Additionally, 1,202,775 shares of Common Stock
underlying the Class A Preferred Stock and Class B Preferred Stock and 1,202,775
shares of Common Stock underlying the Class B Warrants issuable upon conversion
of the Class A Preferred Stock have "piggy-back" registration rights which
require the shares to be registered for sale in future registrations of the
Company, subject to certain restrictions. The Company is unable to predict the
effect that sales of Regulation S stock, future sales under Rule 144 or the sale
of registered shares may have on the then prevailing market price of Common
Stock. It can be expected, however, that the sale of any substantial number of
shares of Common Stock will have a depressive effect on the market price of the
Common Stock.
Possible Dilutive Effect of the Issuance of Substantial Amounts of
Additional Shares Without Stockholder Approval. The Company will have an
aggregate of approximately 985,929 shares of Common Stock authorized but
unissued and not reserved for specific purposes and an additional 10,228,500
shares of Common Stock unissued but reserved for issuance pursuant to (i) the
Company's Long Term Incentive Plans, (ii) exercise of other Purchase Options
(including any shares of Common Stock obtainable upon exercise of the Class A
Warrants included in the Units sold in the Company's initial public offering of
securities in December 1995 and shares reserved for issuance in payment for
consulting services). All of such shares may be issued without any action or
approval by the Company's shareholders. Any shares issued would further dilute
the percentage ownership of the Company held by the holders of the Company's
Common Stock. The terms on which the Company could obtain additional capital
during the life of these securities may be adversely affected because of such
potential dilution and because the holders thereof might be expected to convert
or exercise them if the market price of the Common Stock exceeds their
conversion or exercise price.
Possible Issuance of Preferred Stock and Superior Rights of Preferred
Stock; Potential Adverse Effect on Common Stockholders. In addition to the
above-referenced shares of Common Stock which may be issued without shareholder
approval, the Company has 797,225 authorized and unissued shares of Class A
Preferred Stock, and an additional 1,325,000 authorized and unissued shares of
Serial Preferred Stock, the terms of which may be fixed by the Company's Board
of Directors. While the Company has no present plans to issue any additional
shares of preferred stock, the Board of Directors has the authority, without
shareholder approval, to create and issue one or more series of such preferred
stock and to determine the voting, dividend and other rights of holders of such
preferred stock. The issuance of any of such series of preferred stock could
have an adverse effect on the rights of holders of Common Stock.
Potential Anti-Takeover Effects of Delaware Law and Certificate of
Incorporation; Possible Issuances of Preferred Stock. Certain provisions of
Delaware law and the Company's certificate of incorporation and by-laws could
make more difficult a merger, tender offer or proxy contest involving the
Company, even if such events could be beneficial to the interests of the
shareholders. These provisions include Section 203 of the Delaware General
Corporation law, the classification of the Company's Board of Directors into
three classes and the requirement that 66 2/3% of the stockholders of the
Company entitled to vote thereon approve certain transactions including mergers
and sales or transfers of all or substantially all the assets of the Company.
Such provisions could limit the price that certain investors might be willing to
pay in the future for shares of the Company's Common Stock or preferred stock.
<PAGE>
Moreover, although the ability to issue other classes of preferred stock may
provide flexibility in connection with possible acquisitions and other corporate
purposes, such issuance may make it more difficult for a third party to acquire,
or may discourage a third party from acquiring, a majority of the voting stock
of the Company.
Possibility of NASDAQ Delisting and Decrease in Stock Price. The continued
trading of the Company's securities on NASDAQ is conditioned upon meeting
certain asset, capital and surplus, earnings and stock price tests. The
requirements to maintain eligibility on NASDAQ require the Company to maintain
total assets in excess of $2,000,000, capital and surplus in excess of
$1,000,000, and (subject to certain exceptions) a bid price of at least $1.00
per share. If the Company fails any of these tests, the Common Stock may be
delisted from trading on NASDAQ. In this regard the Company has received
notification from NASDAQ that the continued listing of its securities is
conditioned upon the Company effectuating a reverse stock split of at least
three-to-one at its Annual Meeting of Stockholders scheduled for May 29, 1997
and that thereafter its Common Stock close at a minimum of $1.00 for ten
consecutive trading days. The effects of delisting include the limited release
of the market prices of the Company's securities and limited news coverage of
the Company. Delisting may restrict investors' interest in the Company's
securities and materially adversely affect the trading market and prices for
such securities and the Company's ability to issue additional securities or to
secure additional financing. In addition to the risk of volatility of stock
prices and possible delisting, low price stocks are subject to the additional
risks of additional federal and state regulatory requirements and the potential
loss of effective trading markets. In particular, if the Common Stock was
delisted from trading on NASDAQ and the trading price of the Common Stock were
less than $5.00 per share, the Common Stock could be subject to Rule 15g-9 under
the Exchange Act, which, among other things, require that broker/dealers satisfy
sales practice requirements, including making individualized written suitability
determinations and receiving any purchaser's written consent prior to any
transaction. In such case, the Company's securities could also be deemed penny
stocks under the Securities Enforcement and Penny Stock Reform Act of 1990,
which would require additional disclosure in connection with trades in the
Company's securities, including the delivery of a disclosure schedule explaining
the nature and risks of the penny stock market. Such requirements could severely
limit the liquidity of the Company's securities and the ability of purchasers in
this offering to sell their securities in the secondary market.
Possible Going Concern Issue. As a result of continuing losses, the
uncertainty as to the Company's ability to operate at a level to achieve
profitability and the likely need for additional financing after completion of
this offering, there may be doubt regarding the Company's ability to continue as
a going concern.
<PAGE>
DIVIDEND POLICY
The Company has never declared or paid any cash dividends and currently does
not intend to pay cash dividends in the foreseeable future on the shares of
Common Stock.
Management intends to reinvest earnings, if any, in the development and
expansion of the Company's business. Cash dividends, if any, that may be paid in
the future to holders of shares of Common Stock will be payable when, as and if
declared by the Board of Directors of the Company, based upon the Board's
assessment of the financial condition of the Company, its earnings, need for
funds, capital requirements, and prior claims, of preferred stock to the extent
issued and outstanding and other factors, including any applicable laws.
USE OF PROCEEDS
The net proceeds from this offering are estimated to be approximately
$740,000, assuming sale of 2,428,571 shares of Common Stock, and after deducting
sales commissions of approximately $85,000, and $25,000 of other expenses. These
net proceeds will be used for working capital to continue the development and
expansion of the Company's business operations at its Holtsville, New York
facility. Pending such use, the net proceeds will be invested in interest
bearing United States Government or other investment grade marketable securities
or will be deposited in money market accounts, interest bearing certificates of
deposit or bank accounts or other limited-risk short term investments.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Securities
and Exchange Commission (File No. 0-27240) pursuant to the Securities Exchange
Act of 1934, are incorporated by reference to this Prospectus, shall be deemed
to be a part hereof and are attached as exhibits hereto:
(1) The Company's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1996.
(2) The Company's Quarterly Report on Form 10-QSB for the nine months
ended December 31, 1996.
DESCRIPTION OF SECURITIES
Capital Stock
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, $.001 par value per share, 2,000,000 shares of Class A Convertible
Preferred Stock, 675,000 shares of Class B Convertible Preferred Stock and
1,325,000 shares of Preferred Stock, $.001 par value per share.
Common Stock
------------
Holders of the Common Stock do not have subscription, redemption,
conversion or preemptive rights. The shares of Common Stock sold by the Company
in this offering will be, when issued and paid for, fully paid and
non-assessable. Each share of Common Stock is entitled to participate pro rata
in distribution upon liquidation, subject to the rights of holders of Preferred
Stock, and to one vote on all matters submitted to a vote of stockholders. The
holders of Common Stock may receive cash dividends as declared by the Board of
Directors out of funds legally available therefor, subject to the rights of any
holders of Preferred Stock. Holders of the Common Stock are entitled to elect
all directors. The Company's Board consists of three classes each of which
serves for a term of three years. At each annual meeting of the stockholders the
directors in only one class will be elected. The holders of the Common Stock do
not have cumulative voting rights, which means that the holders of more than
half of the shares voting for the election of a class of directors can elect all
of the directors of such class and in such event the holders of the remaining
shares will not be able to elect any of such directors.
<PAGE>
Class A Convertible Preferred Stock
- -----------------------------------
Each issued and outstanding share of Class A Convertible Preferred Stock
("Class A Preferred") entitles the holder to receive dividends when, as and if
declared by the Board of Directors, at the annual rate of 10%, payable
semi-annually in either cash or common stock at the option of the Company.
Additionally, these preferred shareholders have the right to receive
preferential payments in the event of liquidation, dissolution or winding up of
the affairs of the Company. The holders of Class A Preferred have the right to
convert all or any part of their shares into Common Stock of the Company. The
Conversion Rate shall be (A) the sum of (1) $1.00 plus (2) all accrued and
unpaid dividends on a single share of Class A Convertible Preferred Stock
divided by (B) the Conversion Price (as hereinafter defined). The "Conversion
Price" shall be the lesser of (a) $3.00 per share ("fixed conversion price") or
(b) seventy-five (75%) percent of the Closing Bid Price of one share of the
Company's Common Stock for the five trading day period immediately prior to the
conversion date. For the purposes hereof, the "Closing Bid Price" shall mean the
closing bid price of the Company's Common Stock as reported by NASDAQ (or, if
not reported by NASDAQ, as reported by such other exchange or market where
traded).
Until July 15, 1997, each holder of shares of Class A Convertible Preferred
Stock shall not be entitled to convert any shares of Class A Convertible
Preferred Stock. After July 15, 1997, each holder of shares of Class A
Convertible Preferred Stock shall be permitted to convert such shares as
follows:
(a) commencing July 15, 1997, for such month and for each calendar
month thereafter, each holder of Class A Convertible Preferred Stock shall be
entitled to convert up to twenty-five (25%) percent of the shares of Class A
Convertible Preferred Stock held by such holder as of July 15, 1997.
(b) commencing October 15, 1997 all of the shares of Class A
Convertible Preferred Stock shall be convertible into Common Stock.
The number of shares of Common Stock into which each share of Class A
Convertible Preferred Stock is convertible also shall be subject to adjustment
from time to time under certain situations including reclassification or
recapitalization of the Common Stock.
Class B Convertible Preferred Stock
Each issued and outstanding share of Class B Convertible Preferred Stock
("Class B Preferred") entitles the holder to receive dividends when, as and if
declared by the Board of Directors, at the annual rate of 10%, payable
semi-annually in either cash or common stock at the option of the Company.
Additionally, these preferred shareholders have the right to receive
preferential payments in the event of liquidation, dissolution or winding up of
the affairs of the Company. The holders of Class B Preferred have the right to
convert all or any part of their shares into Common Stock of the Company. The
conversion rate shall be (A) the sum of (1) $1.00 plus (2) all accrued and
unpaid dividends on a single share of Class B Convertible Preferred Stock
<PAGE>
divided by (B) the Conversion Price (as hereinafter defined). The "Conversion
Price" shall be $.35 per share. Notwithstanding the foregoing, in no event shall
the shares of Common Stock issued on conversion have a market value of less than
$675,000 in the aggregate.
The number of shares of Common Stock into which each share of Class B
Convertible Preferred Stock is convertible shall also be subject to adjustment
from time to time under certain situations including reclassification or
recapitalization of the Common Stock.
Preferred Stock
---------------
The Company's certificate of incorporation, as amended, authorizes the
issuance of up to 1,325,000 shares of additional preferred stock, par value
$.001 per share.
The issuance of additional Series A Preferred Stock by the Board of
Directors could adversely affect the rights of holders of shares of Common Stock
by, among other things, establishing preferential dividends, liquidation rights
or voting power. The issuance of Series A Preferred Stock or Preferred Stock
could be used to discourage or prevent efforts to acquire control of the Company
through the acquisition of shares of Common Stock.
Certain Provisions of the Certificate of Incorporation
The Company's Certificate of Incorporation contains certain provisions
which may be deemed to be "anti-takeover" in nature in that such provisions may
deter, discourage or make more difficult the assumption of control of the
Company by another entity or person. In addition to the ability to issue
Preferred Stock, these provisions are as follows:
A vote of 66-2/3% of the stockholders is required by the Certificate of
Incorporation in order to approve certain transactions including mergers and
sales or transfers of all or substantially all of the assets of the Company.
The Company's Certificate of Incorporation also provides that the members
of the Board of Directors of the Company have been classified into three
classes. The term of each class will run for three years and expire at
successive annual meetings of stockholders. Accordingly, it is expected that it
would take a minimum of two annual meetings of stockholders to change a majority
of the Board of Directors.
The Delaware General Corporation Law further contains certain anti-takeover
provisions. Section 203 of the Delaware General Corporation Law provides, with
certain exceptions, that a Delaware corporation may not engage in any of a broad
range of business combinations with a person who owns 15% or more of the
corporation's outstanding voting stock (an "interested stockholder") for a
period of three years from the date that such person became an interested
<PAGE>
stockholder unless: (i) the transaction resulting in a person's becoming an
interested stockholder, or the business combination is approved by the board of
directors of the corporation before the person becomes an interested
stockholder; (ii) the interested stockholder acquires 85% or more of the
outstanding voting stock of the corporation (excluding shares owned by persons
who are both officers and directors of the corporation, and shares held by
certain employee stock ownership plans); or (iii) the business combination is
approved by the corporation's board of directors and by the holders of at least
66 2/3% of the corporation's outstanding voting stock at an annual or special
meeting, excluding shares owned by the interested stockholder.
Transfer Restrictions
This offering is being made pursuant to an exemption to the registration
requirements of Section 5 of the Securities Act. The Securities have not been
registered under the Securities Act and may not be offered or sold within the
United States, except that the Notes may be offered or sold in reliance on
exemption from the registration requirements of the Securities Act.
Each purchaser of the Securities offered hereby will be deemed to have
represented and agreed as follows:
(1) It is acquiring the Securities for its own account for investment
purposes and not with a view to resale.
(2) It understands that such Securities are being offered only in a
transaction not involving any public offering within the meaning of the
Securities Act, and that, if in the future it decides to resell, pledge or
otherwise transfer such Securities, such Securities may be resold, pledged or
transferred only (i) to the Company, (ii) pursuant to an exemption from
registration under the Securities Act.
(3) It understands that the Securities offered hereby will bear a legend to
the following effect unless otherwise agreed by the Company and the holder
thereof:
THIS SECURITY IS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY AGREES
FOR THE BENEFIT OF THE ISSUER THAT SUCH SHARES MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) TO THE COMPANY OR (2) IF, IN THE OPINION OF
COUNSEL TO THE COMPANY, SUCH TRANSFER IS MADE PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT.
<PAGE>
PRIVATE PLACEMENT
The Securities will not be registered by the Company under the Securities
Act of 1933, as amended, and will not be listed on any securities exchange.
Securities offered hereby can be purchased only by "accredited investors," as
such term is defined under Regulation D promulgated under the Securities Act.
The Company extends to each prospective investor the opportunity, prior to
the consummation of the sale of the securities offered hereby, to ask questions
of, and receive answers from, the Company concerning the securities offered
hereby, and the terms and conditions of this offering, and to obtain any
additional information it may consider necessary in making an informed
investment decision or in order to verify the accuracy of the information set
forth herein, to the extent that the Company possesses the same or can acquire
it without unreasonable effort or expense and can make such information
available without divulging information deemed by the Company, in its absolute
discretion, to be proprietary and confidential.
Determination of Offering Price
The price of the Common Stock has been determined by the Company. Among the
factors considered in such determination were the closing price of its Common
Stock, an analysis of the areas of activity in which the Company is engaged, the
present state of the Company's business, the Company's financial condition, the
Company's prospects, an assessment of management, the general condition of the
securities market at the time of the offering and the demand for similar
securities of comparable companies. The price of the securities does not
necessarily bear any relationship to assets, earnings, book value or other
criteria of value applicable to the Company.
FINANCIAL STATEMENTS
The financial statements of the Company as of December 31, 1996 (unaudited)
and March 31, 1996 and 1995 are set forth in its reports on Forms 10-KSB and
10-QSB annexed as exhibits to the Private Placement Memorandum.
<PAGE>
Exhibit A
SUBSCRIPTION AGREEMENT
Subscription Agreement, dated as of _________, 1997, between EcoTyre
Technologies, Inc., a Delaware corporation (the "Company") and
________________________________ (the "Purchaser").
WHEREAS, the Purchaser desires to subscribe for, and the Company desires to
issue to the Purchaser, Units (the "Units") each Unit consisting of 70,000
shares of common stock, par value $.001 per share (the "Common Stock") of the
Company (the "Shares"), all upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
premises, covenants, representations and warranties herein contained, it is
hereby agreed as follows:
1. Subscription Price; Issuance.
----------------------------
In reliance on the representations and warranties contained herein and
subject to the terms and conditions hereof, the Purchaser hereby subscribes for
___ Units and concurrently with delivery hereof has paid to the Company an
amount equal to $24,500 per Unit or $__________ in the aggregate, in immediately
available funds upon the execution and delivery of this Agreement, and the
Company will issue upon the closing as contemplated by the Memorandum (as
hereinafter defined) to the Purchaser 70,000 Shares with respect to each such
Unit.
2. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants to the Purchaser as follows:
2.1. Corporate Status.
----------------
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware with full corporate
power and authority to carry on its business as now conducted.
2.2. Authority of Agreement.
----------------------
The Company has the power and authority to execute and deliver
this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company and this Agreement
constitutes the valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization or other laws affecting the
<PAGE>
enforcement of creditors' rights generally now or hereafter in effect and
subject to the application of equitable principles and the availability of
equitable remedies. The Company has reserved from its authorized but unissued
shares of Common Stock such number of shares as shall be deliverable to the
Purchaser upon the Closing of the Units subscribed for hereby.
2.3. No Conflicts.
------------
The execution, delivery and performance of this Agreement and
the other instruments and agreements to be executed, delivered and performed by
the Company pursuant hereto and the consummation of the transactions
contemplated hereby and thereby by the Company do not and will not with or
without the giving of notice or the passage of time or both, violate or conflict
with or result in a breach or termination of any provision of, or constitute a
default under, the Certificate of Incorporation or the By-Laws of the Company or
any order, judgment, decree, statute, regulation, contract, agreement or any
other restriction of any kind or description to which the Company or its assets
may be bound or subject.
2.4 Fully Paid and Non-Assessable
-----------------------------
Upon issuance of the Shares and payment therefor pursuant to the
terms hereof, each share of Common Stock shall be validly issued, fully paid and
non-assessable.
3. Representations and Warranties of the Purchaser.
-----------------------------------------------
The Purchaser represents and warrants to the Company as follows:
3.1. Status.
------
If the Purchaser is a corporation or other entity, the Purchaser
is a corporation or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with full power
and authority to execute, deliver and perform its obligations under this
Agreement. If the Purchaser is an individual, the Purchaser has legal capacity
to execute, deliver and perform his or her obligations under this Agreement.
3.2 Authority for Agreements.
------------------------
The Purchaser has the power and authority to execute and deliver
this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance by the Purchaser of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary action on the part of the Purchaser and this Agreement constitutes the
valid and legally binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally now or hereafter in effect and subject to the
application of equitable principles and the availability of equitable remedies.
<PAGE>
3.3. No Conflicts.
------------
The execution, delivery and performance of this Agreement and the
other instruments and agreements to be executed, delivered and performed by the
Purchaser pursuant hereto and the consummation of the transactions contemplated
hereby and thereby by the Purchaser do not and will not with or without the
giving of notice or the passage of time or both, violate or conflict with or
result in a breach or termination of any provision of, or constitute a default
under, the Certificate of Incorporation or the By-Laws of the Purchaser (if the
Purchaser is a corporation), any other organizational instrument (if the
Purchaser is a legal entity other than a corporation) or any order, judgment,
decree, statute, regulation, contract, agreement or any other restriction of any
kind or description to which the Purchaser is a party or by which the Purchaser
may be bound.
3.4. Investor Representations and Acknowledgements.
---------------------------------------------
(a) The Purchaser is acquiring the Units for the Purchaser's own
account for investment only and not as nominee or agent and not with a view to,
or for sale in connection with, a distribution of the Units or its components
and with no present intention of selling, transferring, granting a participation
in or otherwise distributing, the Units or such components, all within the
meaning of the Securities Act of 1933, as amended, and the rules and regulations
thereunder (the "Securities Act") and any applicable state, securities or
blue-sky laws.
(b) The Purchaser is not a party or subject to or bound by any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or pledge the Units or any part thereof to any person, and has no
present intention to enter into such a contract, undertaking, agreement or
arrangement.
(c) The Purchaser acknowledges to the Company that:
(i) The Company has advised the Purchaser that the Units have not been
registered under the Securities Act or under the laws of any state on the
basis that the issuance thereof contemplated by this Agreement is exempt
from such registration;
(ii) The Company's reliance on the availability of such exemption is,
in part, based upon the accuracy and truthfulness of the Purchaser's
representations contained herein;
(iii) The Units cannot be resold without registration or an exemption
under the Securities Act and such state securities laws, and that
certificates representing the Common Stock will bear a restrictive legend
to such effect;
<PAGE>
(iv) The Purchaser has evaluated the merits and risks of purchasing
the Units, and has such knowledge and experience in financial and business
matters that the Purchaser is capable of evaluating the merits and risks of
such purchase, is aware of and has considered the financial risks and
financial hazards of purchasing the Units, and is able to bear the economic
risk of purchasing the Units, including the possibility of a complete loss
with respect thereto;
(v) The Purchaser has had access to such information regarding the
business and finances of the Company, including without limitation, the
Company's audited and unaudited financial statements included in the
disclosure documents delivered by the Company to the Purchaser, and has
been provided the opportunity to discuss with the Company's management the
business, affairs and financial condition of the Company and such other
matters with respect to the Company as would concern a reasonable person
considering the transactions contemplated by this Agreement and/or
concerned with the operation of the Company;
(vi) All the information which is set forth with respect to the
Purchaser in the Qualified Purchaser Questionnaire executed by the
Purchaser, all of which are incorporated herein by this reference, and all
of the Purchaser's representations and warranties set forth herein are
correct and complete as of the date of this Agreement, shall be true and
correct as of the closing of the transaction contemplated by this
Agreement, shall survive such closing and if there should be any material
change in such information prior to the sale to the Purchaser of the Units
the Purchaser will immediately furnish such revised or corrected
information to the Company; and
(vii) Additional Representations and Warranties of Accredited
Investors. The Purchaser, by initialing the applicable paragraph below (a)
through (g) hereby represents and warrants that the Purchaser is an
"Accredited Investor", because the Purchaser comes within one or more of
the enumerated categories. The Purchaser has reviewed the Investor
Suitability Standards attached as Annex A hereto and confirms it is an
"Accredited Investor" as indicated below. Place your initials in the space
provided in the beginning of each applicable paragraph, thereby
representing and warranting as to the applicability to the Purchaser of the
initialed paragraph or paragraphs:
[ ] (a) any individual Purchaser whose net worth, or joint net worth
with that person's spouse at the time of his purchase, exceeds $1,000,000
(including any individual participant of a Keogh Plan, IRA or IRA Rollover
Purchaser);
[ ] (b) any individual Purchaser who had an income in excess of
$200,000 in each of the two most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and who
reasonably expects an income in excess of the same income level in the
current year (including any individual participant of a Keogh Plan, IRA or
IRA Rollover Purchaser);
<PAGE>
[ ] (c) any corporation or partnership not formed for the specific
purpose of making an investment in the Common Stock, with total assets in
excess of $5,000,000;
[ ] (d) any trust, which is not formed for the specific purpose of
investing in the Common Stock, with total assets in excess of $5,000,000,
whose purchase is directed by a sophisticated person, as such term is
defined in Rule 506(b) of Regulation D under the Securities Act;
[ ] (e) any ERISA Plan if the investment decision is made by a plan
fiduciary, as defined in section 3(21) of ERISA, which is either a bank,
insurance company, or registered investment adviser, or the Plan has total
assets in excess of $5,000,000;
[ ] (f) any entity in which all of the equity owners are Accredited
Investors under paragraphs (a), (b) or (c) above or any other entity
meeting required "Accredited Investor" standards under Rule 501 of
Regulation D under the Securities Act and applicable State securities law
criteria;
[ ] (g) other (please explain)
4. Registration Rights.
-------------------
4.1 Demand Registration Rights. The Company hereby covenants and
agrees that the Purchaser shall have the right, exercisable no earlier than
thirty (30) days after completion of the offering covered by the Memorandum to
demand registration of the Common Stock sold thereunder in a registration
statement; provided that no such registration statement shall be required to be
filed by the Company unless the holder of a majority of the shares of Common
Stock sold in such offering makes such demand. In the event of such demand, the
Company shall use its reasonable efforts to file such registration statement in
a timely manner. In addition, the Company does hereby grant certain other
registration rights, which rights are set forth in more detail in Section 4.2
hereof and Section 5.
4.2 Piggyback Registration Rights. The Company further covenants
and agrees that if, at any time following the date hereof, the Company proposes
to file a registration statement with respect to the public offering of any
class of security (other than in connection with a merger or acquisition on Form
S-4 or successor form or in connection with an employee benefit plan on Form S-8
or successor form) under the Securities Act in a primary registration on behalf
of the Company and/or in a secondary registration on behalf of holders of such
securities (other than the Shares) and the registration form to be used may be
used for registration of the Shares, the Company will give prompt written notice
to the holders of the Shares (the "Holders") at the addresses appearing on the
records of the Company of its intention to file a registration statement and
will offer to include in such registration to the maximum extent possible,
subject to paragraph (a) and (b) below of this Section 4.2, such number of
Shares with respect to which the Company has received written requests for
inclusion therein within ten (10) days after the giving of the Company's
aforementioned notice. The registration requested pursuant to this Section 4.2
is referred to herein as a "Piggyback Registration." The Company shall continue
to provide these Piggyback Registration rights and shall continue to give notice
of any such registrations to the Holders until such time as all of the Shares
shall have been registered under the Act.
<PAGE>
(a) Priority on Secondary Registrations. If the Piggyback Registration
applies only to an underwritten secondary registration on behalf of holders of
securities of the Company, and the underwriter(s) for such offering being
registered by the Company advise(s) the Company in writing that, in its/their
opinion, the number of Shares requested to be included in such registration
exceeds the number which can be registered on such registration statement
without materially adversely affecting the distribution of such securities, the
Company will include in such registration (i) first, the securities requested to
be included therein by the initial holders requesting such registration, (ii)
second, the securities purchased by the Purchaser pursuant to this Subscription
Agreement and all other purchasers in the same offering, and (iii) third, any
other securities requested to be included in such registration, apportioned pro
rata among the holders of such securities.
(b) Notwithstanding the foregoing, if any such underwriter shall determine
in good faith and advise the Company in writing that any distribution of the
Shares requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely affect the
distribution of such securities by the Company, then the Holders of such Shares
shall delay their offering and sale for such period ending on the earliest of
(1) 120 days following the effective date of the Company's registration
statement, (2) the day upon which the underwriting syndicate, if any, for such
offering shall have been disbanded or, (3) such date as the Company, the
managing underwriter of such offering and the Holders shall otherwise agree. In
the event of such delay, the Company shall file such supplements, post-effective
amendments and take any such other steps as may be necessary to permit such
Holders to make his proposed offering and sale for a period of 120 days
immediately following the end of such period or delay. If the Purchaser
disapproves of the terms of any such underwriting, the Purchaser may elect to
withdraw therefrom by written notice to the Company.
5. Company's Obligations for Registrations.
---------------------------------------
5.1 Costs and Expenses. The Company shall pay all costs
(excluding expenses of counsel to the Holders and underwriting, dealers or
selling commissions, which shall be borne by the Holders), fees and expenses in
connection with any registration statement filed pursuant to Section 4 hereof
including, without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses. If the Company shall fail to comply with
the provisions of Section 4 hereof, the Company shall, in addition to any other
equitable or other non-monetary relief available to the Holders, be liable for
any or all incidental, special and consequential damages due to loss of profit
sustained by the Holders as a result of such failure.
5.2 Blue Sky Laws. The Company will take all necessary action
which may be required in qualifying or registering the Shares included in a
registration statement for offer and sale under the securities or blue sky laws
of such states as reasonably are requested by the Holder(s); provided, that the
Company shall not be obligated to execute or file any general consent to service
of process or to qualify as a foreign corporation to do business under the laws
of any such jurisdiction; provided, further, that the Company shall not be
obligated to qualify or register the Shares in any state where the Company's
shares are not already qualified or registered for offer and sale.
<PAGE>
5.3 Indemnification of Holders. The Company shall indemnify the
Holder(s) of the Shares to be sold pursuant to any registration statement and
each person, if any, who controls such Holders within the meaning of Section 15
of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Securities Act, the Exchange Act or otherwise, arising
from such registration statement; provided, however, that the Company shall not
be required to indemnify the Holders for any loss, claim, damage, expense or
liability arising from any misstatement or omission of a material fact which is
based on information furnished in writing by or on behalf of such Holders, or
their successors or assigns, for inclusion in the registration statement. In
addition, the Company shall not be obligated to indemnify the Holders for any
loss, claims, damage, expense or liability arising from any misstatement or
omission of a material fact where the Company shall have timely delivered to the
Holders amendments or supplements of a registration statement or prospectus
which correct such misstatement or omission of a material fact and the Holders
fail to utilize such amendment or supplement in the offer and sale of the
Shares.
5.4 Indemnification of the Company. The Holders(s) of the Shares
to be sold pursuant to a registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Company, its officers
and directors and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which they may become subject under the Securities Act,
the Exchange Act or otherwise, arising from information furnished in writing by
or on behalf of such Holders, or their successors or assigns, for inclusion in
such registration statement.
5.5 Financial Statements. The Company as soon as practicable, but
in any event not later than 45 days after the end of the 12-month period
beginning on the day after the end of the fiscal quarter of the Company during
which the effective date of the registration statement occurs (90 days in the
event that the end of such fiscal quarter is the end of the Company's fiscal
year), shall make generally available to its securities holders, in the manner
specified in Rule 158(b) under the Securities Act, and to the underwriter, an
earnings statement which will be in the detail required by, and will otherwise
comply with, the provisions of section 11(a) of the Securities Act and Rule
158(a), which statement need not be audited unless required by the Securities
Act, covering a period of at least 12 consecutive months after the effective
date of the registration statement.
5.6 Copies. The Company shall furnish to each Holder of Shares
such number of copies of the registration statement, each amendment thereto, the
prospectus included in such registration (including each preliminary prospectus)
and such other documents as such Holder any reasonably request in order to
facilitate the disposition of the Shares owned by such Holder.
<PAGE>
6. Further Assurances.
------------------
At any time and from time to time after the date hereof, each
party shall, without further consideration, execute and deliver to the other
such other instruments or documents and shall take such other actions as the
other may reasonably request to carry out the transactions contemplated by this
Agreement.
7. Miscellaneous.
-------------
Any party may waive compliance by the other with any of the provisions of
this Agreement. No waiver of any provision shall be construed as a waiver of any
other provision. Any waiver must be in writing. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. This Agreement may not be modified
or amended except in writing signed by both parties hereto. This Agreement may
be executed in several counterparts, each of which shall be deemed an original,
and all of which shall constitute one and the same instrument. This Agreement
shall be governed in all respects, including validity, interpretation and
effect, by the laws of the State of Delaware, applicable to contracts made and
to be performed in Delaware. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the successors and assigns of the parties
hereto. This Agreement shall not be assignable by either party without the prior
written consent of the other, such consent not to be unreasonably withheld. The
rights and obligations contained in this Agreement are solely for the benefit of
the parties hereto and are not intended to benefit or be enforceable by any
other party, under the third party beneficiary doctrine or otherwise.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
<PAGE>
EXECUTION PAGE FOR SUBSCRIPTION BY INDIVIDUALS
(not applicable to subscriptions by entities, Individual
Retirement Accounts, Keogh Plans or ERISA Plans)
TOTAL SUBSCRIPTION AMOUNT $ .
---------------------------
[ ]INDIVIDUAL OWNER [ ]CUSTODIAN UNDER
(One signature required below) Uniform Gifts to Minors Act
[ ]JOINT TENANTS WITH RIGHT --------------------------------------------
OF SURVIVORSHIP (Insert applicable state)
(All tenants must sign below) (Custodian must sign below)
[ ]TENANTS IN COMMON [ ]COMMUNITY PROPERTY
(All tenants must sign below) (Both spouses in community property
states must sign below)
Print information as it is to appear on the Company records.
- -------------------------------- ---------------------------------------------
(Name of Subscriber) (Social Security or Taxpayer ID No.)
- -------------------------------- ---------------------------------------------
- -------------------------------- ---------------------------------------------
(Home Address) (Home Telephone)
- -------------------------------- ---------------------------------------------
- -------------------------------- ------------------------------------
(Business Address) (Business Telephone)
- -------------------------------- ---------------------------------------------
(Name of Co-Subscriber) (Social Security or Taxpayer ID No.)
- -------------------------------- ---------------------------------------------
- -------------------------------- ---------------------------------------------
(Home Address) (Home Telephone)
- --------------------------------
- -------------------------------- ------------------------------------(Business
Address) (Business Telephone)
SIGNATURE(S)
-----------
Dated:______________, 1997.
(1)By: (2) By:
------------------------- -------------------------------------
Signature of Authorized Signatory Signature of Authorized Co-Signatory
------------------------- -------------------------------------
Print Name of Signatory and Title, Print Name of Co-Signatory and Title,
if applicable if applicable
ACCEPTED AND AGREED:
ECOTYRE TECHNOLOGIES, INC.
By: Dated: , 1997.
--------------------------- ----------------------------
Name:
Title:
<PAGE>
(ACKNOWLEDGEMENT FOR INDIVIDUALS)
STATE OF :
: s:
COUNTY OF :
On this _____________ day of ___________, 1997, before me, a notary public in
and for the state and county aforesaid, personally appeared
___________________________, known to me to be the person(s) whose name(s) is
(are) subscribed to the foregoing Subscription Agreement and acknowledged that
he, she or they executed the same.
-------------------------
Notary Public
<PAGE>
EXECUTION PAGE FOR SUBSCRIPTION BY ENTITIES
TOTAL SUBSCRIPTION AMOUNT $ .
--------------------------
[ ]EMPLOYMENT BENEFIT PLAN OR TRUST (including pension plan, profit sharing
plan, other defined contribution plan and SEP)
[ ]IRA, IRA ROLLOVER OR KEOGH PLAN
[ ]TRUST (other than employee benefit trust)
[ ]CORPORATION (Please include certified corporate resolution authorizing
signature)
[ ]PARTNERSHIP
[ ]OTHER
Print information as it is to appear on the Company records.
- ----------------------------- ---------------------------------------------
(Name of Subscriber) (Taxpayer ID Number)
- ----------------------------- ---------------------------------------------
(Plan number, if applicable)
- ----------------------------- ---------------------------------------------
(Address) (Telephone Number)
- --------------------------------------------------------------------------------
Name and Taxpayer ID number of sponsor, if applicable
The undersigned trustee, partner, corporate officer or fiduciary certifies
that he or she has full power and authority from all beneficiaries, partners or
shareholders of the entity named above to execute this Subscription Agreement on
behalf of the entity and to make the representations, warranties and agreements
made herein on their behalf and that investment in the Units has been
affirmatively authorized by the governing board or body of such entity and is
not prohibited by law or the governing documents of the entity.
SIGNATURE(S)
------------
Dated: , 1997.
-------------------------
By: By:
---------------------------- -------------------------------------------
Signature of Authorized Signatory Signature of Required Authorized Co-Signatory
- ------------------------------- -------------------------------------------
Print Name of Signatory Print Name of Required Co-Signatory
- ------------------------------- -------------------------------------------
Print Name of Signatory Print Title of Required Co-Signatory
ACCEPTED AND AGREED:
ECOTYRE TECHNOLOGIES, INC.
By: Dated: , 1997
---------------------------- ------------------
Name:
Title:
<PAGE>
(ACKNOWLEDGEMENT FOR ENTITIES)
STATE OF :
: ss:
COUNTY OF :
On this ___________ day of _______, 1997, before me personally came
_____________________ known to me, who, being by me duly sworn, did depose and
say that he or she is the __________ of ___________________________________, the
entity described in and which executed the foregoing Subscription Agreement;
that is was so affirmatively authorized by the governing board or body of such
entity; and that he or she signed his or her name thereto by like order.
-----------------------------------
Notary Public
<PAGE>
Annex A
INVESTOR SUITABILITY STANDARDS
A purchase of the Units involves a high degree of risk and is suitable only
for persons of substantial financial means who have no need for liquidity in
their investments. The offer, offer for sale, and sale of the securities are
intended to be exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to Regulation D promulgated
thereunder ("Regulation D"), and are intended to be exempt from the requirements
of applicable state securities laws.
The Common Stock is being offered and sold only to up to thirty-five (35)
"non-accredited investors" and to "accredited investors," as those terms are
defined in Regulation D.
Regulation D defines an "accredited investor" as follows:
(1) Any bank as defined in section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934; any insurance company as defined in section
2(13) of the Securities Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
section 2(a)(48) of that act; any Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such act, which is
or either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors;
(2) Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose or acquiring the securities offered, with total
assets in excess of $5,000,000;
(4) Any director, executive officer, or general partner of the issuer of
the securities being offered or sold, or any director, executive officer, or
general partner of a general partner of that issuer;
(5) Any natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of his or her purchase exceeds $1,000,000;
<PAGE>
(6) Any natural person who had an individual income in excess of $200,000
in each of the two most recent years or joint income with that person's spouse
in excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
(7) Any trust with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is directed
by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D;
and
(8) Any entity in which all of the equity owners are accredited investors.
<PAGE>
Exhibit B
Qualified Purchaser Questionnaire
Purpose of this Questionnaire
- -----------------------------
The Units (the "Units") of EcoTyre Technologies Inc., a Delaware corporation
(the "Company"), are being offered without registration under the Securities Act
of 1933, as amended (the "Act"), or the securities laws of any state, in
reliance on the exemptions contained in Sections 3(b) and 4(2) of the Act and on
similar exemptions under applicable state laws. Under Sections 3(b) and 4(2)
and/or certain state laws, the Company may be required to determine that an
individual, or an individual together with a "purchaser representative" or each
individual equity owner of an investing entity meets certain suitability
requirements before selling the Units to such individual or entity. THE COMPANY
MAY, AT ITS ELECTION, NOT SELL THE UNITS TO A SUBSCRIBER WHO HAS NOT THOROUGHLY
FILLED OUT A QUESTIONNAIRE. IN THE CASE OF AN INVESTOR THAT IS A PARTNERSHIP,
TRUST OR CORPORATION, EACH EQUITY OWNER MUST COMPLETE A QUESTIONNAIRE. This
Questionnaire does not constitute an offer to sell or a solicitation of an offer
to buy the Units or any other security.
Instructions
- -----------
One (1) copy of this Questionnaire should be completed, signed, dated and
delivered to Vito Alongi,, c/o EcoTyre Technologies, Inc., 895 Waverly Avenue,
Holtsville, New York 11742 (Telephone: (516) 289-4545) if you have any questions
with respect to the Questionnaire.
PLEASE ANSWER ALL QUESTIONS. If the appropriate answer is "None" or "Not
Applicable," so state. Please print or type your answers to all questions.
Attach additional sheets if necessary to complete your answers to any item.
Your answers will be kept strictly confidential at all times; however, the
Company may present this Questionnaire to such parties as it deems appropriate,
including its counsel, in order to assure itself that the offer and sale of the
Units will not result in a violation of the registration provisions of the Act
or a violation of the securities laws of any state.
<PAGE>
1. Please provide the following personal information:
Name_____________________ Age: _______
Residence Address (including zip code):
---------------------------
---------------------------
Telephone Numbers: Residence: ___________ Business: ____________
Social Security or Federal Tax I.D. Number _________________________
2. Please describe your present or most recent business or occupation
and indicate such information as the nature of your employment, the principal
business of your employer, the principal activities under your management or
supervision and the scope (e.g., dollar volume, industry rank, etc.)
of such activities:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. Please provide the following information concerning your financial
experience:
3.1 Indicate by check mark which of the following categories best
describes the extent of your prior experience in the areas of investment listed
below:
Substantial Limited No
Experience Experience Experience
----------- ---------- ----------
Marketable Securities _____ _____ _____
Equity Securities for
which no market exists _____ _____ _____
Limited Partnerships _____ _____ _____
Initial Public Offerings _____ _____ _____
3.2 Indicate by check mark whether you maintain any of the following
types of accounts over which you, rather than a third party,
exercise investment discretion, and the length of time you have
maintained each type of account.
Securities (cash): _____ _____ _____ Number of years: _____
Yes No
<PAGE>
Securities (margin): _____ _____ Number of years: _____
Yes No
4. Please answer the following questions (If you are investing as an
individual, please fill out section 4.1; otherwise, please fill out section
4.2):
4.1 For Individuals:
(a) Does your net worth1 (or joint net worth with your spouse, if
greater) exceed $1,000,000?
----- -----
Yes No
(b) Did you have an individual income2 in excess of $200,000 or
joint income together with your spouse in excess of $300,000, in
each of the two most recent years and do you reasonably expect to
reach the same income level in the current year?
----- -----
Yes No
(c) For New Jersey Residents Only: Did you have individual income in
excess of $200,00 in each of the two most recent years and do you
reasonably expect to reach the to reach the same level in the
current year?
----- -----
Yes No
- ---------
1 For purposes hereof, net worth shall be deemed to include all of your assets,
liquid or illiquid (including such items as home, furnishings, automobile and
restricted securities) minus any liabilities (including such items as home
mortgages and other debts and liabilities).
2 For purposes hereof, the term "income" is not limited to "adjusted gross
income" as that term is defined for Federal Income Tax purposes, but rather
includes certain items of income which are deducted in computing "adjusted gross
income," For investors who are salaried employees, the gross salary of such
investor, minus any significant expenses personally incurred by such investor in
connection with earning the salary, plus any income from any other source,
including unearned income, is a fair measure of "income" for purposes hereof.
For investors who are self-employed, "income" is generally construed to mean
total revenues received during the calendar year minus significant expenses
incurred in connection with earning such revenues.
<PAGE>
4.2 For Corporations, Trusts, Pension Funds and other Non-Individuals, are
you:
(a) A bank as defined in section 3(a)(2) of the Act, or any savings
and loan association or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934; any insurance company as
defined in section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 or a business
development company as defined in section 2(a)(48) of that act;
Small Business Investment Company licensed by the U.S. Small
Business Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions for the
benefit of its employees, if such plan has total assets in excess
of $5,000,000; employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 if the investment
decision is made by a plan fiduciary, as defined in section 3(21)
of such Act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000 or,
if a self-directed plan, with investment decisions made solely by
persons that are accredited investors, as defined in Regulation D
promulgated pursuant to the Act ("Regulation D"):
----- -----
Yes No
(b) A private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940:
----- -----
Yes No
(c) Any organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust
or partnership, not formed for the specific purpose of acquiring
the securities offered with total assets in excess of $5,000,000:
----- -----
Yes No
<PAGE>
(d) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any director,
executive officer, or general partner of a general partner of that
issuer:
----- -----
Yes No
(e) Any trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) of Regulation D:
----- -----
Yes No
(f) Any entity in which all of the equity owners are accredited
investors, as defined in Regulation D:
----- -----
Yes No
(g) If you are a corporation that has its principal place of
business in California, do you have total assets in excess of
$14,000,000 and were you not formed for the specific purpose of
acquiring any Units?
----- -----
Yes No
5. Check if appropriate:
[ ] I hereby represent and warrant that I have such knowledge and
experience in financial and business matters that I am capable of
evaluating the merits and risks of any prospective investment in the
Company.
(If you checked this box, please skip item 6. If you are a resident of
California, Florida or New York, please go to item 7. If you are a
resident of another state, go directly to item 8.)
6. If you did not check the box to Question 5, please answer the following
additional questions:
<PAGE>
6.1 Please describe any preexisting personal or business relationship
that you have with the Company or any of its officers and
directors.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6.2 Please describe any business or financial experience that you have
had that would allow the Company to reasonably conclude that you
are capable of protecting your interests in connection with your
prospective investment in the Company. If none, so state:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6.3 If your answer to question 6.2 above was "None," in order to
evaluate the merits and risks of the investment, will you be
relying upon the advice of any other person(s) who will be acting
as your purchaser representative(s)?
----- -----
Yes No
If "yes," please identify each such person and indicate his business
address and telephone number in the space below. (Each such person
must complete, and you must review and acknowledge, a separate
Purchaser Representative questionnaire which will be supplied at
your request and must be returned to the Company prior to the sale
of any Units to you.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
7. 1. For Residents of California:
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS QUESTIONNAIRE
HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT
OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 251000, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THE
SUBSCRIPTION AGREEMENT RELATING TO THESE SECURITIES ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
2. For Residents of Florida:
WHERE SALES ARE MADE TO FIVE OR MORE PERSONS IN FLORIDA (EXCLUDING
CERTAIN INSTITUTIONAL PURCHASERS DESCRIBED IN SECTION 517.061(7) OF
THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT (THE "FLORIDA
ACT"), ANY SUCH SALE MADE PURSUANT TO SECTION 517.061(11) OF THE
FLORIDA ACT SHALL BE VOIDABLE BY THE PURCHASER EITHER WITHIN THREE
DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER
TO THE ISSUER, OR AN AGENT OF THE ISSUER, OR AN ESCROW AGENT, OR
WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS
COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER.
3. For Residents of New York:
THE UNDERSIGNED NEW YORK STATE RESIDENT UNDERSTANDS THAT THIS OFFERING
HAS NOT BEEN REVIEWED BY THE ATTORNEY GENERAL OF THE STATE OF NEW YORK
BECAUSE OF THE OFFEROR'S REPRESENTATIONS THAT THIS IS INTENDED TO BE A
NON-PUBLIC OFFERING PURSUANT TO SEC REGULATION D, AND THAT IF ALL OF
THE CONDITIONS AND LIMITATIONS OF THE SEC REGULATION ARE NOT COMPLIED
WITH, THE OFFERING WILL BE RESUBMITTED TO THE ATTORNEY GENERAL FOR
AMENDMENT EXEMPTION. I UNDERSTAND THAT ANY OFFERING LITERATURE USED IN
CONNECTION WITH THIS OFFERING HAS NOT BEEN PRE-FILED WITH THE ATTORNEY
GENERAL AND HAS NOT BEEN REVIEWED BY THE ATTORNEY GENERAL .
<PAGE>
THE UNITS BEING PURCHASED FOR MY OWN ACCOUNT FOR INVESTMENT, AND NOT
FOR DISTRIBUTION OR RESALE TO OTHERS. I AGREE THAT I WILL NOT SELL OR
OTHERWISE TRANSFER THESE SECURITIES UNLESS THEY ARE REGISTERED UNDER
THE FEDERAL SECURITIES ACT OF 1933 OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. I REPRESENT THAT I HAVE ADEQUATE MEANS OF
PROVIDING FOR MY CURRENT NEEDS AND POSSIBLE PERSONAL CONTINGENCIES,
AND THAT I HAVE NO NEED FOR LIQUIDITY OF THIS INVESTMENT.
IT IS UNDERSTOOD THAT ALL DOCUMENTS, RECORDS AND BOOKS PERTAINING TO
THIS INVESTMENT HAVE BEEN MADE AVAILABLE FOR INSPECTION BY MY ATTORNEY
AND/OR MY ACCOUNTANT AND/OR MY OFFEREE REPRESENTATIVE AND MYSELF, AND
THAT THE BOOKS AND RECORDS OF THE ISSUER WILL BE AVAILABLE UPON
REASONABLE NOTICE, FOR INSPECTION BY INVESTORS AT REASONABLE HOURS AT
ITS PRINCIPAL PLACE OF BUSINESS.
---------------------------
Acknowledged (Please initial)
8. By signing this questionnaire, I hereby confirm the following statements:
(a) I am aware that the offering of the Units pursuant to the
accompanying Subscription Documents which I hereby acknowledge as received and
reviewed, will involve securities for which no market currently exists, thereby
requiring any investment to be maintained for an indefinite period of time, and
I have no need to liquidate the investment.
(b) I acknowledge that any delivery to me of any documentation relating
to the Units prior to the determination by the Company of my suitability as an
investor shall not constitute an offer of the Units until such determination of
suitability shall be made, and I agree that I shall promptly return all such
documentation to the Company upon request.
(c) My answers to the foregoing questions are true and complete to the
best of my information and belief, and I will promptly notify the Company of
any changes in the information I have provided.
(d) I also understand and agree that, although the Company will use its
best efforts to keep the information provided in answers to this questionnaire
strictly confidential, the Company may present this questionnaire and the
information provided in answers to it to such parties as it may deem advisable
if called upon to establish the availability under any federal or state
securities laws of an exemption from registration of the private placement or
if the contents thereof are relevant to any issue in any action, suit or
proceeding to which the Company or its affiliates is a party or by which it or
they are or may be bound.
<PAGE>
(e) I realize that this questionnaire does not constitute an offer by the
Company or its affiliates to sell the Units but is merely a request for
information.
-------------------------- -------------------------
Printed Name Spouse's Name
(If purchasing jointly)
-------------------------- -------------------------
Signature Spouse's Signature
(If purchasing jointly)
-------------------------- -------------------------
Social Security or Employee Spouse's Social Security Number
Identification Number (If purchasing jointly)
Date and Place Executed:
Date:
--------------------
Place:
----------------------------------------
Confidential
PRIVATE PLACEMENT MEMORANDUM
ECOTYRE TECHNOLOGIES, INC.
800,000 Shares of Common Stock
in Units of 50,000 Shares
June 18, 1997
Copy No. _______
<PAGE>
CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM
Best Efforts Offering - Up to 800,000 Shares of Common Stock, par value $.001
per share at $1.25 per share in Units of 50,000 Shares
OFFERING PRICE: $62,500 PER UNIT
The Company Reserves the Right to
Accept or Reject Subscriptions
These Securities Involve a High Degree of Risk (See "Risk Factors")
---------------
The Company's Common Stock is traded on the NASDAQ SmallCap market (symbol:
ETTI). On June 13, 1997, the closing price of the Company's Common Stock on
NASDAQ was $2 5/8 per share. The offering price of this Common Stock ("Common
Stock") has been arbitrarily determined by the Company based, among other
things, on the closing price of its Common Stock, the Company's assets, net
worth, operations and other recognized criteria of value.
<TABLE>
<CAPTION>
Price to Sales Proceeds to
Investors Commissions (1)(2) Company (3)
--------- ----------------- -----------
<S> <C> <C> <C>
Per Unit $62,500 $6,250 $ 56,250
Maximum Offering $1,000,000 $100,000 $900,000
- --------------
<FN>
(1) The Shares are being offered by the Company on "best efforts, no minimum,
maximum 800,000 shares basis." All proceeds of the offering will be
utilized by the Company as it is received. The subscription price is
payable upon submission to the Company of a fully completed and executed
Subscription Agreement and Qualified Purchaser Questionnaire. This offering
will terminate forty-five (45) days from the date of this Private Placement
Memorandum, unless extended by the Company for an additional period of time
not exceeding thirty (30) days, or such earlier date as may be determined
by the Company. See "Private Placement."
(2) Registered broker-dealers may receive a commission of 10% of the aggregate
gross sales price of the Units sold by them.
(3) Before deducting expenses payable by the Company in connection with this
offering estimated at $25,000.
</FN>
</TABLE>
--------------
THE SECURITIES BEING OFFERED HEREBY HAVE NOT BEEN REGISTERED OR APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
REGULATORY AUTHORITY OF ANY STATE, NOR HAS THE COMMISSION OR ANY SUCH AUTHORITY
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
--------------
June 18, 1997
<PAGE>
INTRODUCTION
This Confidential Private Placement Memorandum has been prepared by EcoTyre
Technologies, Inc., a Delaware corporation (the "Company"), and will be
delivered to a limited number of potential investors who may be interested in
purchasing from the Company Common Stock at $1.25 per share. By accepting this
Private Placement Memorandum, each recipient agrees that it will keep the
information contained herein confidential and will not copy, reproduce or
distribute any of it to others without the prior written consent of the Company.
This Private Placement Memorandum is being delivered by the Company to
prospective investors for use in connection with their consideration of the
purchase of the Common Stock with the understanding that all prospective
investors will conduct their own independent investigation of those matters
which they deem appropriate in order to evaluate the merits and risks of
purchasing the Common Stock.
Except where otherwise indicated, this Private Placement Memorandum speaks
as of the date hereof. Neither the delivery of this Private Placement Memorandum
nor any sale of Common Stock shall, under any circumstances, create any
implication that the information contained herein is correct or complete as of
any time subsequent to the date hereof.
The Common Stock is being offered when, as and if issued, subject to prior
sale or withdrawal, cancellation or modification of the offer without notice,
subject to the rights of the Company to reject any subscription for the Common
Stock in whole or in part, for any reason, and subject to the approval of
certain legal matters by counsel and certain other conditions. The Common Stock
offered hereby may not be sold without delivery of this Private Placement
Memorandum.
The Common Stock offered hereby is offered for a period not exceeding
forty-five (45) days, subject to extension by the Company.
The Common Stock subject hereto has not been registered with or approved by
the Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "Securities Act"), and may not be offered or sold within
the United States, except pursuant to an exemption from the registration
requirements of the Securities Act. The Common Stock subject hereto also has not
been registered with or approved by any securities regulatory authority of any
state or other jurisdiction, nor has the SEC or any such authority passed upon
the adequacy or accuracy of this Private Placement Memorandum. Any
representation to the contrary is unlawful. This Private Placement Memorandum
does not constitute an offer or solicitation in any state or other jurisdiction
in which such offer to sell or solicitation is not authorized. Each purchaser of
the Common Stock described in this Private Placement Memorandum must acquire the
Common Stock for its own account for investment purposes and may have to bear
the full economic risk of its investment. Each such purchaser must complete and
deliver to the Company a Qualified Purchaser's Questionnaire in the form
attached as Exhibit B to this Private Placement Memorandum.
<PAGE>
The Subscription Agreement to be executed and delivered by purchasers of
the Common Stock will contain restrictions applicable to subsequent dispositions
thereof designed to require compliance with the Securities Act. The form of this
Subscription Agreement is attached as Exhibit A to this Private Placement
Memorandum. The certificates representing shares of Common Stock will bear a
legend to the effect that such securities have not been registered under the
Securities Act and that the transfer thereof is restricted.
The statements in this Private Placement Memorandum do not constitute legal
or tax advice and recipients should consult their own legal and tax advisers
regarding any such matters.
The Company reserves the right to request the return of this Private
Placement Memorandum at any time and each recipient agrees, by accepting this
Private Placement Memorandum, to promptly return it as well as all other
material received in the course of evaluating this financing.
Inquiries relating to the Company should be directed confidentially to Mr.
Vito Alongi at EcoTyre Technologies, Inc., 895 Waverly Avenue, Holtsville, New
York 11742, Telephone No.:
(516) 289-4545; Fax No.: (516) 289-4722.
<PAGE>
WHO SHOULD INVEST
An investment in the Common Stock offered hereby involves a high degree of
financial risk and is therefore suitable only for persons who have substantial
income or net worth and are capable of evaluating the merits and risks of
investing in the Common Stock. Only prospective investors who are also able to
bear indefinitely the economic risk of their investment and who otherwise
satisfy the suitability standards described herein will be permitted to purchase
any of the Common Stock offered hereby.
This offering of Common Stock has not been registered or qualified with,
nor has the adequacy or accuracy of this Memorandum been reviewed or passed upon
by, the Securities and Exchange Commission or by any state securities
administrator. The offering is being made in reliance on certain exemptions from
such registration and qualification requirements. The availability of these
exemptions is dependent upon, among other things, the investment intent and
qualifications of each prospective investor. The Common Stock will only be sold
to "accredited investors," as such term is defined in Rule 501(a) of Regulation
D under the Securities Act of 1933, as amended (the "Securities Act"). An
"accredited investor" includes any person or entity who the Company reasonably
believes comes within any one of the following categories:
(i) An individual having a net worth with spouse (including automobiles,
principal residence and furnishings) at the time of purchase,
individually or jointly, in excess of $1,000,000; or
(ii) An individual whose individual income was in excess of $200,000 in
each of the two most recent years, or whose joint income with spouse
was in excess of $300,000 in each of those years, and who reasonably
expects his individual or joint income with such investor's spouse to
reach such level(s) in the current year; or
(iii)A corporation, partnership, Massachusetts or similar business trust,
or organization described in Section 501(c)(3) of the Internal Revenue
Code (tax exempt organization), not formed for the specific purpose of
acquiring the Common Stock, having total assets in excess of
$5,000,000; or
(iv) A bank, savings and loan association or other similar institution (as
defined in Sections 3(a)(2) and 3(a)(5)(A) of the Securities Act; or
(v) An insurance company (as defined in Section 2(13) of the Securities
Act); or
(vi) An investment company registered under the Investment Company Act of
1940; or
(vii)A business development company (as defined in Section 2(a)(48) of the
Investment Company Act of 1940) or a private business development
company (as defined in Section 202(a)(22) of the Investment Advisers
Act of 1940); or
<PAGE>
(viii) A Small Business Investment Company licensed by the U. S. Small
Business Administration under Sections 301(c) or (d) of the Small
Business Investment Act of 1958; or
(ix) A broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934; as amended; or
(x) A plan established and maintained by a state, its political
subdivision, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, which plan
has total assets in excess of $5,000,000; or
(xi) An employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974 ("ERISA"), if the investment decision is
made by a "Plan Fiduciary," as defined in Section 3(21) of such Act,
which is either a bank, savings and loan association, insurance
company or registered investment adviser; or
(xii)An employee benefit plan within the meaning of ERISA having total
assets in excess of $5,000,000; or
(xiii) A self-directed employee benefit plan within the meaning of ERISA,
with investment decisions made solely by persons who are accredited
investors as defined in Rule 501(a) of Regulation D; or
(xiv)A trust with total assets in excess of $5,000,000 not formed for the
specific purpose of acquiring Common Stock, whose purchase is directed
by a sophisticated person (i.e., a person who has such knowledge and
experience in financial and business matters that he is capable of
evaluating the merits and risks of an investment in the Common Stock);
or
Investors will be required to represent in writing that they meet the
requirements outlined above by completing and returning to the Company the
Subscription Agreement attached as an Exhibit hereto and the Purchaser
Questionnaire attached as an Exhibit hereto. In addition, each investor will be
required to represent that he or it is acquiring the Common Stock for investment
purposes only, with no intention of reselling or further distribution, and that
the Common Stock will not be transferred or otherwise resold except in
compliance with the Securities Act, and any applicable state acts. The Company
reserves the right to modify or extend the suitability requirements for
potential investors in order for the offering to comply with the requirements of
all applicable state laws and regulations.
Due to the risks inherent in an investment in the Common Stock offered
hereby, and in order to comply with the provisions of the exemption from the
registration and qualification requirements of the Securities Act and applicable
state securities laws, the Company has determined that Common Stock will be
<PAGE>
offered and sold only to prospective investors who, prior to purchase: (a)
represent that they are acquiring the Common Stock for their own account, for
investment purposes only and not with a view to or in connection with a further
resale or distribution; (b) represent that they are aware that the Common Stock
has not been registered or qualified under the Securities Act and applicable
state securities laws and therefore cannot be resold unless they are registered
and qualified under the Securities Act and applicable state securities laws or
an exemption therefrom is available; (c) have such knowledge and experience in
business and financial matters that they are capable of evaluating the merits
and risks of, and protecting their interests in connection with, this
investment; and (d) represent that they are able to bear the economic risk of a
complete loss of their investment.
The suitability standards referred to above represent minimum suitability
requirements for prospective investors. Accordingly, the satisfaction of such
standards by a prospective investor does not necessarily mean that the Common
Stock is a suitable investment for him or her or that his or her subscription
for Common Stock will be accepted.
The Company may reject the subscription of any prospective purchaser who
does not represent that he meets such standards. In addition, the Company, at
its sole discretion, or to the extent required by the laws of any applicable
state, may require that transferees comply with these standards as a condition
to substitute as a shareholder in the Company. In the event any Common Stock is
purchased by a person or entity in fiduciary capacity for any other person (or
for an entity in which each such person is deemed to be a "purchaser" of the
Common Stock), the suitability standards set forth above will be applicable to
such other person.
If any information furnished or representations made by a prospective
investor or others acting on their behalf mislead the Company as to the
financial or other circumstances of such investor or, if, because of any error
or misunderstanding as to such circumstances, a copy of this Memorandum is
delivered to a prospective investor who does not meet the suitability standards
set forth above, the delivery of this Memorandum to the prospective investor
will not be deemed to be an offer, and this Memorandum must be returned to the
Company immediately.
<PAGE>
HOW TO SUBSCRIBE
If, after carefully reviewing the information contained in this Private
Placement Memorandum and such other information as an investor may deem
relevant, an investor decides to invest in the Company, the investor should
complete and deliver to the Company copies of each of (1) the Subscription
Agreement, duly executed in the form attached hereto as Exhibit A, (2) a payment
equal to the amount of Common Stock subscribed for, by check payable to "EcoTyre
Technologies, Inc." and (3) the Qualified Purchaser's Questionnaire, duly filled
in and executed in the form attached hereto as Exhibit B.
The Subscription Agreement, the check and the Qualified Purchaser's
Questionnaire should be sent to:
EcoTyre Technologies, Inc.
895 Waverly Avenue
Holtsville, New York 11742
Attn: Mr. Vito Alongi
An investor's execution and delivery of the Subscription Agreement
constitutes a binding offer to subscribe for the Common Stock and such
subscription may not be withdrawn, except as specifically provided below.
Upon acceptance of the subscription by the Company (which the Company may
reject or accept, in whole or in part, in its sole discretion, within thirty
(30) days after receipt of such subscription), the Company will notify the
investor of such acceptance and of the date designated by the Company for the
closing of the offering.
<PAGE>
THE PURCHASE OF THE COMMON STOCK WILL ENTAIL A HIGH DEGREE OF RISK. NO PERSON
SHOULD INVEST IN THE SECURITIES WHO IS NOT IN A POSITION TO LOSE, AND CANNOT
AFFORD THE LOSS OF, HIS OR HER ENTIRE INVESTMENT. SEE 'RISK FACTORS." INVESTORS
WILL BE REQUIRED TO MAKE REPRESENTATIONS WITH RESPECT TO THEIR NET WORTH AND
INCOME AND TO REPRESENT, AMONG OTHER THINGS, THAT THEY ARE ABLE TO BEAR THE
ECONOMIC RISK OF LOSS OF THEIR INVESTMENT AND THAT THEY ARE FAMILIAR WITH AND
UNDERSTAND THE TERMS AND RISKS OF THIS OFFERING, INCLUDING THE SUBSTANTIAL
RESTRICTIONS ON THE TRANSFERABILITY OF THE SECURITIES OFFERED HEREBY.
-------------------------
THIS MEMORANDUM IS SUBMITTED IN CONNECTION WITH THE OFFERING OF THE COMMON STOCK
AND MAY NOT BE REPRODUCED OR USED FOR ANY OTHER PURPOSES. ANY ACTION CONTRARY TO
THESE RESTRICTIONS MAY INVOLVE A VIOLATION OF CERTAIN STATES' BLUE SKY LAWS.
-------------------------
MANAGEMENT HAS AGREED TO MAKE AVAILABLE, PRIOR TO THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREIN, TO EACH OFFEREE OF COMMON STOCK OR HIS
REPRESENTATIVE(S) OR BOTH, THE OPPORTUNITY TO ASK QUESTIONS OF, AND RECEIVE
ANSWERS FROM, MANAGEMENT OR ANY PERSON ACTING ON ITS BEHALF CONCERNING THE TERMS
AND CONDITIONS OF THIS OFFERING, AND TO OBTAIN ANY ADDITIONAL INFORMATION, TO
THE EXTENT MANAGEMENT POSSESSES SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT
UNREASONABLE EFFORT OR EXPENSE, NECESSARY TO VERIFY THE ACCURACY OF THE
INFORMATION SET FORTH HEREIN.
-------------------------
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OF SECURITIES TO ANYONE OTHER THAN
THE PERSON(S) WHOSE NAME(S) APPEAR(S) ON THE COVER. NO ONE, OTHER THAN SUCH
PERSON(S), RECEIVING A COPY OF THIS MEMORANDUM MAY TREAT THE SAME AS
CONSTITUTING AN OFFER TO PURCHASE AND NO SUBSCRIPTION AGREEMENT WILL BE ACCEPTED
OTHER THAN FROM SUCH PERSON(S).
-------------------------
<PAGE>
PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS MEMORANDUM OR ANY
PRIOR OR SUBSEQUENT COMMUNICATION FROM THE COMPANY, ITS AFFILIATES, DIRECTORS,
OFFICERS AND EMPLOYEES OR ANY PROFESSIONAL ASSOCIATED WITH THIS OFFERING AS
LEGAL OR TAX ADVICE. EACH INVESTOR SHOULD CONSULT HIS OR HER OWN PERSONAL
COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX , ECONOMIC, AND RELATED
MATTERS CONCERNING THE INVESTMENT DESCRIBED HEREIN AND ITS SUITABILITY FOR HIM
OR HER.
-------------------------
NEITHER THE DISTRIBUTION OF THIS MEMORANDUM, IN WHOLE OR IN PART, NOR THE
DIVULGENCE OF ANY OF ITS CONTENTS, IS PERMITTED UNLESS AUTHORIZED BY MANAGEMENT.
NO OFFERING LITERATURE OR ADVERTISING, IN WHATEVER FORM, SHALL BE EMPLOYED IN
THE OFFERING OF THESE SHARES, EXCEPT THE INFORMATION CONTAINED HEREIN OR
AUTHORIZED BY MANAGEMENT. NO PERSON HAS BEEN AUTHORIZED TO MAKE REPRESENTATIONS
OR GIVE ANY INFORMATION WITH RESPECT TO THESE SHARES EXCEPT THE INFORMATION
CONTAINED HEREIN.
-------------------------
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO ANYONE IN ANY
STATE OR IN ANY OTHER JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT
AUTHORIZED.
-------------------------
REFERENCE SHOULD BE MADE TO THE SUPPORTING DOCUMENTS AND OTHER INFORMATION
FURNISHED HEREWITH FOR THE COMPLETE INFORMATION CONCERNING THE RIGHTS AND
OBLIGATIONS OF THE PARTIES THERETO. CERTAIN PROVISIONS OF SUCH AGREEMENTS ARE
SUMMARIZED IN THIS MEMORANDUM, BUT IT SHOULD NOT BE ASSUMED THAT THE SUMMARIES
ARE COMPLETE.
-------------------------
THE SALE OF THE COMMON STOCK IS SUBJECT TO THE PROVISIONS OF A `SUBSCRIPTION
AGREEMENT (THE "SUBSCRIPTION AGREEMENT") CONTAINING CERTAIN REPRESENTATIONS,
WARRANTIES, TERMS AND CONDITIONS. ANY INVESTMENT IN THE COMMON STOCK SHOULD BE
MADE ONLY AFTER A COMPLETE AND THOROUGH REVIEW OF THE PROVISIONS OF THE
SUBSCRIPTION AGREEMENT AND THE OTHER SUBSCRIPTION DOCUMENTS.
<PAGE>
-------------------------
NOTICE TO FLORIDA RESIDENTS:
A SALE IS VOIDABLE BY THE PURCHASER IN SUCH STATE WITHIN 3 DAYS AFTER THE
FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER OR WITHIN
3 DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH
PURCHASER, WHICHEVER OCCURS LATER.
NOTICE TO PENNSYLVANIA RESIDENTS:
THE SECURITIES REPRESENTED BY THIS MEMORANDUM WILL HAVE BEEN ISSUED
PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION OR QUALIFICATION
PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS
OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXCEPTIONS
THEREFROM.
PURSUANT TO SECTION 207(m) OF THE PENNSYLVANIA SECURITIES ACT OF 1972, AS
AMENDED, EACH PENNSYLVANIA RESIDENT WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES
EXEMPTED FROM REGISTRATION UNDER SECTION 203(d) OF THE 1972 ACT, DIRECTLY FROM
AN ISSUER OR AN AFFILIATE OF AN ISSUER, SHALL HAVE THE RIGHT TO WITHDRAW HIS
ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE SELLER, UNDERWRITER (IF ANY)
OR ANY OTHER PERSON, WITHIN TWO BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE
ISSUER OF HIS WRITTEN BINDING CONTRACT OF PURCHASE OR, IN THE CASE OF A
TRANSACTION IN WHICH THERE IS NO WRITTEN BINDING CONTRACT OF PURCHASE, WITHIN
TWO BUSINESS DAYS AFTER HE MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING
OFFERED. TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER OR
TELEGRAM TO THE COMPANY AT THE ADDRESS SET FORTH IN THE TEXT OF THIS MEMORANDUM
INDICATING HIS OR HER INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM SHOULD BE
SENT AND POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED SECOND BUSINESS DAY.
IT IS PRUDENT TO SEND SUCH LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
TO ENSURE THAT IT IS RECEIVED AND ALSO TO EVIDENCE THE TIME WHEN IT WAS MAILED.
IF THIS REQUEST IS MADE ORALLY (IN PERSON OR BY TELEPHONE, TO THE COMPANY AT THE
NUMBER LISTED IN THE TEXT OF THIS MEMORANDUM), A WRITTEN CONFIRMATION THAT THE
REQUEST HAS BEEN RECEIVED SHOULD BE REQUESTED. EACH PENNSYLVANIA RESIDENT WHO
SUBSCRIBES FOR THE SECURITIES BEING OFFERED HEREBY MUST AGREE NOT TO SELL SUCH
SECURITIES FOR A PERIOD OF TWELVE (12) MONTHS AFTER THE DATE OF PURCHASE.
<PAGE>
NOTICE TO NORTH CAROLINA RESIDENTS:
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO THE RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
<PAGE>
EcoTyre Technologies, Inc.
Private Placement Memorandum
Table of Contents
-----------------
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Company . . . . . . . . . . . . . . . . . . . . . . . . 1
The Offering. . . . . . . . . . . . . . . . . . . . . . . . 2
Summary Financial Information . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . . . . 10
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 10
Incorporation of Certain Documents by Reference. . . . . . . . . 11
Description of Securities. . . . . . . . . . . . . . . . . . . . 11
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 11
Certain Provisions of the Certificate of
Incorporation . . . . . . . . . . . . . . . . . . . . . . 13
Transfer Restrictions . . . . . . . . . . . . . . . . . . . 14
Private Placement. . . . . . . . . . . . . . . . . . . . . . . . 15
Determination of Offering Price . . . . . . . . . . . . . . 15
Financial Statements . . . . . . . . . . . . . . . . . . . . . . 15
Exhibits
- --------
Exhibit A - Subscription Agreement
Exhibit B - Qualified Purchaser Questionnaire
Exhibit C - Report on Form 10-KSB for the fiscal year ended March 31, 1996.
Exhibit D - Report on Form 10-QSB for the nine months ended December 31,
1996.
Exhibit E - Proxy Statement dated April 24, 1997.
<PAGE>
SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the more detailed information and the financial statements
appearing elsewhere in, or incorporated by reference to, this Private Placement
Memorandum. Unless otherwise indicated herein, references to common stock of the
Company give effect to a 7-for-1 reverse stock split effectuated by the Company
in May 1997.
The Company
EcoTyre Technologies Inc., (the "Company") has marketed since 1993 remolded
automobile tires manufactured by third parties for sale in the United States
replacement automobile passenger tire market. The Company believes based on
published industry reports that in 1994, over $7 billion of replacement
automobile passenger tires were sold in the United States. During 1995, the
Company curtailed distribution operations, concentrating its efforts on
commencing manufacturing operations for its own line of remolded tires, which
limited manufacturing operations commenced in December 1995. The remolded tires
manufactured by the Company are created by remanufacturing a previously used
high-quality passenger automobile tire casing of a name brand manufacturer.
Through a process comparable to manufacturing a new tire, new rubber is attached
to the casing from sidewall to sidewall.
While remolded passenger automobile tires have for many years been used in
the United Kingdom and other parts of Europe, their use in the United States has
been primarily for commercial purposes such as in the airline industry. Based
upon its experience in distributing remolded passenger automobile tires in the
United States, and in order to exercise greater control over costs and product
quality, the Company acquired equipment to manufacture its own remolded tires
and leased a 65,000 sq. ft. manufacturing facility. The Company also hired
executive, management and engineering personnel with significant experience in
the automobile passenger automobile tire industry, including the manufacture of
remolded passenger automobile tires.
The Company was incorporated under the laws of the State of Delaware on May
20, 1994 as a successor to a predecessor New York corporation formed in April
1993 from which it acquired the assets used in connection with its business in
June 1994. The Company's executive offices, manufacturing facility and warehouse
are located at 895 Waverly Avenue, Holtsville, New York 11742, and its telephone
number is (516) 289-4545.
<PAGE>
The Offering
Securities Offered: The Company is offering hereby up to 800,000
shares of Common Stock in Units, each Unit consisting of
50,000 shares of Common Stock. The minimum subscription is
for one Unit, although the Company reserves the right to
accept subscriptions for less than one Unit.
Common Stock: The shares of Common Stock issuable in this
placement will have demand registration rights exercisable
no earlier than thirty (30) days after the completion of
this offering as well as piggyback registration rights
with respect to all other registration statements
filed by the Company with the SEC (other than on forms S-4
or S-8), subject to customary underwriter's or board of
director's rights to limit such participation.
In the event the shares of Common Stock issuable in
this placement are not registered within forty-five days
after demand, the Company shall be required to issue to
the subscribers hereof additional Common Stock of the
Company in an amount equal to 5% of Common Stock issued
hereunder for each month thereafter that the Common Stock
remains unregistered.
Use of Proceeds: Proceeds from this offering will be primarily
used for working capital to continue the development and
expansion of the Company's business operations at its
Holtsville, New York facility.
<PAGE>
Summary Financial Information
The unaudited summary financial information, other than the "as adjusted"
data, set forth below is derived from the financial statements appearing
elsewhere herein. This information should be read in conjunction with such
financial statements, including the notes thereto.
Balance Sheet Data:
<TABLE>
<CAPTION>
At March 31, 1997
-------------------------------
Actual As Adjusted(1)(2)(3)
---------- -------------------
(unaudited) (unaudited)
<S> <C> <C>
Working Capital. . . . . . $ 226,870 $1,772,148
Total Assets . . . . . . . 4,352,225 5,777,225
Total Liabilities. . . . . 2,585,390 2,465,112
Class A Redeemable Convertible
Preferred Stock . . . . 1,191,590 -
Stockholders' Equity
(Deficiency) . . . . . . 575,245 3,312,113
Statement of Operations Data:
Nine Months Ended December 31,
1996 1995
(Unaudited) (Unaudited)
Net Sales. . . . . . . . . $ 1,598,351 $ 218,583
Net Income (Loss). . . . . $(2,910,424) $ (1,972,023)
Income (Loss) Per
Common Share (4) . . . . $(.83) $(1.39)
- -------------
<FN>
(1) Adjusted to reflect receipt of the maximum net proceeds from this
placement.
(2) Adjusted to give effect to (i) purchase of Butler Retreading machinery and
equipment for $889,000 paid by $700,000 in proceeds from Phoenixcor loan
and issuance of 300,000 shares of common stock valued at market ($189,000)
and (ii) the issuance of 100,000 shares of common stock in exchange for
debt.
(3) Adjusted to give effect to (1) conversion of redeemable convertible
preferred stock into convertible preferred stock including conversion of
$120,278 of accrued dividends and (ii) receipt of 300,000 shares of
publicly traded stock in exchange for 675,000 shares of convertible Series
B preferred stock.
(4) Does not give effect to a 7-for-1 reverse stock split effectuated by the
Company in May, 1997.
</FN>
</TABLE>
<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk. Only those persons able to lose their entire investment should purchase
these securities. Prospective investors, prior to making an investment decision,
should carefully consider, along with other matters referred to herein, the
following risk factors:
Limited Operating History; Historical and Anticipated Operating Losses. The
Company has had limited sales and operations since the inception of its business
in April 1993. For the nine months ended December 31, 1996 and for its fiscal
years ended March 31, 1996 and 1995, the Company had net sales of $1,598,351,
$314,024 and $1,281,223, respectively, and net losses of ($2,910,424),
($2,637,313) and ($833,925), respectively. As of March 31, 1997 the Company had
total assets of $4,352,225, working capital of $226,870, and stockholders'
equity of $575,245, respectively. The Company is subject to all the general
risks inherent in, and the problems, expenses, difficulties, complications and
delays frequently encountered in connection with establishing any new business
and manufacturing operations. There is no assurance that the Company will
operate at a level sufficient to achieve profitability.
Limited Manufacturing History. The Company commenced limited remolded tire
manufacturing operations in December, 1995, but no assurance can be given that
the Company will be able to successfully manufacture remolded tires of
sufficient quality to permit the successful sale thereof, that the Company will
be able to manufacture a sufficiently complete line of products to satisfy the
demands of its customers or that the Company will be able to produce quantities
of remolded tires sufficient to achieve profitability. In this regard, the
Company will be purchasing new machinery and equipment in order to manufacture a
greater percentage of recreational vehicle and high performance tires which
historically sell at greater profit margins. There is no assurance that this
machinery and equipment will operate efficiently and manufacture sufficient
numbers of such tires to increase the Company's profit margins.
Manufacturing with Used Machinery and Equipment. A majority of the
machinery and equipment which the Company is using in its manufacturing
operations is approximately nine years old and was used for approximately four
years. The equipment sat idle for four years, except that it has been used for
the past twelve months by the Company. The Company has no warranty or service
contract with respect to such equipment, and bears the sole risk of such
equipment failing to operate effectively. Accordingly, no assurance can be given
that this equipment will function properly and some amount of repairs,
refurbishings and delays already have been experienced. There also can be no
assurance that the Company's manufacturing facility will not experience
additional delays.
Need for Additional Financing. This offering is on a "best efforts" basis
so that less than the maximum funds of $1,000,000 covered by this memorandum may
be received. In such event, the Company may need to secure additional financing
to continue its operations. The Company also may require additional funds to
expand its manufacturing facilities. Adequate funds for this purpose on terms
favorable to the Company, whether through equity financing, debt financing or
other sources, may not be available when needed. Furthermore, the Company has
granted a first priority security interest on its machinery and equipment to a
third party, which could adversely impact its ability to finance its operations.
<PAGE>
Uncertainty of Market Acceptance; Failure of Prior Tire Remolders. In
April, 1993, the Company began distributing remolded automobile passenger tires
in the United States manufactured by third parties and believes there will be
market acceptance of its own manufactured remolded passenger tires based on its
experience as a distributor. Remolded passenger automobile tires historically
have not accounted for a significant portion of the United States passenger
automobile replacement tire market. Since the Company's remolded tires will
compete with new replacement tires, there can be no assurance that consumers
will be willing to purchase remolded tires notwithstanding the price
differential and the Company's belief that its remolded tires will be comparable
in quality and appearance to new tires. In this regard, the Company believes
that at least three previous businesses which attempted to manufacture, market
and sell remolded passenger automobile tires in the United States, including the
previous owner of the Company's machinery and equipment, failed to successfully
do so and such previous owner has ceased business operations. There is no
assurance that a U.S. market for the Company's products will develop and grow.
There also is no assurance that the U.S. market will provide sufficient revenue
and earnings to satisfy the cash requirements of the Company.
Dependence on Large Customers. As a distributor of remolded tires
manufactured by third parties, two customers, Martino Tire Company and RPJ Tire
Company, accounted for 27% and 18%, respectively, of the Company's net sales for
the fiscal year ended March 31, 1995, and one of these customers accounted for
12% of the Company's net sales for the fiscal year ended March 31, 1996. The
Company has distribution agreements which grant each of these customers
exclusive territorial rights to sell the Company's products in their respective
territories based on certain minimum purchase requirements and provide that
these customers will not sell any other remolded tires. While the Company
intends to expand its customer base as a manufacturer of remolded tires, there
is no assurance that it will be successful in these efforts. Further, there is
no assurance that these customers will purchase large quantities of tires from
the Company since their minimum purchase requirements only effect the
exclusivity of their distributorships.
Competition. There are inherent difficulties for any new business seeking
to continue limited manufacturing operations and market a new product,
particularly in a very competitive market such as that for replacement
automobile tires. There are numerous manufacturers and/or distributors of new
tires, previously used tires and retreaded tires. The replacement tire market is
quite mature, and is serviced by a large number of competitors, several of which
dominate the marketplace. The Company anticipates that its primary competition
will be from lower-priced, lesser-known associated brands of major
manufacturers, and private-label manufacturers of new tires, both imported and
domestic, such as Coronet (Armstrong Tire Company), Summit (General Tire
<PAGE>
Company), Hankock, Hercules (Cooper Tire & Rubber Co.), Ohtsu and others. The
Company would also compete with manufacturers and distributors of retreaded
tires such as Les SchwabTire Centers. Many of these competitors have been in
existence for many years, have extensive marketing budgets, established market
shares, wide name recognition and existing franchise, dealer or other
distribution networks. They also have greater financial, personnel and
administrative resources than the Company and have the capability of value
pricing their products to deter or eliminate competition. Assuming the Company
does gain significant market share, there is no assurance that other U.S. or
foreign tire manufacturers, including those with experience in the foreign
remolded tire markets, will not begin manufacturing and marketing remolded tires
in direct competition with the Company in the United States. New entrants in
this industry could have an adverse impact on the Company's potential revenues
and profit margins. While the Company believes that the primary areas of
competition in its industry are price, warranty, service, appearance and quality
and that its products should compete favorably in these regards, there is no
assurance that the Company will be able successfully to compete against
established manufacturers or any new entrants into its industry.
Possible Adverse Impact of Unavailability of, or Higher Prices for, Raw
Materials. The primary raw materials anticipated by the Company to be used in
its manufacturing operations are previously used tire casings and rubber. The
Company believes that rubber is readily available from several sources, though
the price thereof may fluctuate. The Company also believes that suitable tire
casings are readily available from a wide variety of sources, including several
distributors of automobile tire casings and directly from tire distribution
centers. Given the nature of the market for tire casings, the Company believes
that it will be necessary to obtain casings from many sources to meet its
anticipated needs. While the Company does not anticipate any difficulties in
obtaining sufficient quantities of automobile tire casings and rubber to be used
in its operations, no assurance can be given in this regard. In the event that
sufficient quantities of raw materials are not available, or if the prices
thereof become uneconomical, the Company's business operations and financial
condition could be materially adversely affected.
Risks Relating to Environmental and Other Governmental Regulation. As a
manufacturer of remolded automobile tires, the Company's products are subject to
regulation by the United States Department of Transportation and other
government agencies relating to the safety and performance of its products. In
addition, as a manufacturer of rubber products with a manufacturing facility
located in the ecologically sensitive eastern region of Long Island, the Company
may be subject to various environmental regulations imposed by federal, state
and local authorities. While the Company believes that its manufacturing
operations are not environmentally sensitive, are in compliance with all
applicable environmental laws and regulations and that all necessary permits and
approvals will be obtained, no assurance can be given that compliance with
environmental laws, regulations or other restrictions, including any new laws or
regulations, will not impose additional costs on the Company which could
adversely affect its financial performance and results of operations.
Importance of and Risks Relating to Intellectual Property Rights. The
automobile tire industry is characterized by extensive use of intellectual
property protected by patent and trademark laws. The Company utilizes tire tread
designs and a manufacturing process which it has not patented and which it
believes are lawfully in the public domain. While the Company believes that it
does not infringe on the intellectual property rights of any third parties in
the conduct of its business, allegations of any such infringement, or disputes
or litigations relating thereto, could have a material adverse affect on the
Company's financial condition and results of operations.
<PAGE>
Risk of Seasonality. While there is a year-round demand for automobile
tires, automobile tire sales in the Northeastern United States are generally
strongest during the second and third calendar quarters of the year. Seasonality
may have an impact on the Company's operations including cash flow, insofar as
the Company is required to control inventory levels to reflect projected
quarterly sales. However, since the Company anticipates that approximately 50%
of its sales will be in the Western United States and other regions where all
purpose automobile tires are used year round, it does not believe that
seasonality will adversely impact its operations.
Risk of Inadequate Product Liability Insurance. The Company's business
exposes it to potential liability which is inherent in the production and
distribution of automotive equipment. The Company currently maintains
$15,000,000 of product liability, general and personal and advertising injury
insurance per occurrence and in the aggregate, subject to a $10,000 deductible.
There can be no assurance that the Company will be able in the future to obtain
any product liability insurance on an economic basis or that such coverage, if
obtained, will ultimately prove adequate or will be renewable for any period. If
any product liability claim is made and sustained against the Company and is not
covered by insurance, the Company's business and prospects could be materially
adversely affected.
Dependence on Key Personnel. The Company's continuation of manufacturing
operations and the implementation of its business expansion plan are dependent
in substantial part upon the abilities of Vito F. Alongi, its President and John
W. King, the Company's Vice President. Although each of Mr. Alongi and Mr. King
has entered into an employment agreement with the Company, there can be no
assurance that they will remain in the employ of or continue to provide services
to the Company. The loss of the services of either of such persons would likely
have a material adverse effect on the Company. The Company is the beneficiary
under a $1,000,000 life insurance policy with respect to the lives of Vito F.
Alongi and John King.
No Dividends on Common Stock. The Company has never declared or paid any
dividends on its shares of Common Stock. The Company intends to utilize its
earnings, if any, to facilitate the expansion of its business for the
foreseeable future. Accordingly, it has no intention of declaring or paying
dividends on its Common Stock for the foreseeable future. Any such dividends are
subject to the prior payment of dividends on the Class A Preferred Stock. See
"Dividend Policy".
Potential Adverse Impact on Market Price of Shares Offered Hereunder and
Other Shares Eligible for Future Sale. 285,714 shares of Common Stock were sold
in October, 1996 under Regulation S of the Securities Act. While the Company
believes that part of these shares have been sold, the remaining shares are
presently freely saleable. In April and May 1997, the Company also sold 90,000
shares of Common Stock to investors, for which the investors have demand
registration rights. Additionally, approximately 97,000 shares of the Company's
<PAGE>
Common Stock owned by non-public shareholders, are "restricted securities" as
that term is defined under Rule 144 promulgated under the Securities Act of
1933, as amended (the "Act") and may only be sold pursuant to a registered
offering or in accordance with applicable exemptions from the registration
requirements of the Act. Additionally, approximately 1,045,000 shares of Common
Stock underlying the Class A Preferred Stock and Class B Preferred Stock have
"piggy-back" registration rights which require the shares to be registered for
sale in future registrations of the Company, subject to certain restrictions.
The Company is unable to predict the effect that sales of Regulation S stock,
future sales under Rule 144 or the sale of registered shares may have on the
then prevailing market price of Common Stock. It can be expected, however, that
the sale of any substantial number of shares of Common Stock will have a
depressive effect on the market price of the Common Stock.
Possible Dilutive Effect of the Issuance of Substantial Amounts of
Additional Shares Without Stockholder Approval. The Company will have an
aggregate of approximately 27,630,643 shares of Common Stock authorized but
unissued and not reserved for specific purposes and an additional 1,504,071
shares of Common Stock unissued but reserved for issuance pursuant to (i) the
Company's Long Term Incentive Plans, (ii) exercise of other Purchase Options
(including any shares of Common Stock obtainable upon exercise of the Class A
Warrants included in the Units sold in the Company's initial public offering of
securities in December 1995 and shares reserved for issuance in payment for
consulting services). All of such shares may be issued without any action or
approval by the Company's shareholders. Any shares issued would further dilute
the percentage ownership of the Company held by the holders of the Company's
Common Stock. The terms on which the Company could obtain additional capital
during the life of these securities may be adversely affected because of such
potential dilution and because the holders thereof might be expected to convert
or exercise them if the market price of the Common Stock exceeds their
conversion or exercise price.
Possible Issuance of Preferred Stock and Superior Rights of Preferred
Stock; Potential Adverse Effect on Common Stockholders. In addition to the
above-referenced shares of Common Stock which may be issued without shareholder
approval, the Company has 544,642 authorized and unissued shares of Class A
Preferred Stock, and an additional 1,325,000 authorized and unissued shares of
Serial Preferred Stock, the terms of which may be fixed by the Company's Board
of Directors. While the Company has no present plans to issue any additional
shares of preferred stock, the Board of Directors has the authority, without
shareholder approval, to create and issue one or more series of such preferred
stock and to determine the voting, dividend and other rights of holders of such
preferred stock. The issuance of any of such series of preferred stock could
have an adverse effect on the rights of holders of Common Stock.
Potential Anti-Takeover Effects of Delaware Law and Certificate of
Incorporation; Possible Issuances of Preferred Stock. Certain provisions of
Delaware law and the Company's certificate of incorporation and by-laws could
make more difficult a merger, tender offer or proxy contest involving the
Company, even if such events could be beneficial to the interests of the
shareholders. These provisions include Section 203 of the Delaware General
Corporation law, the classification of the Company's Board of Directors into
three classes and the requirement that 66 2/3% of the stockholders of the
<PAGE>
Company entitled to vote thereon approve certain transactions including mergers
and sales or transfers of all or substantially all the assets of the Company.
Such provisions could limit the price that certain investors might be willing to
pay in the future for shares of the Company's Common Stock or preferred stock.
Moreover, although the ability to issue other classes of preferred stock may
provide flexibility in connection with possible acquisitions and other corporate
purposes, such issuance may make it more difficult for a third party to acquire,
or may discourage a third party from acquiring, a majority of the voting stock
of the Company.
Possibility of NASDAQ Delisting and Decrease in Stock Price. The continued
trading of the Company's securities on NASDAQ is conditioned upon the Company
continuing to meet certain asset, capital and surplus, earnings and stock price
tests. The requirements to maintain eligibility on NASDAQ require the Company to
maintain total assets in excess of $2,000,000, capital and surplus in excess of
$1,000,000, and (subject to certain exceptions) a bid price of at least $1.00
per share. If the Company fails any of these tests, the Common Stock may be
delisted from trading on NASDAQ. In this regard the Company has previously
received notification from NASDAQ that the continued listing of its securities
was conditioned upon the Company effectuating a reverse stock split of at least
3-to-1 at its Annual Meeting of Stockholders held on May 29, 1997 and that
thereafter its Common Stock close at a minimum of $1.00 for ten consecutive
trading days. To comply with the NASDAQ requirements for continued listing, the
Company effectuated a 7-for-1 reverse stock split in May, 1997 and, as a result,
has maintained the closing price for ten days required by NASDAQ for continued
listing. The effects of future delisting, however, include the limited release
of the market prices of the Company's securities and limited news coverage of
the Company. Delisting may restrict investors' interest in the Company's
securities and materially adversely affect the trading market and prices for
such securities and the Company's ability to issue additional securities or to
secure additional financing. In addition to the risk of volatility of stock
prices and possible delisting, low price stocks are subject to the additional
risks of additional federal and state regulatory requirements and the potential
loss of effective trading markets. In particular, if the Common Stock was
delisted from trading on NASDAQ and the trading price of the Common Stock were
less than $5.00 per share, the Common Stock could be subject to Rule 15g-9 under
the Exchange Act, which, among other things, require that broker/dealers satisfy
sales practice requirements, including making individualized written suitability
determinations and receiving any purchaser's written consent prior to any
transaction. In such case, the Company's securities could also be deemed penny
stocks under the Securities Enforcement and Penny Stock Reform Act of 1990,
which would require additional disclosure in connection with trades in the
Company's securities, including the delivery of a disclosure schedule explaining
the nature and risks of the penny stock market. Such requirements could severely
limit the liquidity of the Company's securities and the ability of purchasers in
this offering to sell their securities in the secondary market.
Possible Going Concern Issue. As a result of continuing losses, the
uncertainty as to the Company's ability to operate at a level to achieve
profitability and the likely need for additional financing after completion of
this offering, there may be doubt regarding the Company's ability to continue as
a going concern.
<PAGE>
DIVIDEND POLICY
The Company has never declared or paid any cash dividends and currently does
not intend to pay cash dividends in the foreseeable future on the shares of
Common Stock.
Management intends to reinvest earnings, if any, in the development and
expansion of the Company's business. Cash dividends, if any, that may be paid in
the future to holders of shares of Common Stock will be payable when, as and if
declared by the Board of Directors of the Company, based upon the Board's
assessment of the financial condition of the Company, its earnings, need for
funds, capital requirements, and prior claims, of preferred stock to the extent
issued and outstanding and other factors, including any applicable laws.
USE OF PROCEEDS
The net proceeds from this offering are estimated to be approximately
$880,000, assuming sale of 800,000 shares of Common Stock, and after deducting
sales commissions of approximately $100,000, and $20,000 of other expenses.
These net proceeds will be used for working capital to continue the development
and expansion of the Company's business operations at its Holtsville, New York
facility. Pending such use, the net proceeds will be invested in interest
bearing United States Government or other investment grade marketable securities
or will be deposited in money market accounts, interest bearing certificates of
deposit or bank accounts or other limited-risk short term investments.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Securities
and Exchange Commission (File No. 0-27240) pursuant to the Securities Exchange
Act of 1934, are incorporated by reference to this Prospectus, shall be deemed
to be a part hereof and are attached as exhibits hereto:
(1) The Company's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1996.
(2) The Company's Quarterly Report on Form 10-QSB for the nine months
ended December 31, 1996.
(3) The Company's Notice of Annual Meeting and Proxy Statement dated April
24, 1997.
DESCRIPTION OF SECURITIES
Capital Stock
The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock, $.001 par value per share, 2,000,000 shares of Class A Convertible
Preferred Stock, 675,000 shares of Class B Convertible Preferred Stock and
1,325,000 shares of Preferred Stock, $.001 par value per share.
Common Stock
------------
Holders of the Common Stock do not have subscription, redemption,
conversion or preemptive rights. The shares of Common Stock sold by the Company
in this offering will be, when issued and paid for, fully paid and
non-assessable. Each share of Common Stock is entitled to participate pro rata
in distribution upon liquidation, subject to the rights of holders of Preferred
Stock, and to one vote on all matters submitted to a vote of stockholders. The
holders of Common Stock may receive cash dividends as declared by the Board of
Directors out of funds legally available therefor, subject to the rights of any
holders of Preferred Stock. Holders of the Common Stock are entitled to elect
all directors. The Company's Board consists of three classes each of which
serves for a term of three years. At each annual meeting of the stockholders the
directors in only one class will be elected. The holders of the Common Stock do
not have cumulative voting rights, which means that the holders of more than
half of the shares voting for the election of a class of directors can elect all
of the directors of such class and in such event the holders of the remaining
shares will not be able to elect any of such directors.
<PAGE>
Class A Convertible Preferred Stock
- -----------------------------------
Each issued and outstanding share of Class A Convertible Preferred Stock
("Class A Preferred") entitles the holder to receive dividends when, as and if
declared by the Board of Directors, at the annual rate of 10%, payable
semi-annually in either cash or common stock at the option of the Company.
Additionally, these preferred shareholders have the right to receive
preferential payments in the event of liquidation, dissolution or winding up of
the affairs of the Company. The holders of Class A Preferred have the right to
convert all or any part of their shares into Common Stock of the Company. The
Conversion Rate shall be (A) the sum of (1) $1.00 plus (2) all accrued and
unpaid dividends on a single share of Class A Convertible Preferred Stock
divided by (B) the Conversion Price (as hereinafter defined). The "Conversion
Price" shall be the lesser of (a) $21.00 per share ("fixed conversion price") or
(b) seventy-five (75%) percent of the Closing Bid Price of one share of the
Company's Common Stock for the five trading day period immediately prior to the
conversion date. For the purposes hereof, the "Closing Bid Price" shall mean the
closing bid price of the Company's Common Stock as reported by NASDAQ (or, if
not reported by NASDAQ, as reported by such other exchange or market where
traded).
Until July 15, 1997, each holder of shares of Class A Convertible Preferred
Stock shall not be entitled to convert any shares of Class A Convertible
Preferred Stock. After July 15, 1997, each holder of shares of Class A
Convertible Preferred Stock shall be permitted to convert such shares as
follows:
(a) commencing July 15, 1997, for such month and for each calendar
month thereafter, each holder of Class A Convertible Preferred Stock shall be
entitled to convert up to twenty-five (25%) percent of the shares of Class A
Convertible Preferred Stock held by such holder as of July 15, 1997.
(b) commencing October 15, 1997 all of the shares of Class A
Convertible Preferred Stock shall be convertible into Common Stock.
The number of shares of Common Stock into which each share of Class A
Convertible Preferred Stock is convertible also shall be subject to adjustment
from time to time under certain situations including reclassification or
recapitalization of the Common Stock.
Class B Convertible Preferred Stock
- -----------------------------------
Each issued and outstanding share of Class B Convertible Preferred Stock
("Class B Preferred") entitles the holder to receive dividends when, as and if
declared by the Board of Directors, at the annual rate of 10%, payable
semi-annually in either cash or common stock at the option of the Company.
Additionally, these preferred shareholders have the right to receive
preferential payments in the event of liquidation, dissolution or winding up of
the affairs of the Company. The holders of Class B Preferred have the right to
convert all or any part of their shares into Common Stock of the Company. The
conversion rate shall be (A) the sum of (1) $1.00 plus (2) all accrued and
unpaid dividends on a single share of Class B Convertible Preferred Stock
<PAGE>
divided by (B) the Conversion Price (as hereinafter defined). The "Conversion
Price" shall be $2.45 per share. Notwithstanding the foregoing, in no event
shall the shares of Common Stock issued on conversion have a market value of
less than $675,000 in the aggregate.
The number of shares of Common Stock into which each share of Class B
Convertible Preferred Stock is convertible shall also be subject to adjustment
from time to time under certain situations including reclassification or
recapitalization of the Common Stock.
Preferred Stock
---------------
The Company's certificate of incorporation, as amended, authorizes the
issuance of up to 1,325,000 shares of additional preferred stock, par value
$.001 per share.
The issuance of additional Series A Preferred Stock or Preferred Stock by
the Board of Directors could adversely affect the rights of holders of shares of
Common Stock by, among other things, establishing preferential dividends,
liquidation rights or voting power. The issuance of Series A Preferred Stock or
Preferred Stock could be used to discourage or prevent efforts to acquire
control of the Company through the acquisition of shares of Common Stock.
Certain Provisions of the Certificate of Incorporation
The Company's Certificate of Incorporation contains certain provisions
which may be deemed to be "anti-takeover" in nature in that such provisions may
deter, discourage or make more difficult the assumption of control of the
Company by another entity or person. In addition to the ability to issue
Preferred Stock, these provisions are as follows:
A vote of 66-2/3% of the stockholders is required by the Certificate of
Incorporation in order to approve certain transactions including mergers and
sales or transfers of all or substantially all of the assets of the Company.
The Company's Certificate of Incorporation also provides that the members
of the Board of Directors of the Company have been classified into three
classes. The term of each class will run for three years and expire at
successive annual meetings of stockholders. Accordingly, it is expected that it
would take a minimum of two annual meetings of stockholders to change a majority
of the Board of Directors.
The Delaware General Corporation Law further contains certain anti-takeover
provisions. Section 203 of the Delaware General Corporation Law provides, with
certain exceptions, that a Delaware corporation may not engage in any of a broad
range of business combinations with a person who owns 15% or more of the
corporation's outstanding voting stock (an "interested stockholder") for a
period of three years from the date that such person became an interested
<PAGE>
stockholder unless: (i) the transaction resulting in a person's becoming an
interested stockholder, or the business combination is approved by the board of
directors of the corporation before the person becomes an interested
stockholder; (ii) the interested stockholder acquires 85% or more of the
outstanding voting stock of the corporation (excluding shares owned by persons
who are both officers and directors of the corporation, and shares held by
certain employee stock ownership plans); or (iii) the business combination is
approved by the corporation's board of directors and by the holders of at least
66 2/3% of the corporation's outstanding voting stock at an annual or special
meeting, excluding shares owned by the interested stockholder.
Transfer Restrictions
This offering is being made pursuant to an exemption to the registration
requirements of Section 5 of the Securities Act. The Securities have not been
registered under the Securities Act and may not be offered or sold within the
United States, except that the Notes may be offered or sold in reliance on
exemption from the registration requirements of the Securities Act.
Each purchaser of the Securities offered hereby will be deemed to have
represented and agreed as follows:
(1) It is acquiring the Securities for its own account for investment
purposes and not with a view to resale.
(2) It understands that such Securities are being offered only in a
transaction not involving any public offering within the meaning of the
Securities Act, and that, if in the future it decides to resell, pledge or
otherwise transfer such Securities, such Securities may be resold, pledged or
transferred only (i) to the Company, (ii) pursuant to an exemption from
registration under the Securities Act.
(3) It understands that the Securities offered hereby will bear a legend to
the following effect unless otherwise agreed by the Company and the holder
thereof:
THIS SECURITY IS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY AGREES
FOR THE BENEFIT OF THE ISSUER THAT SUCH SHARES MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) TO THE COMPANY OR (2) IF, IN THE OPINION OF
COUNSEL TO THE COMPANY, SUCH TRANSFER IS MADE PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT.
<PAGE>
PRIVATE PLACEMENT
The Securities will not be registered by the Company under the Securities
Act of 1933, as amended, and will not be listed on any securities exchange.
Securities offered hereby can be purchased only by "accredited investors," as
such term is defined under Regulation D promulgated under the Securities Act.
The Company extends to each prospective investor the opportunity, prior to
the consummation of the sale of the securities offered hereby, to ask questions
of, and receive answers from, the Company concerning the securities offered
hereby, and the terms and conditions of this offering, and to obtain any
additional information it may consider necessary in making an informed
investment decision or in order to verify the accuracy of the information set
forth herein, to the extent that the Company possesses the same or can acquire
it without unreasonable effort or expense and can make such information
available without divulging information deemed by the Company, in its absolute
discretion, to be proprietary and confidential.
Determination of Offering Price
The price of the Common Stock has been determined by the Company. Among the
factors considered in such determination were the closing price of its Common
Stock, an analysis of the areas of activity in which the Company is engaged, the
present state of the Company's business, the Company's financial condition, the
Company's prospects, an assessment of management, the general condition of the
securities market at the time of the offering and the demand for similar
securities of comparable companies. The price of the securities does not
necessarily bear any relationship to assets, earnings, book value or other
criteria of value applicable to the Company.
FINANCIAL STATEMENTS
The financial statements of the Company as of December 31, 1996 (unaudited)
and March 31, 1996 and 1995 are set forth in its reports on Forms 10-KSB and
10-QSB annexed as exhibits to the Private Placement Memorandum.
<PAGE>
Exhibit A
SUBSCRIPTION AGREEMENT
Subscription Agreement, dated as of _________, 1997, between EcoTyre
Technologies, Inc., a Delaware corporation (the "Company") and
________________________________ (the "Purchaser").
WHEREAS, the Purchaser desires to subscribe for, and the Company desires to
issue to the Purchaser, Units (the "Units") each Unit consisting of 50,000
shares of common stock, par value $.001 per share (the "Common Stock") of the
Company (the "Shares"), all upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
premises, covenants, representations and warranties herein contained, it is
hereby agreed as follows:
1. Subscription Price; Issuance.
----------------------------
In reliance on the representations and warranties contained herein and
subject to the terms and conditions hereof, the Purchaser hereby subscribes for
___ Units and concurrently with delivery hereof has paid to the Company an
amount equal to $62,500 per Unit or $__________ in the aggregate, in immediately
available funds upon the execution and delivery of this Agreement, and the
Company will issue upon the closing as contemplated by the Memorandum (as
hereinafter defined) to the Purchaser 50,000 Shares with respect to each such
Unit.
2. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants to the Purchaser as follows:
2.1. Corporate Status.
----------------
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware with full corporate
power and authority to carry on its business as now conducted.
2.2. Authority of Agreement.
----------------------
The Company has the power and authority to execute and deliver
this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company and this Agreement
constitutes the valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally now or hereafter in effect and
<PAGE>
subject to the application of equitable principles and the availability of
equitable remedies. The Company has reserved from its authorized but unissued
shares of Common Stock such number of shares as shall be deliverable to the
Purchaser upon the Closing of the Units subscribed for hereby.
2.3. No Conflicts.
------------
The execution, delivery and performance of this Agreement and
the other instruments and agreements to be executed, delivered and performed by
the Company pursuant hereto and the consummation of the transactions
contemplated hereby and thereby by the Company do not and will not with or
without the giving of notice or the passage of time or both, violate or conflict
with or result in a breach or termination of any provision of, or constitute a
default under, the Certificate of Incorporation or the By-Laws of the Company or
any order, judgment, decree, statute, regulation, contract, agreement or any
other restriction of any kind or description to which the Company or its assets
may be bound or subject.
2.4 Fully Paid and Non-Assessable
-----------------------------
Upon issuance of the Shares and payment therefor pursuant to the
terms hereof, each share of Common Stock shall be validly issued, fully paid and
non-assessable.
3. Representations and Warranties of the Purchaser.
-----------------------------------------------
The Purchaser represents and warrants to the Company as follows:
3.1. Status.
------
If the Purchaser is a corporation or other entity, the Purchaser
is a corporation or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with full power
and authority to execute, deliver and perform its obligations under this
Agreement. If the Purchaser is an individual, the Purchaser has legal capacity
to execute, deliver and perform his or her obligations under this Agreement.
3.2 Authority for Agreements.
------------------------
The Purchaser has the power and authority to execute and deliver
this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance by the Purchaser of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary action on the part of the Purchaser and this Agreement constitutes the
valid and legally binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally now or hereafter in effect and subject to the
application of equitable principles and the availability of equitable remedies.
<PAGE>
3.3. No Conflicts.
------------
The execution, delivery and performance of this Agreement and the
other instruments and agreements to be executed, delivered and performed by the
Purchaser pursuant hereto and the consummation of the transactions contemplated
hereby and thereby by the Purchaser do not and will not with or without the
giving of notice or the passage of time or both, violate or conflict with or
result in a breach or termination of any provision of, or constitute a default
under, the Certificate of Incorporation or the By-Laws of the Purchaser (if the
Purchaser is a corporation), any other organizational instrument (if the
Purchaser is a legal entity other than a corporation) or any order, judgment,
decree, statute, regulation, contract, agreement or any other restriction of any
kind or description to which the Purchaser is a party or by which the Purchaser
may be bound.
3.4. Investor Representations and Acknowledgements.
---------------------------------------------
(a) The Purchaser is acquiring the Units for the Purchaser's own
account for investment only and not as nominee or agent and not with a view to,
or for sale in connection with, a distribution of the Units or its components
and with no present intention of selling, transferring, granting a participation
in or otherwise distributing, the Units or such components, all within the
meaning of the Securities Act of 1933, as amended, and the rules and regulations
thereunder (the "Securities Act") and any applicable state, securities or
blue-sky laws.
(b) The Purchaser is not a party or subject to or bound by any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or pledge the Units or any part thereof to any person, and has no
present intention to enter into such a contract, undertaking, agreement or
arrangement.
(c) The Purchaser acknowledges to the Company that:
(i) The Company has advised the Purchaser that the Units have not
been registered under the Securities Act or under the laws of any state on
the basis that the issuance thereof contemplated by this Agreement is
exempt from such registration;
(ii) The Company's reliance on the availability of such exemption
is, in part, based upon the accuracy and truthfulness of the Purchaser's
representations contained herein;
(iii) The Units cannot be resold without registration or an
exemption under the Securities Act and such state securities laws, and that
certificates representing the Common Stock will bear a restrictive legend
to such effect;
(iv) The Purchaser has evaluated the merits and risks of
purchasing the Units, and has such knowledge and experience in financial
and business matters that the Purchaser is capable of evaluating the merits
and risks of such purchase, is aware of and has considered the financial
risks and financial hazards of purchasing the Units, and is able to bear
the economic risk of purchasing the Units, including the possibility of a
complete loss with respect thereto;
<PAGE>
(v) The Purchaser has had access to such information regarding the
business and finances of the Company, including without limitation, the
Company's audited and unaudited financial statements included in the
disclosure documents delivered by the Company to the Purchaser, and has
been provided the opportunity to discuss with the Company's management the
business, affairs and financial condition of the Company and such other
matters with respect to the Company as would concern a reasonable person
considering the transactions contemplated by this Agreement and/or
concerned with the operation of the Company;
(vi) All the information which is set forth with respect to the
Purchaser in the Qualified Purchaser Questionnaire executed by the
Purchaser, all of which are incorporated herein by this reference, and all
of the Purchaser's representations and warranties set forth herein are
correct and complete as of the date of this Agreement, shall be true and
correct as of the closing of the transaction contemplated by this
Agreement, shall survive such closing and if there should be any material
change in such information prior to the sale to the Purchaser of the Units
the Purchaser will immediately furnish such revised or corrected
information to the Company; and
(vii) Additional Representations and Warranties of Accredited
Investors. The Purchaser, by initialing the applicable paragraph below (a)
through (g) hereby represents and warrants that the Purchaser is an
"Accredited Investor", because the Purchaser comes within one or more of
the enumerated categories. The Purchaser has reviewed the Investor
Suitability Standards attached as Annex A hereto and confirms it is an
"Accredited Investor" as indicated below. Place your initials in the space
provided in the beginning of each applicable paragraph, thereby
representing and warranting as to the applicability to the Purchaser of the
initialed paragraph or paragraphs:
[ ] (a) any individual Purchaser whose net worth, or joint net worth
with that person's spouse at the time of his purchase, exceeds $1,000,000
(including any individual participant of a Keogh Plan, IRA or IRA Rollover
Purchaser);
[ ] (b) any individual Purchaser who had an income in excess of
$200,000 in each of the two most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and who
reasonably expects an income in excess of the same income level in the
current year (including any individual participant of a Keogh Plan, IRA or
IRA Rollover Purchaser);
[ ] (c) any corporation or partnership not formed for the specific
purpose of making an investment in the Common Stock, with total assets in
excess of $5,000,000;
<PAGE>
[ ] (d) any trust, which is not formed for the specific purpose of
investing in the Common Stock, with total assets in excess of $5,000,000,
whose purchase is directed by a sophisticated person, as such term is
defined in Rule 506(b) of Regulation D under the Securities Act;
[ ] (e) any ERISA Plan if the investment decision is made by a plan
fiduciary, as defined in section 3(21) of ERISA, which is either a bank,
insurance company, or registered investment adviser, or the Plan has total
assets in excess of $5,000,000;
[ ] (f) any entity in which all of the equity owners are Accredited
Investors under paragraphs (a), (b) or (c) above or any other entity
meeting required "Accredited Investor" standards under Rule 501 of
Regulation D under the Securities Act and applicable State securities law
criteria;
[ ] (g) other (please explain)
4. Registration Rights.
-------------------
4.1 Demand Registration Rights. The Company hereby covenants and
agrees that the Purchaser shall have the right, exercisable no earlier than
thirty (30) days after completion of the offering covered by the Memorandum to
demand registration of the Common Stock sold thereunder in a registration
statement; provided that no such registration statement shall be required to be
filed by the Company unless the holder of a majority of the shares of Common
Stock sold in such offering makes such demand. In the event of such demand, the
Company shall use its reasonable efforts to file such registration statement in
a timely manner. In addition, the Company does hereby grant certain other
registration rights, which rights are set forth in more detail in Section 4.2
hereof and Section 5.
4.2 Piggyback Registration Rights. The Company further covenants
and agrees that if, at any time following the date hereof, the Company proposes
to file a registration statement with respect to the public offering of any
class of security (other than in connection with a merger or acquisition on Form
S-4 or successor form or in connection with an employee benefit plan on Form S-8
or successor form) under the Securities Act in a primary registration on behalf
of the Company and/or in a secondary registration on behalf of holders of such
securities (other than the Shares) and the registration form to be used may be
used for registration of the Shares, the Company will give prompt written notice
to the holders of the Shares (the "Holders") at the addresses appearing on the
records of the Company of its intention to file a registration statement and
will offer to include in such registration to the maximum extent possible,
subject to paragraph (a) and (b) below of this Section 4.2, such number of
Shares with respect to which the Company has received written requests for
inclusion therein within ten (10) days after the giving of the Company's
aforementioned notice. The registration requested pursuant to this Section 4.2
is referred to herein as a "Piggyback Registration." The Company shall continue
to provide these Piggyback Registration rights and shall continue to give notice
of any such registrations to the Holders until such time as all of the Shares
shall have been registered under the Act.
<PAGE>
(a) Priority on Secondary Registrations. If the Piggyback Registration
applies only to an underwritten secondary registration on behalf of holders of
securities of the Company, and the underwriter(s) for such offering being
registered by the Company advise(s) the Company in writing that, in its/their
opinion, the number of Shares requested to be included in such registration
exceeds the number which can be registered on such registration statement
without materially adversely affecting the distribution of such securities, the
Company will include in such registration (i) first, the securities requested to
be included therein by the initial holders requesting such registration, (ii)
second, the securities purchased by the Purchaser pursuant to this Subscription
Agreement and all other purchasers in the same offering, and (iii) third, any
other securities requested to be included in such registration, apportioned pro
rata among the holders of such securities.
(b) Notwithstanding the foregoing, if any such underwriter shall determine
in good faith and advise the Company in writing that any distribution of the
Shares requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely affect the
distribution of such securities by the Company, then the Holders of such Shares
shall delay their offering and sale for such period ending on the earliest of
(1) 120 days following the effective date of the Company's registration
statement, (2) the day upon which the underwriting syndicate, if any, for such
offering shall have been disbanded or, (3) such date as the Company, the
managing underwriter of such offering and the Holders shall otherwise agree. In
the event of such delay, the Company shall file such supplements, post-effective
amendments and take any such other steps as may be necessary to permit such
Holders to make his proposed offering and sale for a period of 120 days
immediately following the end of such period or delay. If the Purchaser
disapproves of the terms of any such underwriting, the Purchaser may elect to
withdraw therefrom by written notice to the Company.
5. Company's Obligations for Registrations.
---------------------------------------
5.1 Costs and Expenses. The Company shall pay all costs
(excluding expenses of counsel to the Holders and underwriting, dealers or
selling commissions, which shall be borne by the Holders), fees and expenses in
connection with any registration statement filed pursuant to Section 4 hereof
including, without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses. If the Company shall fail to comply with
the provisions of Section 4 hereof, the Company shall, in addition to any other
equitable or other non-monetary relief available to the Holders, be liable for
any or all incidental, special and consequential damages due to loss of profit
sustained by the Holders as a result of such failure.
5.2 Blue Sky Laws. The Company will take all necessary action
which may be required in qualifying or registering the Shares included in a
registration statement for offer and sale under the securities or blue sky laws
of such states as reasonably are requested by the Holder(s); provided, that the
Company shall not be obligated to execute or file any general consent to service
of process or to qualify as a foreign corporation to do business under the laws
of any such jurisdiction; provided, further, that the Company shall not be
obligated to qualify or register the Shares in any state where the Company's
shares are not already qualified or registered for offer and sale.
<PAGE>
5.3 Indemnification of Holders. The Company shall indemnify the
Holder(s) of the Shares to be sold pursuant to any registration statement and
each person, if any, who controls such Holders within the meaning of Section 15
of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Securities Act, the Exchange Act or otherwise, arising
from such registration statement; provided, however, that the Company shall not
be required to indemnify the Holders for any loss, claim, damage, expense or
liability arising from any misstatement or omission of a material fact which is
based on information furnished in writing by or on behalf of such Holders, or
their successors or assigns, for inclusion in the registration statement. In
addition, the Company shall not be obligated to indemnify the Holders for any
loss, claims, damage, expense or liability arising from any misstatement or
omission of a material fact where the Company shall have timely delivered to the
Holders amendments or supplements of a registration statement or prospectus
which correct such misstatement or omission of a material fact and the Holders
fail to utilize such amendment or supplement in the offer and sale of the
Shares.
5.4 Indemnification of the Company. The Holders(s) of the Shares
to be sold pursuant to a registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Company, its officers
and directors and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which they may become subject under the Securities Act,
the Exchange Act or otherwise, arising from information furnished in writing by
or on behalf of such Holders, or their successors or assigns, for inclusion in
such registration statement.
5.5 Financial Statements. The Company as soon as practicable, but
in any event not later than 45 days after the end of the 12-month period
beginning on the day after the end of the fiscal quarter of the Company during
which the effective date of the registration statement occurs (90 days in the
event that the end of such fiscal quarter is the end of the Company's fiscal
year), shall make generally available to its securities holders, in the manner
specified in Rule 158(b) under the Securities Act, and to the underwriter, an
earnings statement which will be in the detail required by, and will otherwise
comply with, the provisions of section 11(a) of the Securities Act and Rule
158(a), which statement need not be audited unless required by the Securities
Act, covering a period of at least 12 consecutive months after the effective
date of the registration statement.
5.6 Copies. The Company shall furnish to each Holder of Shares
such number of copies of the registration statement, each amendment thereto, the
prospectus included in such registration (including each preliminary prospectus)
and such other documents as such Holder any reasonably request in order to
facilitate the disposition of the Shares owned by such Holder.
<PAGE>
6. Further Assurances.
------------------
At any time and from time to time after the date hereof, each
party shall, without further consideration, execute and deliver to the other
such other instruments or documents and shall take such other actions as the
other may reasonably request to carry out the transactions contemplated by this
Agreement.
7. Miscellaneous.
-------------
Any party may waive compliance by the other with any of the provisions of
this Agreement. No waiver of any provision shall be construed as a waiver of any
other provision. Any waiver must be in writing. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. This Agreement may not be modified
or amended except in writing signed by both parties hereto. This Agreement may
be executed in several counterparts, each of which shall be deemed an original,
and all of which shall constitute one and the same instrument. This Agreement
shall be governed in all respects, including validity, interpretation and
effect, by the laws of the State of Delaware, applicable to contracts made and
to be performed in Delaware. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the successors and assigns of the parties
hereto. This Agreement shall not be assignable by either party without the prior
written consent of the other, such consent not to be unreasonably withheld. The
rights and obligations contained in this Agreement are solely for the benefit of
the parties hereto and are not intended to benefit or be enforceable by any
other party, under the third party beneficiary doctrine or otherwise.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
<PAGE>
EXECUTION PAGE FOR SUBSCRIPTION BY INDIVIDUALS
(not applicable to subscriptions by entities, Individual
Retirement Accounts, Keogh Plans or ERISA Plans)
TOTAL SUBSCRIPTION AMOUNT $ .
--------------
[ ]INDIVIDUAL OWNER [ ] CUSTODIAN UNDER
(One signature required below) Uniform Gifts to Minors Act
[ ]JOINT TENANTS WITH RIGHT ---------------------------------------------
OF SURVIVORSHIP (Insert applicable state)
(All tenants must sign below) (Custodian must sign below)
[ ]TENANTS IN COMMON [ ] COMMUNITY PROPERTY
(All tenants must sign below) (Both spouses in community property
states must sign below)
Print information as it is to appear on the Company records.
- ------------------------------- ---------------------------------------------
(Name of Subscriber) (Social Security or Taxpayer ID No.)
- -------------------------------
- ------------------------------- ---------------------------------------------
(Home Address) (Home Telephone)
- -------------------------------
- ------------------------------- ------------------------------------
(Business Address) (Business Telephone)
- ------------------------------- ---------------------------------------------
(Name of Co-Subscriber) (Social Security or Taxpayer ID No.)
- -------------------------------
- ------------------------------- ---------------------------------------------
(Home Address) (Home Telephone)
- -------------------------------
- ------------------------------- ------------------------------------
(Business Address) (Business Telephone)
SIGNATURE(S)
---------
Dated:______________, 1997.
(1) By: (2) By:
----------------------- ------------------------------------
Signature of Authorized Signatory Signature of Authorized Co-Signatory
--------------------------- ------------------------------------
Print Name of Signatory and Title, Print Name of Co-Signatory and Title,
if applicable if applicable
ACCEPTED AND AGREED:
ECOTYRE TECHNOLOGIES, INC.
By: Dated: , 1997.
------------------------- ------------------------
Name:
Title:
<PAGE>
(ACKNOWLEDGEMENT FOR INDIVIDUALS)
STATE OF :
: s:
COUNTY OF :
On this _____________ day of ___________, 1997, before me, a notary public in
and for the state and county aforesaid, personally appeared
___________________________, known to me to be the person(s) whose name(s) is
(are) subscribed to the foregoing Subscription Agreement and acknowledged that
he, she or they executed the same.
-----------------------------------
Notary Public
<PAGE>
EXECUTION PAGE FOR SUBSCRIPTION BY ENTITIES
TOTAL SUBSCRIPTION AMOUNT $ .
-------------------------
[ ] EMPLOYMENT BENEFIT PLAN OR TRUST (including pension plan, profit sharing
plan, other defined contribution plan and SEP)
[ ] IRA, IRA ROLLOVER OR KEOGH PLAN
[ ] TRUST (other than employee benefit trust)
[ ] CORPORATION (Please include certified corporate resolution authorizing
signature)
[ ] PARTNERSHIP
[ ] OTHER
-----------------------------------------------
Print information as it is to appear on the Company records.
- ------------------------------- ---------------------------------------------
(Name of Subscriber) (Taxpayer ID Number)
- ------------------------------- ---------------------------------------------
(Plan number, if applicable)
- ------------------------------- ---------------------------------------------
(Address) (Telephone Number)
- --------------------------------------------------------------------------------
Name and Taxpayer ID number of sponsor, if applicable
The undersigned trustee, partner, corporate officer or fiduciary certifies
that he or she has full power and authority from all beneficiaries, partners or
shareholders of the entity named above to execute this Subscription Agreement on
behalf of the entity and to make the representations, warranties and agreements
made herein on their behalf and that investment in the Units has been
affirmatively authorized by the governing board or body of such entity and is
not prohibited by law or the governing documents of the entity.
SIGNATURE(S)
Dated: , 1997.
----------------------------
By: By:
------------------------------- ------------------------------------------
Signature of Authorized Signatory Signature of Required Authorized Co-Signatory
- ---------------------------------- -------------------------------------------
Print Name of Signatory Print Name of Required Co-Signatory
- ---------------------------------- -------------------------------------------
Print Name of Signatory Print Title of Required Co-Signatory
ACCEPTED AND AGREED:
ECOTYRE TECHNOLOGIES, INC.
By: Dated:___________________________, 1997
------------------------------
Name:
Title:
<PAGE>
(ACKNOWLEDGEMENT FOR ENTITIES)
STATE OF :
: ss:
COUNTY OF :
On this ___________ day of _______, 1997, before me personally came
_____________________ known to me, who, being by me duly sworn, did depose and
say that he or she is the __________ of ___________________________________, the
entity described in and which executed the foregoing Subscription Agreement;
that is was so affirmatively authorized by the governing board or body of such
entity; and that he or she signed his or her name thereto by like order.
----------------------------
Notary Public
<PAGE>
Annex A
-------
INVESTOR SUITABILITY STANDARDS
A purchase of the Units involves a high degree of risk and is suitable only
for persons of substantial financial means who have no need for liquidity in
their investments. The offer, offer for sale, and sale of the securities are
intended to be exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to Regulation D promulgated
thereunder ("Regulation D"), and are intended to be exempt from the requirements
of applicable state securities laws.
The Common Stock is being offered and sold only to up to thirty-five (35)
"non-accredited investors" and to "accredited investors," as those terms are
defined in Regulation D.
Regulation D defines an "accredited investor" as follows:
(1) Any bank as defined in section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934; any insurance company as defined in section
2(13) of the Securities Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
section 2(a)(48) of that act; any Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such act, which is
or either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors;
(2) Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose or acquiring the securities offered, with total
assets in excess of $5,000,000;
(4) Any director, executive officer, or general partner of the issuer of
the securities being offered or sold, or any director, executive officer, or
general partner of a general partner of that issuer;
(5) Any natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of his or her purchase exceeds $1,000,000;
<PAGE>
(6) Any natural person who had an individual income in excess of $200,000
in each of the two most recent years or joint income with that person's spouse
in excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
(7) Any trust with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is directed
by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D;
and
(8) Any entity in which all of the equity owners are accredited investors.
<PAGE>
Exhibit B
Qualified Purchaser Questionnaire
Purpose of this Questionnaire
- -----------------------------
The Units (the "Units") of EcoTyre Technologies Inc., a Delaware corporation
(the "Company"), are being offered without registration under the Securities Act
of 1933, as amended (the "Act"), or the securities laws of any state, in
reliance on the exemptions contained in Sections 3(b) and 4(2) of the Act and on
similar exemptions under applicable state laws. Under Sections 3(b) and 4(2)
and/or certain state laws, the Company may be required to determine that an
individual, or an individual together with a "purchaser representative" or each
individual equity owner of an investing entity meets certain suitability
requirements before selling the Units to such individual or entity. THE COMPANY
MAY, AT ITS ELECTION, NOT SELL THE UNITS TO A SUBSCRIBER WHO HAS NOT THOROUGHLY
FILLED OUT A QUESTIONNAIRE. IN THE CASE OF AN INVESTOR THAT IS A PARTNERSHIP,
TRUST OR CORPORATION, EACH EQUITY OWNER MUST COMPLETE A QUESTIONNAIRE. This
Questionnaire does not constitute an offer to sell or a solicitation of an offer
to buy the Units or any other security.
Instructions
- ------------
One (1) copy of this Questionnaire should be completed, signed, dated and
delivered to Vito Alongi,, c/o EcoTyre Technologies, Inc., 895 Waverly Avenue,
Holtsville, New York 11742 (Telephone: (516) 289-4545) if you have any questions
with respect to the Questionnaire.
PLEASE ANSWER ALL QUESTIONS. If the appropriate answer is "None" or "Not
Applicable," so state. Please print or type your answers to all questions.
Attach additional sheets if necessary to complete your answers to any item.
Your answers will be kept strictly confidential at all times; however, the
Company may present this Questionnaire to such parties as it deems appropriate,
including its counsel, in order to assure itself that the offer and sale of the
Units will not result in a violation of the registration provisions of the Act
or a violation of the securities laws of any state.
<PAGE>
1. Please provide the following personal information:
Name_____________________ Age: _______
Residence Address (including zip code):
---------------------------
---------------------------
Telephone Numbers: Residence: ___________ Business: ____________
Social Security or Federal Tax I.D. Number _________________________
2. Please describe your present or most recent business or occupation
and indicate such information as the nature of your employment, the principal
business of your employer, the principal activities under your management or
supervision and the scope (e.g., dollar volume, industry rank, etc.)
of such activities:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. Please provide the following information concerning your financial
experience:
3.1 Indicate by check mark which of the following categories best
describes the extent of your prior experience in the areas of investment listed
below:
Substantial Limited No
Experience Experience Experience
----------- ---------- ----------
Marketable Securities _____ _____ _____
Equity Securities for
which no market exists _____ _____ _____
Limited Partnerships _____ _____ _____
Initial Public Offerings _____ _____ _____
3.2 Indicate by check mark whether you maintain any of the following
types of accounts over which you, rather than a third party,
exercise investment discretion, and the length of time you have
maintained each type of account.
Securities (cash): _____ _____ _____ Number of years: _____
Yes No
<PAGE>
Securities (margin): _____ _____ Number of years: _____
Yes No
4. Please answer the following questions (If you are investing as an
individual, please fill out section 4.1; otherwise, please fill out section
4.2):
4.1 For Individuals:
(a) Does your net worth1 (or joint net worth with your spouse, if
greater) exceed $1,000,000?
----- -----
Yes No
(b) Did you have an individual income2 in excess of $200,000 or
joint income together with your spouse in excess of $300,000, in
each of the two most recent years and do you reasonably expect to
reach the same income level in the current year?
----- -----
Yes No
(c) For New Jersey Residents Only: Did you have individual income in
excess of $200,00 in each of the two most recent years and do you
reasonably expect to reach the to reach the same level in the
current year?
----- -----
Yes No
- -------------------------
1 For purposes hereof, net worth shall be deemed to include all of your assets,
liquid or illiquid (including such items as home, furnishings, automobile and
restricted securities) minus any liabilities (including such items as home
mortgages and other debts and liabilities).
2 For purposes hereof, the term "income" is not limited to "adjusted gross
income" as that term is defined for Federal Income Tax purposes, but rather
includes certain items of income which are deducted in computing "adjusted gross
income," For investors who are salaried employees, the gross salary of such
investor, minus any significant expenses personally incurred by such investor in
connection with earning the salary, plus any income from any other source,
including unearned income, is a fair measure of "income" for purposes hereof.
For investors who are self-employed, "income" is generally construed to mean
total revenues received during the calendar year minus significant expenses
incurred in connection with earning such revenues.
<PAGE>
4.2 For Corporations, Trusts, Pension Funds and other Non-Individuals, are
you:
(a) A bank as defined in section 3(a)(2) of the Act, or any savings
and loan association or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934; any insurance company as
defined in section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 or a business
development company as defined in section 2(a)(48) of that act;
Small Business Investment Company licensed by the U.S. Small
Business Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions for the
benefit of its employees, if such plan has total assets in excess
of $5,000,000; employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 if the investment
decision is made by a plan fiduciary, as defined in section 3(21)
of such Act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000 or,
if a self-directed plan, with investment decisions made solely by
persons that are accredited investors, as defined in Regulation D
promulgated pursuant to the Act ("Regulation D"):
----- -----
Yes No
(b) A private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940:
----- -----
Yes No
(c) Any organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust
or partnership, not formed for the specific purpose of acquiring
the securities offered with total assets in excess of $5,000,000:
----- -----
Yes No
<PAGE>
(d) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any director,
executive officer, or general partner of a general partner of that
issuer:
----- -----
Yes No
(e) Any trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) of Regulation D:
----- -----
Yes No
(f) Any entity in which all of the equity owners are accredited
investors, as defined in Regulation D:
----- -----
Yes No
(g) If you are a corporation that has its principal place of
business in California, do you have total assets in excess of
$14,000,000 and were you not formed for the specific purpose of
acquiring any Units?
----- -----
Yes No
5. Check if appropriate:
[ ] I hereby represent and warrant that I have such knowledge and
experience in financial and business matters that I am capable of
evaluating the merits and risks of any prospective investment in the
Company.
(If you checked this box, please skip item 6. If you are a resident of
California, Florida or New York, please go to item 7. If you are a
resident of another state, go directly to item 8.)
6. If you did not check the box to Question 5, please answer the following
additional questions:
<PAGE>
6.1 Please describe any preexisting personal or business relationship
that you have with the Company or any of its officers and
directors.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6.2 Please describe any business or financial experience that you have
had that would allow the Company to reasonably conclude that you
are capable of protecting your interests in connection with your
prospective investment in the Company. If none, so state:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6.3 If your answer to question 6.2 above was "None," in order to
evaluate the merits and risks of the investment, will you be
relying upon the advice of any other person(s) who will be acting
as your purchaser representative(s)?
----- -----
Yes No
If "yes," please identify each such person and indicate his business
address and telephone number in the space below. (Each such person
must complete, and you must review and acknowledge, a separate
Purchaser Representative questionnaire which will be supplied at
your request and must be returned to the Company prior to the sale
of any Units to you.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
7. 1. For Residents of California:
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS QUESTIONNAIRE
HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT
OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 251000, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THE
SUBSCRIPTION AGREEMENT RELATING TO THESE SECURITIES ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
2. For Residents of Florida:
WHERE SALES ARE MADE TO FIVE OR MORE PERSONS IN FLORIDA (EXCLUDING
CERTAIN INSTITUTIONAL PURCHASERS DESCRIBED IN SECTION 517.061(7) OF
THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT (THE "FLORIDA
ACT"), ANY SUCH SALE MADE PURSUANT TO SECTION 517.061(11) OF THE
FLORIDA ACT SHALL BE VOIDABLE BY THE PURCHASER EITHER WITHIN THREE
DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER
TO THE ISSUER, OR AN AGENT OF THE ISSUER, OR AN ESCROW AGENT, OR
WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS
COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER.
3. For Residents of New York:
THE UNDERSIGNED NEW YORK STATE RESIDENT UNDERSTANDS THAT THIS OFFERING
HAS NOT BEEN REVIEWED BY THE ATTORNEY GENERAL OF THE STATE OF NEW YORK
BECAUSE OF THE OFFEROR'S REPRESENTATIONS THAT THIS IS INTENDED TO BE A
NON-PUBLIC OFFERING PURSUANT TO SEC REGULATION D, AND THAT IF ALL OF
THE CONDITIONS AND LIMITATIONS OF THE SEC REGULATION ARE NOT COMPLIED
WITH, THE OFFERING WILL BE RESUBMITTED TO THE ATTORNEY GENERAL FOR
AMENDMENT EXEMPTION. I UNDERSTAND THAT ANY OFFERING LITERATURE USED IN
CONNECTION WITH THIS OFFERING HAS NOT BEEN PRE-FILED WITH THE ATTORNEY
GENERAL AND HAS NOT BEEN REVIEWED BY THE ATTORNEY GENERAL .
<PAGE>
THE UNITS BEING PURCHASED FOR MY OWN ACCOUNT FOR INVESTMENT, AND NOT
FOR DISTRIBUTION OR RESALE TO OTHERS. I AGREE THAT I WILL NOT SELL OR
OTHERWISE TRANSFER THESE SECURITIES UNLESS THEY ARE REGISTERED UNDER
THE FEDERAL SECURITIES ACT OF 1933 OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. I REPRESENT THAT I HAVE ADEQUATE MEANS OF
PROVIDING FOR MY CURRENT NEEDS AND POSSIBLE PERSONAL CONTINGENCIES,
AND THAT I HAVE NO NEED FOR LIQUIDITY OF THIS INVESTMENT.
IT IS UNDERSTOOD THAT ALL DOCUMENTS, RECORDS AND BOOKS PERTAINING TO
THIS INVESTMENT HAVE BEEN MADE AVAILABLE FOR INSPECTION BY MY ATTORNEY
AND/OR MY ACCOUNTANT AND/OR MY OFFEREE REPRESENTATIVE AND MYSELF, AND
THAT THE BOOKS AND RECORDS OF THE ISSUER WILL BE AVAILABLE UPON
REASONABLE NOTICE, FOR INSPECTION BY INVESTORS AT REASONABLE HOURS AT
ITS PRINCIPAL PLACE OF BUSINESS.
---------------------------
Acknowledged (Please initial)
8. By signing this questionnaire, I hereby confirm the following statements:
(a) I am aware that the offering of the Units pursuant to the
accompanying Subscription Documents which I hereby acknowledge as received and
reviewed, will involve securities for which no market currently exists, thereby
requiring any investment to be maintained for an indefinite period of time, and
I have no need to liquidate the investment.
(b) I acknowledge that any delivery to me of any documentation relating
to the Units prior to the determination by the Company of my suitability as an
investor shall not constitute an offer of the Units until such determination of
suitability shall be made, and I agree that I shall promptly return all such
documentation to the Company upon request.
(c) My answers to the foregoing questions are true and complete to the
best of my information and belief, and I will promptly notify the Company of
any changes in the information I have provided.
(d) I also understand and agree that, although the Company will use its
best efforts to keep the information provided in answers to this questionnaire
strictly confidential, the Company may present this questionnaire and the
information provided in answers to it to such parties as it may deem advisable
if called upon to establish the availability under any federal or state
securities laws of an exemption from registration of the private placement or
if the contents thereof are relevant to any issue in any action, suit or
proceeding to which the Company or its affiliates is a party or by which it or
they are or may be bound.
<PAGE>
(e) I realize that this questionnaire does not constitute an offer by the
Company or its affiliates to sell the Units but is merely a request for
information.
-------------------------- -------------------------
Printed Name Spouse's Name
(If purchasing jointly)
-------------------------- -------------------------
Signature Spouse's Signature
(If purchasing jointly)
-------------------------- -------------------------
Social Security or Employee Spouse's Social Security Number
Identification Number (If purchasing jointly)
Date and Place Executed:
Date:
-------------------
Place:
----------------------------------
Confidential
PRIVATE PLACEMENT MEMORANDUM
ECOTYRE TECHNOLOGIES, INC.
500,000 Shares of Common Stock
in Units of 50,000 Shares,
15,000 Class A Warrants and
15,000 Class B Warrants
September 25, 1997
Copy No. _______
<PAGE>
CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM
Best Efforts Offering - Up to 500,000 Shares of Common Stock,
par value $.001 per share at $1.50 per share, 150,000 Class A Warrants and
150,000 Class B Warrants, in Units of 50,000 Shares, 15,000 Class A Warrants and
15,000 Class B Warrants
OFFERING PRICE: $75,000 PER UNIT
The Company Reserves the Right to
Accept or Reject Subscriptions
These Securities Involve a High Degree of Risk (See "Risk Factors")
---------------
The Company is offering hereunder the sale of 10 Units, each Unit consisting
of 50,000 Shares of Common Stock, 15,000 Class A Warrants and 15,000 Class B
Warrants (the "Units"). Each Class A Warrant and Class B Warrant shall be
exercisable upon issuance and entitle the holder to purchase one share of Common
Stock at $4.00 per share and $3.00 per share, respectively, until the close of
business on September 24, 1998. See "Description of Securities."The Company's
Common Stock is traded on the NASDAQ SmallCap market (symbol: ETTI). On
September 24, 1997, the closing price of the Company's Common Stock on NASDAQ
was $2.875 per share.
<TABLE>
<CAPTION>
Price to Sales Proceeds to
Investors Commissions (1)(2) Company (3)
--------- ----------------- ----------
<S> <C> <C> <C>
Per Unit $75,000 $6,000 $69,000
Maximum Offering $750,000 $60,000 $690,000
- --------------
<FN>
(1) The Shares are being offered by the Company on "best efforts, no minimum,
maximum 10 Units basis." All proceeds of the offering will be utilized by
the Company as it is received. The subscription price is payable upon
submission to the Company of a fully completed and executed Subscription
Agreement and Qualified Purchaser Questionnaire. This offering will
terminate forty-five (45) days from the date of this Private Placement
Memorandum, unless extended by the Company for an additional period of time
not exceeding thirty (30) days, or such earlier date as may be determined
by the Company. See "Private Placement."
(2) Registered broker-dealers may receive a commission of 8% of the aggregate
gross sales price of the Units sold by them.
(3) Before deducting expenses payable by the Company in connection with this
offering estimated at $15,000.
</FN>
</TABLE>
---------------------------
THE SECURITIES BEING OFFERED HEREBY HAVE NOT BEEN REGISTERED OR APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
REGULATORY AUTHORITY OF ANY STATE, NOR HAS THE COMMISSION OR ANY SUCH AUTHORITY
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
---------------------------
September 25, 1997
<PAGE>
INTRODUCTION
This Confidential Private Placement Memorandum has been prepared by EcoTyre
Technologies, Inc., a Delaware corporation (the "Company"), and will be
delivered to a limited number of potential investors who may be interested in
purchasing from the Company Common Stock at $1.50 per share and accompanying
Warrants. By accepting this Private Placement Memorandum, each recipient agrees
that it will keep the information contained herein confidential and will not
copy, reproduce or distribute any of it to others without the prior written
consent of the Company. This Private Placement Memorandum is being delivered by
the Company to prospective investors for use in connection with their
consideration of the purchase of the Units with the understanding that all
prospective investors will conduct their own independent investigation of those
matters which they deem appropriate in order to evaluate the merits and risks of
purchasing the Units.
Except where otherwise indicated, this Private Placement Memorandum speaks
as of the date hereof. Neither the delivery of this Private Placement Memorandum
nor any sale of Units shall, under any circumstances, create any implication
that the information contained herein is correct or complete as of any time
subsequent to the date hereof.
The Units are being offered when, as and if issued, subject to prior sale
or withdrawal, cancellation or modification of the offer without notice, subject
to the rights of the Company to reject any subscription for the Units in whole
or in part, for any reason, and subject to the approval of certain legal matters
by counsel and certain other conditions. The Units offered hereby may not be
sold without delivery of this Private Placement Memorandum.
The Units offered hereby are offered for a period not exceeding forty-five
(45) days, subject to extension by the Company.
The Units subject hereto have not been registered with or approved by the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Securities Act"), and may not be offered or sold within the
United States, except pursuant to an exemption from the registration
requirements of the Securities Act. The Units subject hereto also have not been
registered with or approved by any securities regulatory authority of any state
or other jurisdiction, nor has the SEC or any such authority passed upon the
adequacy or accuracy of this Private Placement Memorandum. Any representation to
the contrary is unlawful. This Private Placement Memorandum does not constitute
an offer or solicitation in any state or other jurisdiction in which such offer
to sell or solicitation is not authorized. Each purchaser of the Units described
in this Private Placement Memorandum must acquire the Units for its own account
for investment purposes and may have to bear the full economic risk of its
investment. Each such purchaser must complete and deliver to the Company a
Qualified Purchaser's Questionnaire in the form attached as Exhibit B to this
Private Placement Memorandum.
<PAGE>
The Subscription Agreement to be executed and delivered by purchasers of
the Units will contain restrictions applicable to subsequent dispositions
thereof designed to require compliance with the Securities Act. The form of this
Subscription Agreement is attached as Exhibit A to this Private Placement
Memorandum. The certificates representing shares of Common Stock and Warrants
will bear a legend to the effect that such securities have not been registered
under the Securities Act and that the transfer thereof is restricted.
The statements in this Private Placement Memorandum do not constitute legal
or tax advice and recipients should consult their own legal and tax advisers
regarding any such matters.
The Company reserves the right to request the return of this Private
Placement Memorandum at any time and each recipient agrees, by accepting this
Private Placement Memorandum, to promptly return it as well as all other
material received in the course of evaluating this financing.
Inquiries relating to the Company should be directed confidentially to Mr.
Vito Alongi at EcoTyre Technologies, Inc., 895 Waverly Avenue, Holtsville, New
York 11742, Telephone No.:
(516) 289-4545; Fax No.: (516) 289-4722.
<PAGE>
WHO SHOULD INVEST
An investment in the Units offered hereby involves a high degree of
financial risk and is therefore suitable only for persons who have substantial
income or net worth and are capable of evaluating the merits and risks of
investing in the Units. Only prospective investors who are also able to bear
indefinitely the economic risk of their investment and who otherwise satisfy the
suitability standards described herein will be permitted to purchase any of the
Units offered hereby.
This offering of Units has not been registered or qualified with, nor has
the adequacy or accuracy of this Memorandum been reviewed or passed upon by, the
Securities and Exchange Commission or by any state securities administrator. The
offering is being made in reliance on certain exemptions from such registration
and qualification requirements. The availability of these exemptions is
dependent upon, among other things, the investment intent and qualifications of
each prospective investor. The Units will only be sold to "accredited
investors," as such term is defined in Rule 501(a) of Regulation D under the
Securities Act of 1933, as amended (the "Securities Act"). An "accredited
investor" includes any person or entity who the Company reasonably believes
comes within any one of the following categories:
(i) An individual having a net worth with spouse (including automobiles,
principal residence and furnishings) at the time of purchase,
individually or jointly, in excess of $1,000,000; or
(ii) An individual whose individual income was in excess of $200,000 in
each of the two most recent years, or whose joint income with spouse
was in excess of $300,000 in each of those years, and who reasonably
expects his individual or joint income with such investor's spouse to
reach such level(s) in the current year; or
(iii)A corporation, partnership, Massachusetts or similar business trust,
or organization described in Section 501(c)(3) of the Internal Revenue
Code (tax exempt organization), not formed for the specific purpose of
acquiring the Common Stock, having total assets in excess of
$5,000,000; or
(iv) A bank, savings and loan association or other similar institution (as
defined in Sections 3(a)(2) and 3(a)(5)(A) of the Securities Act; or
(v) An insurance company (as defined in Section 2(13) of the Securities
Act); or
(vi) An investment company registered under the Investment Company Act of
1940; or
(vii)A business development company (as defined in Section 2(a)(48) of the
Investment Company Act of 1940) or a private business development
company (as defined in Section 202(a)(22) of the Investment Advisers
Act of 1940); or
<PAGE>
(viii) A Small Business Investment Company licensed by the U. S. Small
Business Administration under Sections 301(c) or (d) of the Small
Business Investment Act of 1958; or
(ix) A broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934; as amended; or
(x) A plan established and maintained by a state, its political
subdivision, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, which plan
has total assets in excess of $5,000,000; or
(xi) An employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974 ("ERISA"), if the investment decision is
made by a "Plan Fiduciary," as defined in Section 3(21) of such Act,
which is either a bank, savings and loan association, insurance
company or registered investment adviser; or
(xii)An employee benefit plan within the meaning of ERISA having total
assets in excess of $5,000,000; or
(xiii) A self-directed employee benefit plan within the meaning of ERISA,
with investment decisions made solely by persons who are accredited
investors as defined in Rule 501(a) of Regulation D; or
(xiv)A trust with total assets in excess of $5,000,000 not formed for the
specific purpose of acquiring Units, whose purchase is directed by a
sophisticated person (i.e., a person who has such knowledge and
experience in financial and business matters that he is capable of
evaluating the merits and risks of an investment in the units); or
Investors will be required to represent in writing that they meet the
requirements outlined above by completing and returning to the Company the
Subscription Agreement attached as an Exhibit hereto and the Purchaser
Questionnaire attached as an Exhibit hereto. In addition, each investor will be
required to represent that he or it is acquiring the Units for investment
purposes only, with no intention of reselling or further distribution, and that
the Units will not be transferred or otherwise resold except in compliance with
the Securities Act, and any applicable state acts. The Company reserves the
right to modify or extend the suitability requirements for potential investors
in order for the offering to comply with the requirements of all applicable
state laws and regulations.
Due to the risks inherent in an investment in the Units offered hereby, and
in order to comply with the provisions of the exemption from the registration
and qualification requirements of the Securities Act and applicable state
securities laws, the Company has determined that the Units will be offered and
sold only to prospective investors who, prior to purchase: (a) represent that
they are acquiring the Units for their own account, for investment purposes only
<PAGE>
and not with a view to or in connection with a further resale or distribution;
(b) represent that they are aware that the Units have not been registered or
qualified under the Securities Act and applicable state securities laws and
therefore cannot be resold unless they are registered and qualified under the
Securities Act and applicable state securities laws or an exemption therefrom is
available; (c) have such knowledge and experience in business and financial
matters that they are capable of evaluating the merits and risks of, and
protecting their interests in connection with, this investment; and (d)
represent that they are able to bear the economic risk of a complete loss of
their investment.
The suitability standards referred to above represent minimum suitability
requirements for prospective investors. Accordingly, the satisfaction of such
standards by a prospective investor does not necessarily mean that the Units is
a suitable investment for him or her or that his or her subscription for Units
will be accepted.
The Company may reject the subscription of any prospective purchaser who
does not represent that he meets such standards. In addition, the Company, at
its sole discretion, or to the extent required by the laws of any applicable
state, may require that transferees comply with these standards as a condition
to substitute as a shareholder in the Company. In the event any Unit is
purchased by a person or entity in fiduciary capacity for any other person (or
for an entity in which each such person is deemed to be a "purchaser" of the
Units), the suitability standards set forth above will be applicable to such
other person.
If any information furnished or representations made by a prospective
investor or others acting on their behalf mislead the Company as to the
financial or other circumstances of such investor or, if, because of any error
or misunderstanding as to such circumstances, a copy of this Memorandum is
delivered to a prospective investor who does not meet the suitability standards
set forth above, the delivery of this Memorandum to the prospective investor
will not be deemed to be an offer, and this Memorandum must be returned to the
Company immediately.
<PAGE>
HOW TO SUBSCRIBE
If, after carefully reviewing the information contained in this Private
Placement Memorandum and such other information as an investor may deem
relevant, an investor decides to invest in the Company, the investor should
complete and deliver to the Company copies of each of (1) the Subscription
Agreement, duly executed in the form attached hereto as Exhibit A, (2) a payment
equal to the amount of Units subscribed for, by check payable to "EcoTyre
Technologies, Inc." and (3) the Qualified Purchaser's Questionnaire, duly filled
in and executed in the form attached hereto as Exhibit B.
The Subscription Agreement, the check and the Qualified Purchaser's
Questionnaire should be sent to:
EcoTyre Technologies, Inc.
895 Waverly Avenue
Holtsville, New York 11742
Attn: Mr. Vito Alongi
An investor's execution and delivery of the Subscription Agreement
constitutes a binding offer to subscribe for the Units and such subscription may
not be withdrawn, except as specifically provided below.
Upon acceptance of the subscription by the Company (which the Company may
reject or accept, in whole or in part, in its sole discretion, within thirty
(30) days after receipt of such subscription), the Company will notify the
investor of such acceptance and of the date designated by the Company for the
closing of the offering.
<PAGE>
THE PURCHASE OF THE UNITS WILL ENTAIL A HIGH DEGREE OF RISK. NO PERSON SHOULD
INVEST IN THE SECURITIES WHO IS NOT IN A POSITION TO LOSE, AND CANNOT AFFORD THE
LOSS OF, HIS OR HER ENTIRE INVESTMENT. SEE 'RISK FACTORS." INVESTORS WILL BE
REQUIRED TO MAKE REPRESENTATIONS WITH RESPECT TO THEIR NET WORTH AND INCOME AND
TO REPRESENT, AMONG OTHER THINGS, THAT THEY ARE ABLE TO BEAR THE ECONOMIC RISK
OF LOSS OF THEIR INVESTMENT AND THAT THEY ARE FAMILIAR WITH AND UNDERSTAND THE
TERMS AND RISKS OF THIS OFFERING, INCLUDING THE SUBSTANTIAL RESTRICTIONS ON THE
TRANSFERABILITY OF THE SECURITIES OFFERED HEREBY.
-------------------------
THIS MEMORANDUM IS SUBMITTED IN CONNECTION WITH THE OFFERING OF THE UNITS AND
MAY NOT BE REPRODUCED OR USED FOR ANY OTHER PURPOSES. ANY ACTION CONTRARY TO
THESE RESTRICTIONS MAY INVOLVE A VIOLATION OF CERTAIN STATES' BLUE SKY LAWS.
-------------------------
MANAGEMENT HAS AGREED TO MAKE AVAILABLE, PRIOR TO THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREIN, TO EACH OFFEREE OF UNITS OR HIS
REPRESENTATIVE(S) OR BOTH, THE OPPORTUNITY TO ASK QUESTIONS OF, AND RECEIVE
ANSWERS FROM, MANAGEMENT OR ANY PERSON ACTING ON ITS BEHALF CONCERNING THE TERMS
AND CONDITIONS OF THIS OFFERING, AND TO OBTAIN ANY ADDITIONAL INFORMATION, TO
THE EXTENT MANAGEMENT POSSESSES SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT
UNREASONABLE EFFORT OR EXPENSE, NECESSARY TO VERIFY THE ACCURACY OF THE
INFORMATION SET FORTH HEREIN.
-------------------------
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OF SECURITIES TO ANYONE OTHER THAN
THE PERSON(S) WHOSE NAME(S) APPEAR(S) ON THE COVER. NO ONE, OTHER THAN SUCH
PERSON(S), RECEIVING A COPY OF THIS MEMORANDUM MAY TREAT THE SAME AS
CONSTITUTING AN OFFER TO PURCHASE AND NO SUBSCRIPTION AGREEMENT WILL BE ACCEPTED
OTHER THAN FROM SUCH PERSON(S).
-------------------------
<PAGE>
PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS MEMORANDUM OR ANY
PRIOR OR SUBSEQUENT COMMUNICATION FROM THE COMPANY, ITS AFFILIATES, DIRECTORS,
OFFICERS AND EMPLOYEES OR ANY PROFESSIONAL ASSOCIATED WITH THIS OFFERING AS
LEGAL OR TAX ADVICE. EACH INVESTOR SHOULD CONSULT HIS OR HER OWN PERSONAL
COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX , ECONOMIC, AND RELATED
MATTERS CONCERNING THE INVESTMENT DESCRIBED HEREIN AND ITS SUITABILITY FOR HIM
OR HER.
-------------------------
NEITHER THE DISTRIBUTION OF THIS MEMORANDUM, IN WHOLE OR IN PART, NOR THE
DIVULGENCE OF ANY OF ITS CONTENTS, IS PERMITTED UNLESS AUTHORIZED BY MANAGEMENT.
NO OFFERING LITERATURE OR ADVERTISING, IN WHATEVER FORM, SHALL BE EMPLOYED IN
THE OFFERING OF THESE SHARES, EXCEPT THE INFORMATION CONTAINED HEREIN OR
AUTHORIZED BY MANAGEMENT. NO PERSON HAS BEEN AUTHORIZED TO MAKE REPRESENTATIONS
OR GIVE ANY INFORMATION WITH RESPECT TO THESE UNITS EXCEPT THE INFORMATION
CONTAINED HEREIN.
-------------------------
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO ANYONE IN ANY
STATE OR IN ANY OTHER JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT
AUTHORIZED.
-------------------------
REFERENCE SHOULD BE MADE TO THE SUPPORTING DOCUMENTS AND OTHER INFORMATION
FURNISHED HEREWITH FOR THE COMPLETE INFORMATION CONCERNING THE RIGHTS AND
OBLIGATIONS OF THE PARTIES THERETO. CERTAIN PROVISIONS OF SUCH AGREEMENTS ARE
SUMMARIZED IN THIS MEMORANDUM, BUT IT SHOULD NOT BE ASSUMED THAT THE SUMMARIES
ARE COMPLETE.
-------------------------
THE SALE OF THE UNITS IS SUBJECT TO THE PROVISIONS OF A `SUBSCRIPTION AGREEMENT
(THE "SUBSCRIPTION AGREEMENT") CONTAINING CERTAIN REPRESENTATIONS, WARRANTIES,
TERMS AND CONDITIONS. ANY INVESTMENT IN THE UNITS SHOULD BE MADE ONLY AFTER A
COMPLETE AND THOROUGH REVIEW OF THE PROVISIONS OF THE SUBSCRIPTION AGREEMENT AND
THE OTHER SUBSCRIPTION DOCUMENTS.
<PAGE>
-------------------------
NOTICE TO FLORIDA RESIDENTS:
A SALE IS VOIDABLE BY THE PURCHASER IN SUCH STATE WITHIN 3 DAYS AFTER THE
FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER OR WITHIN
3 DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH
PURCHASER, WHICHEVER OCCURS LATER.
NOTICE TO PENNSYLVANIA RESIDENTS:
THE SECURITIES REPRESENTED BY THIS MEMORANDUM WILL HAVE BEEN ISSUED
PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION OR QUALIFICATION
PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS
OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXCEPTIONS
THEREFROM.
PURSUANT TO SECTION 207(m) OF THE PENNSYLVANIA SECURITIES ACT OF 1972, AS
AMENDED, EACH PENNSYLVANIA RESIDENT WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES
EXEMPTED FROM REGISTRATION UNDER SECTION 203(d) OF THE 1972 ACT, DIRECTLY FROM
AN ISSUER OR AN AFFILIATE OF AN ISSUER, SHALL HAVE THE RIGHT TO WITHDRAW HIS
ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE SELLER, UNDERWRITER (IF ANY)
OR ANY OTHER PERSON, WITHIN TWO BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE
ISSUER OF HIS WRITTEN BINDING CONTRACT OF PURCHASE OR, IN THE CASE OF A
TRANSACTION IN WHICH THERE IS NO WRITTEN BINDING CONTRACT OF PURCHASE, WITHIN
TWO BUSINESS DAYS AFTER HE MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING
OFFERED. TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER OR
TELEGRAM TO THE COMPANY AT THE ADDRESS SET FORTH IN THE TEXT OF THIS MEMORANDUM
INDICATING HIS OR HER INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM SHOULD BE
SENT AND POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED SECOND BUSINESS DAY.
IT IS PRUDENT TO SEND SUCH LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
TO ENSURE THAT IT IS RECEIVED AND ALSO TO EVIDENCE THE TIME WHEN IT WAS MAILED.
IF THIS REQUEST IS MADE ORALLY (IN PERSON OR BY TELEPHONE, TO THE COMPANY AT THE
NUMBER LISTED IN THE TEXT OF THIS MEMORANDUM), A WRITTEN CONFIRMATION THAT THE
REQUEST HAS BEEN RECEIVED SHOULD BE REQUESTED. EACH PENNSYLVANIA RESIDENT WHO
SUBSCRIBES FOR THE SECURITIES BEING OFFERED HEREBY MUST AGREE NOT TO SELL SUCH
SECURITIES FOR A PERIOD OF TWELVE (12) MONTHS AFTER THE DATE OF PURCHASE.
<PAGE>
NOTICE TO NORTH CAROLINA RESIDENTS:
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO THE RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
<PAGE>
EcoTyre Technologies, Inc.
Private Placement Memorandum
Table of Contents
-----------------
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Company . . . . . . . . . . . . . . . . . . . . . . . . 1
The Offering. . . . . . . . . . . . . . . . . . . . . . . . 2
Summary Financial Information . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . . . . 8
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 8
Incorporation of Certain Documents by Reference. . . . . . . . . 9
Description of Securities. . . . . . . . . . . . . . . . . . . . 9
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 9
Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Certain Provisions of the Certificate of
Incorporation . . . . . . . . . . . . . . . . . . . . . . 12
Transfer Restrictions . . . . . . . . . . . . . . . . . . . 13
Private Placement. . . . . . . . . . . . . . . . . . . . . . . . 14
Determination of Offering Price . . . . . . . . . . . . . . 14
Financial Statements . . . . . . . . . . . . . . . . . . . . . . 14
Exhibits
- --------
Exhibit A - Subscription Agreement
Exhibit B - Qualified Purchaser Questionnaire
Exhibit C - Form of Warrant Agreement
Exhibit D - Report on Form 10-KSB for the fiscal year ended March 31, 1997.
Exhibit E - Report on Form 10-QSB for the three months ended June 30, 1997.
Exhibit F - Proxy Statement dated April 24, 1997.
<PAGE>
SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the more detailed information and the financial statements
appearing elsewhere in, or incorporated by reference to, this Private Placement
Memorandum. Unless otherwise indicated herein, references to common stock of the
Company give effect to a 7-for-1 reverse stock split effectuated by the Company
in May 1997.
The Company
EcoTyre Technologies Inc., (the "Company") has marketed since 1993 remolded
automobile tires manufactured by third parties for sale in the United States
replacement automobile passenger tire market. The Company believes based on
published industry reports that in 1994, over $7 billion of replacement
automobile passenger tires were sold in the United States. During 1995, the
Company curtailed distribution operations, concentrating its efforts on
commencing manufacturing operations for its own line of remolded tires, which
limited manufacturing operations commenced in December 1995. The remolded tires
manufactured by the Company are created by remanufacturing a previously used
high-quality passenger automobile tire casing of a name brand manufacturer.
Through a process comparable to manufacturing a new tire, new rubber is attached
to the casing from sidewall to sidewall.
While remolded passenger automobile tires have for many years been used in
the United Kingdom and other parts of Europe, their use in the United States has
been primarily for commercial purposes such as in the airline industry. Based
upon its experience in distributing remolded passenger automobile tires in the
United States, and in order to exercise greater control over costs and product
quality, the Company acquired equipment to manufacture its own remolded tires
and leased a 65,000 sq. ft. manufacturing facility. The Company also hired
executive, management and engineering personnel with significant experience in
the automobile passenger automobile tire industry, including the manufacture of
remolded passenger automobile tires.
The Company was incorporated under the laws of the State of Delaware on May
20, 1994 as a successor to a predecessor New York corporation formed in April
1993 from which it acquired the assets used in connection with its business in
June 1994. The Company's executive offices, manufacturing facility and warehouse
are located at 895 Waverly Avenue, Holtsville, New York 11742, and its telephone
number is (516) 289-4545.
<PAGE>
The Offering
Securities Offered: The Company is offering hereby up to 500,000
shares of Common Stock in Units, each Unit consisting of
50,000 shares of Common Stock, 15,000 Class A Warrants and
15,000 Class B Warrants. The minimum subscription is for
one Unit, although the Company reserves the right to
accept subscriptions for less than one Unit.
Common Stock: The shares of Common Stock issuable in this placement and
the shares of Common Stock underlying the Warrants will
have certain demand registration rights.
In the event the shares of Common Stock issuable in
this placement are not registered within forty-five days
after demand, the Company shall be required to issue to
the subscribers hereof additional Common Stock of the
Company in an amount equal to 5% of Common Stock issued
hereunder for each month thereafter that the Common Stock
remains unregistered.
Use of Proceeds: Proceeds from this offering will be primarily
used for working capital and to continue the development
and expansion of the Company's business operations at its
Holtsville, New York facility.
<PAGE>
Forward-Looking Statements
All statements other than statements of historical fact included in this
Memorandum regarding the Company's financial position, business strategy and
plans and objectives of management of the Company for future operations, are
forward-looking statements. When used in this Prospectus, words such as
"anticipate," "believe," "estimate," "expect," "intend" and similar expressions,
as they relate to the Company or its management, identify forward-looking
statements. Such forward-looking statements are based on the beliefs of the
Company's management, as well as assumptions made by and information currently
available to the Company's management. Actual results could differ materially
from those contemplated by the forward-looking statements as a result of certain
factors such as those disclosed under "Risk Factors," including but not limited
to, competitive factors and pricing pressures, changes in legal and regulatory
requirements, technological change or difficulties, product development risks,
commercialization and trade difficulties and general economic conditions. Such
statements reflect the current views of the Company with respect to future
events and are subject to these and other risks, uncertainties and assumptions
relating to the operations, results of operations, growth strategy and liquidity
of the Company. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by this paragraph.
<PAGE>
Summary Financial Information
The unaudited summary financial information, other than the "as adjusted"
data, set forth below is derived from the financial statements appearing
elsewhere herein. This information should be read in conjunction with such
financial statements, including the notes thereto. Gives effect to 7 for 1
reverse stock split effectuated in May, 1997.
Balance Sheet Data:
<TABLE>
<CAPTION>
At June 30, 1997
------------------------------------
Actual As Adjusted(1)(2)(3)
----------- -------------------
(unaudited) (unaudited)
<S> <C> <C>
Working Capital . . . . . . . . . . . . . $ 512,457 $2,428,687
Total Assets . . . . . . . 5,248,127 7,164,357
Total Liabilities. . . . . . . . . . . . . 2,976,965 2,976,965
Class A Convertible Preferred Stock 1,325,000 494,756
Class B Convertible Preferred Stock 450,000 450,000
Stockholders' Equity . . . . . . . . . . .
(Deficiency) . . . . . . . . . . . . . . 2,271,162 4,187,392
Statement of Operations Data:
Three Months Ended June 30
------------------------------
1997 1996
---- ----
(Unaudited) (Unaudited)
--------- ---------
Net Sales . . . . . . . . . . . . . . . . $1,121,261 $218,802
Net Income (Loss) . . . . . . . . . . . . $(913,657) $(967,240)
Income (Loss) Per
Common Share. . . . . . . . . . . . . . $(0.92) $(2.17)
<FN>
- ------
(1) Adjusted to reflect receipt of the maximum net proceeds from this
placement.
(2) Adjusted to give effect to (1) conversion of convertible preferred stock
into 441,985 shares of Common Stock from July 1, 1997 through September 22,
1997, and (ii) issuance of 1,281,698 additional shares of Common Stock from
July 1, 1997 through September 22, 1997.
(3) Not adjusted to reflect the issuance of up to an additional 300,000 shares
of Common Stock issuable upon exercise of Class A and Class B Warrants.
</FN>
</TABLE>
<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk. Only those persons able to lose their entire investment should purchase
these securities. Prospective investors, prior to making an investment decision,
should carefully consider, along with other matters referred to herein, the
following risk factors:
1. Need for Additional Funds. Management believes that its working capital
position at June 30, 1997, its operations, and the full proceeds of this
offering will make it possible for the Company to support its internal overhead
expenses through at least March, 1998. Since the Company has no existing line of
credit, it will be required to secure additional financing for future cash
requirements and there is no assurance that the Company will be successful in
these efforts. If the Company is unsuccessful in achieving positive cash flow
from its operations or generating additional working capital, its business will
be materially and adversely affected.
2. Historical and Anticipated Losses. The Company was incorporated in May,
1994 and, to date, has had limited revenues. For the three months ended June 30,
1997 and the years ended March 31, 1997, 1996 and 1995, the Company sustained
net losses of $913,657, $3,599,928, $2,786,383, and $833,925, respectively. The
Company recognized $1,121,261 , $2,938,565 , $ 314,024 and $1,281,223 in
revenues for the three months ended June 30, 1997 and the years ended March 31,
1997, 1996, and 1995 respectively. As of June 30, 1997, the Company had total
assets of $5,248,127, working capital of $512,457 and stockholders' equity of
$2,271,162. The Company is subject to all the general risks inherent in, and the
problems, expenses, difficulties, complications and delays frequently
encountered in connection with establishing any new business and manufacturing
operation. There is no assurance that the Company will operate at a level
sufficient to achieve profitability.
3. Going Concern Opinion. As indicated in the Company's annual report on
Form 10-KSB, the Company's financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has sustained losses
since inception and requires additional working capital. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
4. Limited Manufacturing History. The Company commenced limited remolded
tire manufacturing operations in December, 1995, but no assurance can be given
that the Company will be able to successfully manufacture remolded tires of
sufficient quality to permit the successful sale thereof, that the Company will
be able to manufacture a sufficiently complete line of products to satisfy the
demands of its customers or that the Company will be able to produce quantities
of remolded tires sufficient to achieve profitability. In this regard, the
Company will be purchasing new machinery and equipment in order to manufacture a
greater percentage of recreational vehicle and high performance tires which
historically sell at greater profit margins. There is no assurance that this
machinery and equipment will operate efficiently and manufacture sufficient
numbers of such tires to increase the Company's profit margins.
<PAGE>
5. Manufacturing with Used Machinery and Equipment. A majority of the
machinery and equipment which the Company is using in its manufacturing
operations is approximately nine years old and was used for approximately four
years. The equipment sat idle for four years prior to its use by the Company.
The Company has no warranty or service contract with respect to such equipment,
and bears the sole risk of such equipment failing to operate effectively.
Accordingly, no assurance can be given that this equipment will function
properly and some amount of repairs, refurbishings and delays already have been
experienced. There also can be no assurance that the Company's manufacturing
facility will not experience additional delays.
6. Uncertainty of Market Acceptance; Failure of Prior Tire Remolders. In
April, 1993, the Company began distributing remolded automobile passenger tires
in the United States manufactured by third parties and believes there will be
market acceptance of its own manufactured remolded passenger tires based on its
experience as a distributor. Remolded passenger automobile tires historically
have not accounted for a significant portion of the United States passenger
automobile replacement tire market. Since the Company's remolded tires compete
with new replacement tires, there can be no assurance that consumers will be
willing to purchase remolded tires notwithstanding the price differential and
the Company's belief that its remolded tires will be comparable in quality and
appearance to new tires. In this regard, the Company believes that at least
three previous businesses which attempted to manufacture, market and sell
remolded passenger automobile tires in the United States, including the previous
owner of the Company's machinery and equipment, failed to successfully do so and
such previous owner has ceased business operations. There is no assurance that a
U.S. market for the Company's products will develop and grow. There also is no
assurance that the U.S. market will provide sufficient revenue and earnings to
satisfy the cash requirements of the Company.
7. Competition. There are inherent difficulties for any new business
seeking to continue limited manufacturing operations and market a new product,
particularly in a very competitive market such as that for replacement
automobile tires. There are numerous manufacturers and/or distributors of new
tires, previously used tires and retreaded tires. The replacement tire market is
quite mature, and is serviced by a large number of competitors, several of which
dominate the marketplace. The Company anticipates that its primary competition
will be from lower-priced, lesser-known associated brands of major
manufacturers, and private-label manufacturers of new tires, both imported and
domestic, such as Coronet (Armstrong Tire Company), Summit (General Tire
Company), Hankock, Hercules (Cooper Tire & Rubber Co.), Ohtsu and others. The
Company would also compete with manufacturers and distributors of retreaded
tires such as Les SchwabTire Centers. Many of these competitors have been in
existence for many years, have extensive marketing budgets, established market
shares, wide name recognition and existing franchise, dealer or other
distribution networks. They also have greater financial, personnel and
administrative resources than the Company and have the capability of value
pricing their products to deter or eliminate competition. Assuming the Company
does gain significant market share, there is no assurance that other U.S. or
foreign tire manufacturers, including those with experience in the foreign
remolded tire markets, will not begin manufacturing and marketing remolded tires
<PAGE>
in direct competition with the Company in the United States. New entrants in
this industry could have an adverse impact on the Company's potential revenues
and profit margins. While the Company believes that the primary areas of
competition in its industry are price, warranty, service, appearance and quality
and that its products should compete favorably in these regards, there is no
assurance that the Company will be able successfully to compete against
established manufacturers or any new entrants into its industry.
8. Possible Adverse Impact of Unavailability of, or Higher Prices for, Raw
Materials. The primary raw materials used by the Company in its manufacturing
operations are previously used tire casings and rubber. The Company believes
that rubber is readily available from several sources, though the price thereof
has fluctuated. The Company also believes that suitable tire casings are readily
available from a wide variety of sources, including several distributors of
automobile tire casings and directly from tire distribution centers. Given the
nature of the market for tire casings, the Company believes that it will be
necessary to obtain casings from many sources to meet its anticipated needs.
While the Company does not anticipate any difficulties in obtaining sufficient
quantities of automobile tire casings and rubber to be used in its operations,
no assurance can be given in this regard. In the event that sufficient
quantities of raw materials are not available, or if the prices thereof become
uneconomical, the Company's business operations and financial condition could be
materially adversely affected.
9. Risks Relating to Environmental and Other Governmental Regulation. As a
manufacturer of remolded automobile tires, the Company's products are subject to
regulation by the United States Department of Transportation and other
government agencies relating to the safety and performance of its products. In
addition, as a manufacturer of rubber products with a manufacturing facility
located in the ecologically sensitive eastern region of Long Island, the Company
may be subject to various environmental regulations imposed by federal, state
and local authorities. While the Company believes that its manufacturing
operations are not environmentally sensitive, are in compliance with all
applicable environmental laws and regulations and that all necessary permits and
approvals will be obtained, no assurance can be given that compliance with
environmental laws, regulations or other restrictions, including any new laws or
regulations, will not impose additional costs on the Company which could
adversely affect its financial performance and results of operations.
10. Importance of and Risks Relating to Intellectual Property Rights. The
automobile tire industry is characterized by extensive use of intellectual
property protected by patent and trademark laws. The Company utilizes tire tread
designs and a manufacturing process which it has not patented and which it
believes are lawfully in the public domain. While the Company believes that it
does not infringe on the intellectual property rights of any third parties in
the conduct of its business, allegations of any such infringement, or disputes
or litigations relating thereto, could have a material adverse affect on the
Company's financial condition and results of operations.
11. Risk of Seasonality. While there is a year-round demand for automobile
tires, automobile tire sales in the Northeastern United States are generally
strongest during the second and third calendar quarters of the year. Seasonality
may have an impact on the Company's operations including cash flow, insofar as
the Company is required to control inventory levels to reflect projected
quarterly sales. However, since the Company anticipates that approximately 50%
of its sales will be in the Western United States and other regions where all
purpose automobile tires are used year round, it does not believe that
seasonality will adversely impact its operations.
<PAGE>
DIVIDEND POLICY
The Company has never declared or paid any cash dividends and currently
does not intend to pay cash dividends in the foreseeable future on the shares of
Common Stock.
Management intends to reinvest earnings, if any, in the development and
expansion of the Company's business. Cash dividends, if any, that may be paid in
the future to holders of shares of Common Stock will be payable when, as and if
declared by the Board of Directors of the Company, based upon the Board's
assessment of the financial condition of the Company, its earnings, need for
funds, capital requirements, and prior claims, of preferred stock to the extent
issued and outstanding and other factors, including any applicable laws.
USE OF PROCEEDS
The net proceeds from this offering are estimated to be approximately
$675,000, assuming the sale of 10 Units, and after deducting sales commissions
of approximately $60,000, and $15,000 of other expenses. These net proceeds will
be used for working capital and to continue the development and expansion of the
Company's business operations at its Holtsville, New York facility. Pending such
use, the net proceeds will be invested in interest bearing United States
Government or other investment grade marketable securities or will be deposited
in money market accounts, interest bearing certificates of deposit or bank
accounts or other limited-risk short term investments.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Securities
and Exchange Commission (File No. 0-27240) pursuant to the Securities Exchange
Act of 1934, are incorporated by reference to this Prospectus, shall be deemed
to be a part hereof and are attached as exhibits hereto:
(1) The Company's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1997
(2) The Company's Quarterly Report on Form 10-QSB for the three months
ended June 30, 1997.
(3) The Company's Notice of Annual Meeting and Proxy Statement dated April
24, 1997.
DESCRIPTION OF SECURITIES
Capital Stock
The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock, $.001 par value per share, 2,000,000 shares of Class A Convertible
Preferred Stock, 675,000 shares of Class B Convertible Preferred Stock and
1,325,000 shares of Preferred Stock, $.001 par value per share.
Common Stock
------------
Holders of the Common Stock do not have subscription, redemption,
conversion or preemptive rights. The shares of Common Stock sold by the Company
in this offering will be, when issued and paid for, fully paid and
non-assessable. Each share of Common Stock is entitled to participate pro rata
in distribution upon liquidation, subject to the rights of holders of Preferred
Stock, and to one vote on all matters submitted to a vote of stockholders. The
holders of Common Stock may receive cash dividends as declared by the Board of
Directors out of funds legally available therefor, subject to the rights of any
holders of Preferred Stock. Holders of the Common Stock are entitled to elect
all directors. The Company's Board consists of three classes each of which
serves for a term of three years. At each annual meeting of the stockholders the
directors in only one class will be elected. The holders of the Common Stock do
not have cumulative voting rights, which means that the holders of more than
half of the shares voting for the election of a class of directors can elect all
of the directors of such class and in such event the holders of the remaining
shares will not be able to elect any of such directors.
<PAGE>
Class A Convertible Preferred Stock
- -----------------------------------
Each issued and outstanding share of Class A Convertible Preferred Stock
("Class A Preferred") entitles the holder to receive dividends when, as and if
declared by the Board of Directors, at the annual rate of 10%, payable
semi-annually in either cash or common stock at the option of the Company.
Additionally, these preferred shareholders have the right to receive
preferential payments in the event of liquidation, dissolution or winding up of
the affairs of the Company. The holders of Class A Preferred have the right to
convert all or any part of their shares into Common Stock of the Company. The
Conversion Rate shall be (A) the sum of (1) $1.00 plus (2) all accrued and
unpaid dividends on a single share of Class A Convertible Preferred Stock
divided by (B) the Conversion Price (as hereinafter defined). The "Conversion
Price" shall be the lesser of (a) $21.00 per share ("fixed conversion price") or
(b) seventy-five (75%) percent of the Closing Bid Price of one share of the
Company's Common Stock for the five trading day period immediately prior to the
conversion date. For the purposes hereof, the "Closing Bid Price" shall mean the
closing bid price of the Company's Common Stock as reported by NASDAQ (or, if
not reported by NASDAQ, as reported by such other exchange or market where
traded).
Each holder of shares of Class A Convertible Preferred Stock is permitted
to convert such shares as follows:
(a) commencing July 15, 1997, for such month and for each calendar
month thereafter, each holder of Class A Convertible Preferred Stock shall be
entitled to convert up to twenty-five (25%) percent of the shares of Class A
Convertible Preferred Stock held by such holder as of July 15, 1997.
(b) commencing October 15, 1997 all of the shares of Class A
Convertible Preferred Stock shall be convertible into Common Stock.
The number of shares of Common Stock into which each share of Class A
Convertible Preferred Stock is convertible also shall be subject to adjustment
from time to time under certain situations including reclassification or
recapitalization of the Common Stock.
Class B Convertible Preferred Stock
- -----------------------------------
Each issued and outstanding share of Class B Convertible Preferred Stock
("Class B Preferred") entitles the holder to receive dividends when, as and if
declared by the Board of Directors, at the annual rate of 10%, payable
semi-annually in either cash or common stock at the option of the Company.
Additionally, these preferred shareholders have the right to receive
preferential payments in the event of liquidation, dissolution or winding up of
the affairs of the Company. The holders of Class B Preferred have the right to
convert all or any part of their shares into Common Stock of the Company. The
conversion rate shall be (A) the sum of (1) $1.00 plus (2) all accrued and
unpaid dividends on a single share of Class B Convertible Preferred Stock
divided by (B) the Conversion Price (as hereinafter defined). The "Conversion
Price" shall be $2.45 per share. Notwithstanding the foregoing, in no event
shall the shares of Common Stock issued on conversion have a market value of
less than $675,000 in the aggregate.
<PAGE>
The number of shares of Common Stock into which each share of Class B
Convertible Preferred Stock is convertible shall also be subject to adjustment
from time to time under certain situations including reclassification or
recapitalization of the Common Stock.
Preferred Stock
---------------
The Company's certificate of incorporation, as amended, authorizes the
issuance of up to 1,325,000 shares of additional preferred stock, par value
$.001 per share.
The issuance of additional Series A Preferred Stock or Preferred Stock by
the Board of Directors could adversely affect the rights of holders of shares of
Common Stock by, among other things, establishing preferential dividends,
liquidation rights or voting power. The issuance of Series A Preferred Stock or
Preferred Stock could be used to discourage or prevent efforts to acquire
control of the Company through the acquisition of shares of Common Stock.
Warrants
The following summary of the provisions of the Class A and Class B Warrants
is qualified in its entirety by reference to the form of warrant agreement, a
copy of which is filed as an exhibit to this memorandum. Except for the exercise
price, the Class A and Class B Warrants are identical in all material respects.
Each Warrant will entitle the registered holder thereof to purchase one
share of Common Stock (subject to certain adjustments) through September 24,
1998, at a price of $4 and $3 for the Class A Warrants and Class B Warrants,
respectively. A holder of Warrants may exercise such Warrants by surrendering
the certificate evidencing such Warrants to the Company, together with the form
of election to purchase on the reverse side of such certificate properly
completed and executed and the payment of the exercise price and any transfer
tax. If less than all of the Warrants evidenced by a Warrant certificate are
exercised, a new certificate will be issued for the remaining number of
Warrants.
For a holder to exercise the Warrants, there must current registration
statement on file with the United States Securities and Exchange Commission and
various state securities commissions. The Company will be required to file
post-effective amendments to the registration statement when events require such
amendments. While it is the Company's intention to file post-effective
amendments when necessary, there is no assurance that the registration statement
will be kept effective. If the registration statement is not kept current for
any reason, the Warrants will not be exercisable, and holders thereof may be
deprived of value. Moreover, if the shares of Common Stock underlying the
Warrants are not registered or qualified for sale in the state in which a
Warrant holder resides, such holder might not be permitted to exercise the
Warrants. If the Company is unable to qualify the Common Stock underlying such
Warrants for sale in certain states, holders of the Company's Warrants in those
states will have no choice but to either sell such Warrants or allow them to
expire.
<PAGE>
The Company has authorized and reserved for issuance a number of underlying
shares of Common Stock sufficient to provide for the exercise of the Warrants.
When issued, each share of Common Stock will be fully paid and nonassessable.
Warrant holders will not have any voting or other rights as shareholders of
the Company unless and until Warrants are exercised and shares issued pursuant
thereto.
The exercise price and the number of shares of Common Stock issuable upon
the exercise of each Warrant are subject to adjustment in the event of a stock
dividend, recapitalization, merger, consolidation or certain other events.
Certain Provisions of the Certificate of Incorporation
The Company's Certificate of Incorporation contains certain provisions
which may be deemed to be "anti-takeover" in nature in that such provisions may
deter, discourage or make more difficult the assumption of control of the
Company by another entity or person. In addition to the ability to issue
Preferred Stock, these provisions are as follows:
A vote of 66-2/3% of the stockholders is required by the Certificate of
Incorporation in order to approve certain transactions including mergers and
sales or transfers of all or substantially all of the assets of the Company.
The Company's Certificate of Incorporation also provides that the members
of the Board of Directors of the Company have been classified into three
classes. The term of each class will run for three years and expire at
successive annual meetings of stockholders. Accordingly, it is expected that it
would take a minimum of two annual meetings of stockholders to change a majority
of the Board of Directors.
The Delaware General Corporation Law further contains certain anti-takeover
provisions. Section 203 of the Delaware General Corporation Law provides, with
certain exceptions, that a Delaware corporation may not engage in any of a broad
range of business combinations with a person who owns 15% or more of the
corporation's outstanding voting stock (an "interested stockholder") for a
period of three years from the date that such person became an interested
stockholder unless: (i) the transaction resulting in a person's becoming an
interested stockholder, or the business combination is approved by the board of
directors of the corporation before the person becomes an interested
stockholder; (ii) the interested stockholder acquires 85% or more of the
outstanding voting stock of the corporation (excluding shares owned by persons
who are both officers and directors of the corporation, and shares held by
certain employee stock ownership plans); or (iii) the business combination is
approved by the corporation's board of directors and by the holders of at least
66 2/3% of the corporation's outstanding voting stock at an annual or special
meeting, excluding shares owned by the interested stockholder.
<PAGE>
Transfer Restrictions
This offering is being made pursuant to an exemption to the registration
requirements of Section 5 of the Securities Act. The Securities have not been
registered under the Securities Act and may not be offered or sold within the
United States, except that the Notes may be offered or sold in reliance on
exemption from the registration requirements of the Securities Act.
Each purchaser of the Securities offered hereby will be deemed to have
represented and agreed as follows:
(1) It is acquiring the Securities for its own account for investment
purposes and not with a view to resale.
(2) It understands that such Securities are being offered only in a
transaction not involving any public offering within the meaning of the
Securities Act, and that, if in the future it decides to resell, pledge or
otherwise transfer such Securities, such Securities may be resold, pledged or
transferred only (i) to the Company, (ii) pursuant to an exemption from
registration under the Securities Act.
(3) It understands that the Securities offered hereby will bear a legend to
the following effect unless otherwise agreed by the Company and the holder
thereof:
THIS SECURITY IS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY AGREES
FOR THE BENEFIT OF THE ISSUER THAT SUCH SHARES MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) TO THE COMPANY OR (2) IF, IN THE OPINION OF
COUNSEL TO THE COMPANY, SUCH TRANSFER IS MADE PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT.
<PAGE>
PRIVATE PLACEMENT
The Securities will not be registered by the Company under the Securities
Act of 1933, as amended, and will not be listed on any securities exchange.
Securities offered hereby can be purchased only by "accredited investors," as
such term is defined under Regulation D promulgated under the Securities Act.
The Company extends to each prospective investor the opportunity, prior to
the consummation of the sale of the securities offered hereby, to ask questions
of, and receive answers from, the Company concerning the securities offered
hereby, and the terms and conditions of this offering, and to obtain any
additional information it may consider necessary in making an informed
investment decision or in order to verify the accuracy of the information set
forth herein, to the extent that the Company possesses the same or can acquire
it without unreasonable effort or expense and can make such information
available without divulging information deemed by the Company, in its absolute
discretion, to be proprietary and confidential.
Determination of Offering Prices
The price of the Common Stock and exercise price of the Warrants have been
determined by the Company. Among the factors considered in such determination
were the closing price of its Common Stock, an analysis of the areas of activity
in which the Company is engaged, the present state of the Company's business,
the Company's financial condition, the Company's prospects, an assessment of
management, the general condition of the securities market at the time of the
offering and the demand for similar securities of comparable companies. The
price of the securities does not necessarily bear any relationship to assets,
earnings, book value or other criteria of value applicable to the Company.
FINANCIAL STATEMENTS
The financial statements of the Company as of June 30, 1997 (unaudited) and
March 31, 1997 are set forth in its reports on Forms 10-QSB and 10-KSB are
annexed as exhibits to the Private Placement Memorandum.
<PAGE>
Exhibit A
SUBSCRIPTION AGREEMENT
Subscription Agreement, dated as of _________, 1997, between EcoTyre
Technologies, Inc., a Delaware corporation (the "Company") and
________________________________ (the "Purchaser").
WHEREAS, the Purchaser desires to subscribe for, and the Company desires to
issue to the Purchaser, Units (the "Units") each Unit consisting of 50,000
shares of common stock, par value $.001 per share (the "Common Stock") of the
Company, 15,000 Class A Warrants and 15,000 Class B Warrants (the "Warrants"),
collectively (the "Units"), all upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
premises, covenants, representations and warranties herein contained, it is
hereby agreed as follows:
1. Subscription Price; Issuance.
----------------------------
In reliance on the representations and warranties contained herein and
subject to the terms and conditions hereof, the Purchaser hereby subscribes for
___ Units and concurrently with delivery hereof has paid to the Company an
amount equal to $75,000 per Unit or $__________ in the aggregate, in immediately
available funds upon the execution and delivery of this Agreement, and the
Company will issue upon the closing as contemplated by the Memorandum (as
hereinafter defined) to the Purchaser 50,000 Shares with respect to each such
Unit and the Warrants.
2. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants to the Purchaser as follows:
2.1. Corporate Status.
----------------
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware with full corporate
power and authority to carry on its business as now conducted.
2.2. Authority of Agreement.
----------------------
The Company has the power and authority to execute and deliver
this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company and this Agreement
<PAGE>
constitutes the valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally now or hereafter in effect and
subject to the application of equitable principles and the availability of
equitable remedies. The Company has reserved from its authorized but unissued
shares of Common Stock such number of shares as shall be deliverable to the
Purchaser upon the Closing of the Units subscribed for hereby and such number of
shares which are reserved for issuance upon exercise of the Warrants.
2.3. No Conflicts.
------------
The execution, delivery and performance of this Agreement and
the other instruments and agreements to be executed, delivered and performed by
the Company pursuant hereto and the consummation of the transactions
contemplated hereby and thereby by the Company do not and will not with or
without the giving of notice or the passage of time or both, violate or conflict
with or result in a breach or termination of any provision of, or constitute a
default under, the Certificate of Incorporation or the By-Laws of the Company or
any order, judgment, decree, statute, regulation, contract, agreement or any
other restriction of any kind or description to which the Company or its assets
may be bound or subject.
2.4 Fully Paid and Non-Assessable
-----------------------------
Upon issuance of the Units and payment therefor pursuant to the
terms hereof, each share of Common Stock issued at closing shall be validly
issued, fully paid and non-assessable.
3. Representations and Warranties of the Purchaser.
-----------------------------------------------
The Purchaser represents and warrants to the Company as follows:
3.1. Status.
------
If the Purchaser is a corporation or other entity, the Purchaser
is a corporation or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with full power
and authority to execute, deliver and perform its obligations under this
Agreement. If the Purchaser is an individual, the Purchaser has legal capacity
to execute, deliver and perform his or her obligations under this Agreement.
3.2 Authority for Agreements.
------------------------
The Purchaser has the power and authority to execute and deliver
this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance by the Purchaser of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary action on the part of the Purchaser and this Agreement constitutes the
valid and legally binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally now or hereafter in effect and subject to the
application of equitable principles and the availability of equitable remedies.
<PAGE>
3.3. No Conflicts.
------------
The execution, delivery and performance of this Agreement and the
other instruments and agreements to be executed, delivered and performed by the
Purchaser pursuant hereto and the consummation of the transactions contemplated
hereby and thereby by the Purchaser do not and will not with or without the
giving of notice or the passage of time or both, violate or conflict with or
result in a breach or termination of any provision of, or constitute a default
under, the Certificate of Incorporation or the By-Laws of the Purchaser (if the
Purchaser is a corporation), any other organizational instrument (if the
Purchaser is a legal entity other than a corporation) or any order, judgment,
decree, statute, regulation, contract, agreement or any other restriction of any
kind or description to which the Purchaser is a party or by which the Purchaser
may be bound.
3.4. Investor Representations and Acknowledgments.
--------------------------------------------
(a) The Purchaser is acquiring the Units for the Purchaser's own
account for investment only and not as nominee or agent and not with a view to,
or for sale in connection with, a distribution of the Units or its components
and with no present intention of selling, transferring, granting a participation
in or otherwise distributing, the Units or such components, all within the
meaning of the Securities Act of 1933, as amended, and the rules and regulations
thereunder (the "Securities Act") and any applicable state, securities or
blue-sky laws.
(b) The Purchaser is not a party or subject to or bound by any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or pledge the Units or any part thereof to any person, and has no
present intention to enter into such a contract, undertaking, agreement or
arrangement.
(c) The Purchaser acknowledges to the Company that:
(i) The Company has advised the Purchaser that the Units have not
been registered under the Securities Act or under the laws of any state on
the basis that the issuance thereof contemplated by this Agreement is
exempt from such registration;
(ii) The Company's reliance on the availability of such exemption
is, in part, based upon the accuracy and truthfulness of the Purchaser's
representations contained herein;
(iii) The Units cannot be resold without registration or an
exemption under the Securities Act and such state securities laws, and that
certificates representing the Common Stock and Warrants will bear a
restrictive legend to such effect;
<PAGE>
(iv) The Purchaser has evaluated the merits and risks of purchasing
the Units, and has such knowledge and experience in financial and business
matters that the Purchaser is capable of evaluating the merits and risks of
such purchase, is aware of and has considered the financial risks and
financial hazards of purchasing the Units, and is able to bear the economic
risk of purchasing the Units, including the possibility of a complete loss
with respect thereto;
(v) The Purchaser has had access to such information regarding the
business and finances of the Company, including without limitation, the
Company's audited and unaudited financial statements included in the
disclosure documents delivered by the Company to the Purchaser, and has
been provided the opportunity to discuss with the Company's management the
business, affairs and financial condition of the Company and such other
matters with respect to the Company as would concern a reasonable person
considering the transactions contemplated by this Agreement and/or
concerned with the operation of the Company;
(vi) All the information which is set forth with respect to the
Purchaser in the Qualified Purchaser Questionnaire executed by the
Purchaser, all of which are incorporated herein by this reference, and all
of the Purchaser's representations and warranties set forth herein are
correct and complete as of the date of this Agreement, shall be true and
correct as of the closing of the transaction contemplated by this
Agreement, shall survive such closing and if there should be any material
change in such information prior to the sale to the Purchaser of the Units
the Purchaser will immediately furnish such revised or corrected
information to the Company; and
(vii) Additional Representations and Warranties of Accredited
Investors. The Purchaser, by initialing the applicable paragraph below (a)
through (g) hereby represents and warrants that the Purchaser is an
"Accredited Investor", because the Purchaser comes within one or more of
the enumerated categories. The Purchaser has reviewed the Investor
Suitability Standards attached as Annex A hereto and confirms it is an
"Accredited Investor" as indicated below. Place your initials in the space
provided in the beginning of each applicable paragraph, thereby
representing and warranting as to the applicability to the Purchaser of the
initialed paragraph or paragraphs:
[ ] (a) any individual Purchaser whose net worth, or joint net worth
with that person's spouse at the time of his purchase, exceeds $1,000,000
(including any individual participant of a Keogh Plan, IRA or IRA Rollover
Purchaser);
[ ] (b) any individual Purchaser who had an income in excess of
$200,000 in each of the two most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and who
reasonably expects an income in excess of the same income level in the
current year (including any individual participant of a Keogh Plan, IRA or
IRA Rollover Purchaser);
<PAGE>
[ ] (c) any corporation or partnership not formed for the specific
purpose of making an investment in the Units, with total assets in excess
of $5,000,000;
[ ] (d) any trust, which is not formed for the specific purpose of
investing in the Common Stock, with total assets in excess of $5,000,000,
whose purchase is directed by a sophisticated person, as such term is
defined in Rule 506(b) of Regulation D under the Securities Act;
[ ] (e) any ERISA Plan if the investment decision is made by a plan
fiduciary, as defined in section 3(21) of ERISA, which is either a bank,
insurance company, or registered investment adviser, or the Plan has total
assets in excess of $5,000,000;
[ ] (f) any entity in which all of the equity owners are Accredited
Investors under paragraphs (a), (b) or (c) above or any other entity
meeting required "Accredited Investor" standards under Rule 501 of
Regulation D under the Securities Act and applicable State securities law
criteria;
[ ] (g) other (please explain)
4. Registration Rights.
-------------------
4.1 Demand Registration Rights. The Company hereby covenants and
agrees that the Purchaser shall have the right, exercisable after completion of
the offering covered by the Memorandum to demand registration of the Common
Stock sold thereunder in a registration statement; provided that no such
registration statement shall be required to be filed by the Company unless the
holder of a majority of the shares of Common Stock sold in such offering makes
such demand. In the event of such demand, the Company shall use its reasonable
efforts to file such registration statement in a timely manner.
5. Company's Obligations for Registrations.
---------------------------------------
5.1 Costs and Expenses. The Company shall pay all costs
(excluding expenses of counsel to the Holders and underwriting, dealers or
selling commissions, which shall be borne by the Holders), fees and expenses in
connection with any registration statement filed pursuant to Section 4 hereof
including, without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses. If the Company shall fail to comply with
the provisions of Section 4 hereof, the Company shall, in addition to any other
equitable or other non-monetary relief available to the Holders, be liable for
any or all incidental, special and consequential damages due to loss of profit
sustained by the Holders as a result of such failure.
5.2 Blue Sky Laws. The Company will take all necessary action
which may be required in qualifying or registering the Shares included in a
registration statement for offer and sale under the securities or blue sky laws
of such states as reasonably are requested by the Holder(s); provided, that the
Company shall not be obligated to execute or file any general consent to service
of process or to qualify as a foreign corporation to do business under the laws
of any such jurisdiction; provided, further, that the Company shall not be
obligated to qualify or register the Shares in any state where the Company's
shares are not already qualified or registered for offer and sale.
<PAGE>
5.3 Indemnification of Holders. The Company shall indemnify the
Holder(s) of the Shares to be sold pursuant to any registration statement and
each person, if any, who controls such Holders within the meaning of Section 15
of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Securities Act, the Exchange Act or otherwise, arising
from such registration statement; provided, however, that the Company shall not
be required to indemnify the Holders for any loss, claim, damage, expense or
liability arising from any misstatement or omission of a material fact which is
based on information furnished in writing by or on behalf of such Holders, or
their successors or assigns, for inclusion in the registration statement. In
addition, the Company shall not be obligated to indemnify the Holders for any
loss, claims, damage, expense or liability arising from any misstatement or
omission of a material fact where the Company shall have timely delivered to the
Holders amendments or supplements of a registration statement or prospectus
which correct such misstatement or omission of a material fact and the Holders
fail to utilize such amendment or supplement in the offer and sale of the
Shares.
5.4 Indemnification of the Company. The Holders(s) of the Shares
to be sold pursuant to a registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Company, its officers
and directors and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which they may become subject under the Securities Act,
the Exchange Act or otherwise, arising from information furnished in writing by
or on behalf of such Holders, or their successors or assigns, for inclusion in
such registration statement.
5.5 Financial Statements. The Company as soon as practicable, but
in any event not later than 45 days after the end of the 12-month period
beginning on the day after the end of the fiscal quarter of the Company during
which the effective date of the registration statement occurs (90 days in the
event that the end of such fiscal quarter is the end of the Company's fiscal
year), shall make generally available to its securities holders, in the manner
specified in Rule 158(b) under the Securities Act, and to the underwriter, an
earnings statement which will be in the detail required by, and will otherwise
comply with, the provisions of section 11(a) of the Securities Act and Rule
158(a), which statement need not be audited unless required by the Securities
Act, covering a period of at least 12 consecutive months after the effective
date of the registration statement.
5.6 Copies. The Company shall furnish to each Holder of Common
Stock or Warrants such number of copies of the registration statement, each
amendment thereto, the prospectus included in such registration (including each
preliminary prospectus) and such other documents as such Holder any reasonably
request in order to facilitate the disposition of the Shares owned by such
Holder.
<PAGE>
6. Further Assurances.
------------------
At any time and from time to time after the date hereof, each
party shall, without further consideration, execute and deliver to the other
such other instruments or documents and shall take such other actions as the
other may reasonably request to carry out the transactions contemplated by this
Agreement.
7. Miscellaneous.
-------------
Any party may waive compliance by the other with any of the provisions of
this Agreement. No waiver of any provision shall be construed as a waiver of any
other provision. Any waiver must be in writing. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. This Agreement may not be modified
or amended except in writing signed by both parties hereto. This Agreement may
be executed in several counterparts, each of which shall be deemed an original,
and all of which shall constitute one and the same instrument. This Agreement
shall be governed in all respects, including validity, interpretation and
effect, by the laws of the State of Delaware, applicable to contracts made and
to be performed in Delaware. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the successors and assigns of the parties
hereto. This Agreement shall not be assignable by either party without the prior
written consent of the other, such consent not to be unreasonably withheld. The
rights and obligations contained in this Agreement are solely for the benefit of
the parties hereto and are not intended to benefit or be enforceable by any
other party, under the third party beneficiary doctrine or otherwise.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
<PAGE>
EXECUTION PAGE FOR SUBSCRIPTION BY INDIVIDUALS
(not applicable to subscriptions by entities, Individual
Retirement Accounts, Keogh Plans or ERISA Plans)
TOTAL SUBSCRIPTION AMOUNT $ .
------------------------------------------
[ ]INDIVIDUAL OWNER [ ]CUSTODIAN UNDER
(One signature required below) Uniform Gifts to Minors Act
[ ]JOINT TENANTS WITH RIGHT ---------------------------------
OF SURVIVORSHIP (Insert applicable state)
(All tenants must sign below) (Custodian must sign below)
[ ]TENANTS IN COMMON [ ]COMMUNITY PROPERTY
(All tenants must sign below) (Both spouses in community property
states must sign below)
Print information as it is to appear on the Company records.
- ------------------------------ ----------------------------------
(Name of Subscriber) (Social Security or Taxpayer ID No.)
- ------------------------------
- ------------------------------ ----------------------------------
(Home Address) (Home Telephone)
- ------------------------------
- ------------------------------ ----------------------------------
(Business Address) (Business Telephone)
- ------------------------------ ----------------------------------
(Name of Co-Subscriber) (Social Security or Taxpayer ID No.)
- ------------------------------
- ------------------------------ ----------------------------------
(Home Address) (Home Telephone)
- ------------------------------
- ------------------------------ ----------------------------------
(Business Address) (Business Telephone)
SIGNATURE(S)
-----------
Dated:______________, 1997.
(1)By: (2) By:
----------------------- ----------------------------
Signature of Authorized Signatory Signature of Authorized Co-Signatory
-------------------------- ----------------------------
Print Name of Signatory and Title, Print Name of Co-Signatory and Title,
if applicable if applicable
ACCEPTED AND AGREED:
ECOTYRE TECHNOLOGIES, INC.
By: Dated: , 1997.
----------------------- -----------------------------
Name:
Title:
<PAGE>
(ACKNOWLEDGEMENT FOR INDIVIDUALS)
STATE OF :
: ss:
COUNTY OF :
On this _____________ day of ___________, 1997, before me, a notary public in
and for the state and county aforesaid, personally appeared
___________________________, known to me to be the person(s) whose name(s) is
(are) subscribed to the foregoing Subscription Agreement and acknowledged that
he, she or they executed the same.
-----------------------------------
Notary Public
<PAGE>
EXECUTION PAGE FOR SUBSCRIPTION BY ENTITIES
TOTAL SUBSCRIPTION AMOUNT $ .
-------------------------------------
[ ] EMPLOYMENT BENEFIT PLAN OR TRUST (including pension plan, profit sharing
plan, other defined contribution plan and SEP)
[ ] IRA, IRA ROLLOVER OR KEOGH PLAN
[ ] TRUST (other than employee benefit trust)
[ ] CORPORATION (Please include certified corporate resolution authorizing
signature)
[ ] PARTNERSHIP
[ ] OTHER
Print information as it is to appear on the Company records.
- ------------------------------ -------------------------------------
(Name of Subscriber) (Taxpayer ID Number)
- ------------------------------ -------------------------------------
(Plan number, if applicable)
- ------------------------------ -------------------------------------
(Address) (Telephone Number)
- ------------------------------------------------------------------------
Name and Taxpayer ID number of sponsor, if applicable
The undersigned trustee, partner, corporate officer or fiduciary certifies
that he or she has full power and authority from all beneficiaries, partners or
shareholders of the entity named above to execute this Subscription Agreement on
behalf of the entity and to make the representations, warranties and agreements
made herein on their behalf and that investment in the Units has been
affirmatively authorized by the governing board or body of such entity and is
not prohibited by law or the governing documents of the entity.
SIGNATURE(S)
-----------
Dated: , 1997.
--------------------
By: By:
------------------------------- ---------------------------------------
Signature of Authorized Signatory Signature of Required Authorized Co-Signatory
------------------------------- ---------------------------------------
Print Name of Signatory Print Name of Required Co-Signatory
------------------------------- ---------------------------------------
Print Name of Signatory Print Title of Required Co-Signatory
ACCEPTED AND AGREED:
ECOTYRE TECHNOLOGIES, INC.
By: Dated:___________________________, 1997
-------------------------------
Name:
Title:
<PAGE>
(ACKNOWLEDGEMENT FOR ENTITIES)
STATE OF :
: ss:
COUNTY OF :
On this ___________ day of _______, 1997, before me personally came
_____________________ known to me, who, being by me duly sworn, did depose and
say that he or she is the __________ of ___________________________________, the
entity described in and which executed the foregoing Subscription Agreement;
that is was so affirmatively authorized by the governing board or body of such
entity; and that he or she signed his or her name thereto by like order.
---------------------------
Notary Public
<PAGE>
Annex A
-------
INVESTOR SUITABILITY STANDARDS
A purchase of the Units involves a high degree of risk and is suitable only
for persons of substantial financial means who have no need for liquidity in
their investments. The offer, offer for sale, and sale of the securities are
intended to be exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to Regulation D promulgated
thereunder ("Regulation D"), and are intended to be exempt from the requirements
of applicable state securities laws.
The Units are being offered and sold only to up to thirty-five (35)
"non-accredited investors" and to "accredited investors," as those terms are
defined in Regulation D.
Regulation D defines an "accredited investor" as follows:
(1) Any bank as defined in section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934; any insurance company as defined in section
2(13) of the Securities Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
section 2(a)(48) of that act; any Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such act, which is
or either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors;
(2) Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose or acquiring the securities offered, with total
assets in excess of $5,000,000;
(4) Any director, executive officer, or general partner of the issuer of
the securities being offered or sold, or any director, executive officer, or
general partner of a general partner of that issuer;
(5) Any natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of his or her purchase exceeds $1,000,000;
<PAGE>
(6) Any natural person who had an individual income in excess of $200,000
in each of the two most recent years or joint income with that person's spouse
in excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
(7) Any trust with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is directed
by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D;
and
(8) Any entity in which all of the equity owners are accredited investors.
<PAGE>
Exhibit B
Qualified Purchaser Questionnaire
Purpose of this Questionnaire
- -----------------------------
The Units (the "Units") of EcoTyre Technologies Inc., a Delaware corporation
(the "Company"), are being offered without registration under the Securities Act
of 1933, as amended (the "Act"), or the securities laws of any state, in
reliance on the exemptions contained in Sections 3(b) and 4(2) of the Act and on
similar exemptions under applicable state laws. Under Sections 3(b) and 4(2)
and/or certain state laws, the Company may be required to determine that an
individual, or an individual together with a "purchaser representative" or each
individual equity owner of an investing entity meets certain suitability
requirements before selling the Units to such individual or entity. THE COMPANY
MAY, AT ITS ELECTION, NOT SELL THE UNITS TO A SUBSCRIBER WHO HAS NOT THOROUGHLY
FILLED OUT A QUESTIONNAIRE. IN THE CASE OF AN INVESTOR THAT IS A PARTNERSHIP,
TRUST OR CORPORATION, EACH EQUITY OWNER MUST COMPLETE A QUESTIONNAIRE. This
Questionnaire does not constitute an offer to sell or a solicitation of an offer
to buy the Units or any other security.
Instructions
One (1) copy of this Questionnaire should be completed, signed, dated and
delivered to Vito Alongi,, c/o EcoTyre Technologies, Inc., 895 Waverly Avenue,
Holtsville, New York 11742 (Telephone: (516) 289-4545) if you have any questions
with respect to the Questionnaire.
PLEASE ANSWER ALL QUESTIONS. If the appropriate answer is "None" or "Not
Applicable," so state. Please print or type your answers to all questions.
Attach additional sheets if necessary to complete your answers to any item.
Your answers will be kept strictly confidential at all times; however, the
Company may present this Questionnaire to such parties as it deems appropriate,
including its counsel, in order to assure itself that the offer and sale of the
Units will not result in a violation of the registration provisions of the Act
or a violation of the securities laws of any state.
<PAGE>
1. Please provide the following personal information:
Name_____________________ Age: _______
Residence Address (including zip code):
---------------------------
---------------------------
Telephone Numbers: Residence: ___________ Business: ____________
Social Security or Federal Tax I.D. Number _________________________
2. Please describe your present or most recent business or occupation
and indicate such information as the nature of your employment, the principal
business of your employer, the principal activities under your management or
supervision and the scope (e.g., dollar volume, industry rank, etc.)
of such activities:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. Please provide the following information concerning your financial
experience:
3.1 Indicate by check mark which of the following categories best
describes the extent of your prior experience in the areas of investment listed
below:
Substantial Limited No
Experience Experience Experience
----------- ---------- ----------
Marketable Securities _____ _____ _____
Equity Securities for
which no market exists _____ _____ _____
Limited Partnerships _____ _____ _____
Initial Public Offerings _____ _____ _____
3.2 Indicate by check mark whether you maintain any of the following
types of accounts over which you, rather than a third party,
exercise investment discretion, and the length of time you have
maintained each type of account.
Securities (cash): _____ _____ _____ Number of years: _____
Yes No
<PAGE>
Securities (margin): _____ _____ Number of years: _____
Yes No
4. Please answer the following questions (If you are investing as an
individual, please fill out section 4.1; otherwise, please fill out section
4.2):
4.1 For Individuals:
(a) Does your net worth1 (or joint net worth with your spouse, if
greater) exceed $1,000,000?
----- -----
Yes No
(b) Did you have an individual income2 in excess of $200,000 or
joint income together with your spouse in excess of $300,000, in
each of the two most recent years and do you reasonably expect to
reach the same income level in the current year?
----- -----
Yes No
(c) For New Jersey Residents Only: Did you have individual income in
excess of $200,00 in each of the two most recent years and do you
reasonably expect to reach the to reach the same level in the
current year?
----- -----
Yes No
- ------------
1 For purposes hereof, net worth shall be deemed to include all of your assets,
liquid or illiquid (including such items as home, furnishings, automobile and
restricted securities) minus any liabilities (including such items as home
mortgages and other debts and liabilities).
2 For purposes hereof, the term "income" is not limited to "adjusted gross
income" as that term is defined for Federal Income Tax purposes, but rather
includes certain items of income which are deducted in computing "adjusted gross
income," For investors who are salaried employees, the gross salary of such
investor, minus any significant expenses personally incurred by such investor in
connection with earning the salary, plus any income from any other source,
including unearned income, is a fair measure of "income" for purposes hereof.
For investors who are self-employed, "income" is generally construed to mean
total revenues received during the calendar year minus significant expenses
incurred in connection with earning such revenues.
<PAGE>
4.2 For Corporations, Trusts, Pension Funds and other Non-Individuals, are you:
(a) A bank as defined in section 3(a)(2) of the Act, or any savings
and loan association or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934; any insurance company as
defined in section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 or a business
development company as defined in section 2(a)(48) of that act;
Small Business Investment Company licensed by the U.S. Small
Business Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions for the
benefit of its employees, if such plan has total assets in excess
of $5,000,000; employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 if the investment
decision is made by a plan fiduciary, as defined in section 3(21)
of such Act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000 or,
if a self-directed plan, with investment decisions made solely by
persons that are accredited investors, as defined in Regulation D
promulgated pursuant to the Act ("Regulation D"):
----- -----
Yes No
(b) A private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940:
----- -----
Yes No
(c) Any organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust
or partnership, not formed for the specific purpose of acquiring
the securities offered with total assets in excess of $5,000,000:
----- -----
Yes No
<PAGE>
(d) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any director,
executive officer, or general partner of a general partner of that
issuer:
----- -----
Yes No
(e) Any trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) of Regulation D:
----- -----
Yes No
(f) Any entity in which all of the equity owners are accredited
investors, as defined in Regulation D:
----- -----
Yes No
(g) If you are a corporation that has its principal place of
business in California, do you have total assets in excess of
$14,000,000 and were you not formed for the specific purpose of
acquiring any Units?
----- -----
Yes No
5. Check if appropriate:
[ ] I hereby represent and warrant that I have such knowledge and
experience in financial and business matters that I am capable of
evaluating the merits and risks of any prospective investment in the
Company.
(If you checked this box, please skip item 6. If you are a resident of
California, Florida or New York, please go to item 7. If you are a
resident of another state, go directly to item 8.)
6. If you did not check the box to Question 5, please answer the following
additional questions:
<PAGE>
6.1 Please describe any preexisting personal or business relationship
that you have with the Company or any of its officers and
directors.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6.2 Please describe any business or financial experience that you have
had that would allow the Company to reasonably conclude that you
are capable of protecting your interests in connection with your
prospective investment in the Company. If none, so state:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6.3 If your answer to question 6.2 above was "None," in order to
evaluate the merits and risks of the investment, will you be
relying upon the advice of any other person(s) who will be acting
as your purchaser representative(s)?
----- -----
Yes No
If "yes," please identify each such person and indicate his business
address and telephone number in the space below. (Each such person
must complete, and you must review and acknowledge, a separate
Purchaser Representative questionnaire which will be supplied at
your request and must be returned to the Company prior to the sale
of any Units to you.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
7. 1. For Residents of California:
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS QUESTIONNAIRE
HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT
OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 251000, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THE
SUBSCRIPTION AGREEMENT RELATING TO THESE SECURITIES ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
2. For Residents of Florida:
WHERE SALES ARE MADE TO FIVE OR MORE PERSONS IN FLORIDA (EXCLUDING
CERTAIN INSTITUTIONAL PURCHASERS DESCRIBED IN SECTION 517.061(7) OF
THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT (THE "FLORIDA
ACT"), ANY SUCH SALE MADE PURSUANT TO SECTION 517.061(11) OF THE
FLORIDA ACT SHALL BE VOIDABLE BY THE PURCHASER EITHER WITHIN THREE
DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER
TO THE ISSUER, OR AN AGENT OF THE ISSUER, OR AN ESCROW AGENT, OR
WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS
COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER.
3. For Residents of New York:
THE UNDERSIGNED NEW YORK STATE RESIDENT UNDERSTANDS THAT THIS OFFERING
HAS NOT BEEN REVIEWED BY THE ATTORNEY GENERAL OF THE STATE OF NEW YORK
BECAUSE OF THE OFFEROR'S REPRESENTATIONS THAT THIS IS INTENDED TO BE A
NON-PUBLIC OFFERING PURSUANT TO SEC REGULATION D, AND THAT IF ALL OF
THE CONDITIONS AND LIMITATIONS OF THE SEC REGULATION ARE NOT COMPLIED
WITH, THE OFFERING WILL BE RESUBMITTED TO THE ATTORNEY GENERAL FOR
AMENDMENT EXEMPTION. I UNDERSTAND THAT ANY OFFERING LITERATURE USED IN
CONNECTION WITH THIS OFFERING HAS NOT BEEN PRE-FILED WITH THE ATTORNEY
GENERAL AND HAS NOT BEEN REVIEWED BY THE ATTORNEY GENERAL .
<PAGE>
THE UNITS BEING PURCHASED FOR MY OWN ACCOUNT FOR INVESTMENT, AND NOT
FOR DISTRIBUTION OR RESALE TO OTHERS. I AGREE THAT I WILL NOT SELL OR
OTHERWISE TRANSFER THESE SECURITIES UNLESS THEY ARE REGISTERED UNDER
THE FEDERAL SECURITIES ACT OF 1933 OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. I REPRESENT THAT I HAVE ADEQUATE MEANS OF
PROVIDING FOR MY CURRENT NEEDS AND POSSIBLE PERSONAL CONTINGENCIES,
AND THAT I HAVE NO NEED FOR LIQUIDITY OF THIS INVESTMENT.
IT IS UNDERSTOOD THAT ALL DOCUMENTS, RECORDS AND BOOKS PERTAINING TO
THIS INVESTMENT HAVE BEEN MADE AVAILABLE FOR INSPECTION BY MY ATTORNEY
AND/OR MY ACCOUNTANT AND/OR MY OFFEREE REPRESENTATIVE AND MYSELF, AND
THAT THE BOOKS AND RECORDS OF THE ISSUER WILL BE AVAILABLE UPON
REASONABLE NOTICE, FOR INSPECTION BY INVESTORS AT REASONABLE HOURS AT
ITS PRINCIPAL PLACE OF BUSINESS.
---------------------------
Acknowledged (Please initial)
8. By signing this questionnaire, I hereby confirm the following statements:
(a) I am aware that the offering of the Units pursuant to the
accompanying Subscription Documents which I hereby acknowledge as received and
reviewed, will involve securities for which no market currently exists, thereby
requiring any investment to be maintained for an indefinite period of time, and
I have no need to liquidate the investment.
(b) I acknowledge that any delivery to me of any documentation relating
to the Units prior to the determination by the Company of my suitability as an
investor shall not constitute an offer of the Units until such determination of
suitability shall be made, and I agree that I shall promptly return all such
documentation to the Company upon request.
(c) My answers to the foregoing questions are true and complete to the
best of my information and belief, and I will promptly notify the Company of
any changes in the information I have provided.
(d) I also understand and agree that, although the Company will use its
best efforts to keep the information provided in answers to this questionnaire
strictly confidential, the Company may present this questionnaire and the
information provided in answers to it to such parties as it may deem advisable
if called upon to establish the availability under any federal or state
securities laws of an exemption from registration of the private placement or
if the contents thereof are relevant to any issue in any action, suit or
proceeding to which the Company or its affiliates is a party or by which it or
they are or may be bound.
<PAGE>
(e) I realize that this questionnaire does not constitute an offer by the
Company or its affiliates to sell the Units but is merely a request for
information.
-------------------------- -------------------------
Printed Name Spouse's Name
(If purchasing jointly)
-------------------------- -------------------------
Signature Spouse's Signature
(If purchasing jointly)
-------------------------- -------------------------
Social Security or Employee Spouse's Social Security Number
Identification Number (If purchasing jointly)
Date and Place Executed:
Date:
-----------------
Place:
-------------------------------
<PAGE>
Exhibit C
These securities may not be publicly offered or sold unless at the time of such
offer or sale, the person making such offer of sale delivers a prospectus
meeting the requirements of the Securities Act of 1933 forming a part of a
registration statement, or post-effective amendment thereto, which is effective
under said act, or unless in the opinion of counsel to the Company, such offer
and sale is exempt from the provisions of Section 5 of said Act.
W A R R A N T
For the Purchase of Common Stock, Par Value $.001 per Share of
ECOTYRE TECHNOLOGIES , INC.
(Incorporated under the Laws of the State of Delaware)
VOID AFTER 5 P.M. SEPTEMBER 24, 1998
(unless otherwise extended as provided herein)
No. ___ Warrant to Purchase
___________ Shares
THIS IS TO CERTIFY that, for value received, _________________ is
entitled, subject to the terms and conditions set forth, until 5 P.M., New York
City Time, on September 24, 1998, to purchase the number of shares set forth
above of Common Stock, par value $.001 per share (the "Common Stock"), of
VASOMEDICAL, INC., a Delaware corporation (the "Company"), from the Company at
a purchase price per share of $_____ if and to the extent this Warrant is
exercised, in whole or in part, during the period this Warrant remains in
force, subject in all cases to adjustment as provided in Section 2 hereof, and
to receive a certificate or certificates representing the shares of Common
Stock so purchased, upon presentation and surrender to the Company of this
Warrant, with the form of subscription attached hereto duly executed, and
accompanied by payment of the purchase price of each share purchased either in
cash or by certified or bank cashier's check payable to the order of the
Company.
1. The rights represented by this Warrant are exercisable at the option
of the holder hereof in whole at any time, or in part from time to time, within
<PAGE>
the period above specified at the price specified on page 1 hereof. In case of
the purchase of less than all the shares as to which this Warrant is
exercisable, the Company shall cancel this Warrant upon the surrender hereof
and shall execute and deliver a new Warrant of like tenor for the balance of
the shares purchasable hereunder.
2. Adjustments to Exercise Price and Number of Securities.
------------------------------------------------------
2.1 Subdivision and Combination. In case the Company shall at any time
subdivide or combine the outstanding shares of Common Stock, the Exercise Price
shall forthwith be proportionately decreased in the case of subdivision or
increase in the case of combination.
2.2 Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 2, the number of
Units issuable upon the exercise of each Warrant shall be adjusted to the
nearest full amount by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Units issuable
upon exercise of the Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
2.3 Definition of Common Stock. For the purpose of this Agreement, the
term "Common Stock" shall mean (i) the class of stock designated as Common
Stock in the Certificate of Incorporation of the Company as may be amended as
of the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value.
2.4 Merger or Consolidation. In case of any consolidation or the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental warrant agreement providing that the holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the
number of shares of Common Stock of the Company for which such warrant might
have been exercised immediately prior to such consolidation, merger, sale or
transfer. Such supplemental warrant agreement shall provide for adjustments
which shall be identical to the adjustments provided in Section 2. The above
provisions of this Subsection shall similarly apply to successive
consolidations or mergers.
3. Registration Rights.
-------------------
3.1 (a) Demand Registration Rights. The Company agrees that it will, at
the request of the Warrantholder, and at the Company's expense pursuant to
subparagraph (b) of this Section, file with the Securities and Exchange
Commission (sometimes the "SEC") and other appropriate commissions and agencies
<PAGE>
a registration statement on the appropriate forms under the Securities Act of
1933, as amended (the "Act" or the "Securities Act"), and such state, district
or territorial securities laws as the Investors shall reasonably request,
registering or qualifying the Common Stock underlying the Warrants for
distribution or public offering, and the Company agrees to cause the above
filings to become effective at the earliest practicable date and remain
effective for no less than the longer of (x) nine months after such
registration statement's effective date, or (y) sixteen months after the date
of the most recently audited balance sheet of the Company filed as part of the
registration statement's financial statements; provided, however, if the
Warrantholder shall be required by the Company or any regulatory authority to
discontinue the sale or disposition of any Underlying Stock registered pursuant
to this paragraph for any period for any reason ("Discontinuance Period)", then
the period of time during which the Company shall be required to maintain the
registration statement effective shall be extended by an amount of time equal
to such Discontinuance Period. If any registration statement requested to be
filed pursuant to this Section is not promptly filed or is either withdrawn or
fails to become effective for any reason, such request shall not be counted as
a request under this Section.
(b) Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, shall be borne by the Company whether or not
any of the registration statements or notifications become effective, including
fees with respect to filings required to be made with the SEC and National
Association of Securities Dealers, Inc., fees and expenses of compliance with
securities or blue sky laws, and fees and disbursements of counsel for the
Company and of independent certified public accountants of the Company,
securities acts liability insurance if the Company so desires and fees and
expenses of other persons retained by the Company (all such expenses being
herein called "Registration Expenses").
3.2 Indemnification Provisions.
(i) Indemnification by Company. Whenever pursuant to this
paragraph a registration statement or notification relating to the Underlying
Stock is filed under the Act or any state "Blue Sky" securities law, or is
amended or supplemented, the Company will indemnify and hold harmless the
Warrantholder, and each underwriter (within the meaning of the Act) of such
securities and each person, if any, who controls (within the meaning of the
Act) any such underwriter, against any losses, claims, damages or liabilities,
joint or several, to which the Warrantholder, any such controlling person or
any such underwriter may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any such registration statement or any
preliminary prospectus or final prospectus constituting a part thereof or any
amendment or supplement thereto, or arise out of or are based upon the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or arise out of the Company's
breaching any of its obligations hereunder, or the inaccuracy of any of the
Company's representations and warranties hereunder; and the Company will
reimburse the Warrantholder and each underwriter for any legal or other
expenses reasonably incurred by the Warrantholder or such underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
<PAGE>
any such case to the extent, but only to the extent, that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement in said
registration statement, said preliminary prospectus, said final prospectus or
said amendment or supplement in reliance upon and in conformity with written
information furnished by the Warrantholder for use in the preparation thereof.
(ii) Indemnification by the Warrantholder. The Warrantholder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed said registration statement or notification and such
amendments and supplements thereto, and each person, if any, who controls the
Company (within the meaning of the Act) against any losses, claims, damages or
liabilities that arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in said registration statement, said
preliminary prospectus, said final prospectus, or said amendment or supplement,
or that arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in said registration statement, said
preliminary prospectus, said final prospectus or said amendment or supplement
in reliance upon and in conformity with written information furnished by the
Warrantholder for use in the preparation thereof; and will reimburse the
Company or any such director, officer or controlling person for any legal or
other expenses reasonably incurred by him or them in connection with
investigating or defending any such loss, claim, damage, liability or action.
Notwithstanding the foregoing, the maximum amount which may be recovered from
the Warrantholder shall be limited to the amount of proceeds received by such
person in said Registration Statement from the sale of the Underlying Stock.
(iii) Notice of Claim. Promptly after receipt by an indemnified party
under this paragraph (iii) of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party, give the indemnifying party notice of the commencement
thereof; but the omission to so notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under this paragraph (iii).
(iv) Defense of Claim. If any such action is brought against any
indemnified party, and the indemnified party notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate in, and to assume the defense thereof, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party for any legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof. If the indemnifying party
determines that it cannot assume the defense of such action for any reason, the
indemnifying party will pay all reasonable attorney's fees and disbursements
incurred by the indemnified party in connection with such action. Nothing
herein shall prevent the indemnified parties from retaining their own counsel
at their own expense in connection with any such action. No indemnified party
shall settle any claim or action without the prior written consent of the
indemnifying party.
<PAGE>
4. The Company agrees at all times to reserve or hold available a
sufficient number of shares of Common Stock to cover the number of shares
issuable upon the exercise of this and all other Warrants of the same class.
The Company hereby represent and warrants that this Warrant has been duly
authorized by the Company and has been validly executed and delivered by the
Company and the Warrant constitutes the legal, valid and binding agreement of
the Company, enforceable in accordance with its terms, except to the extent
that the enforceability hereof or thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to time in
effect and affecting the rights of creditors generally, (b) limitations upon
the power of a court to grant specific performance or any other equitable
remedy, and (c) a finding by a court of competent jurisdiction that the
indemnification provisions herein are in violation of public policy. The Common
Stock issuable upon exercise of this Warrant has been duly authorized and, when
issued and paid for in accordance with the terms hereof, will be validly
issued, fully paid and non-assessable; the holders thereof are not and will not
be subject to personal liability solely by reason of being such holders; the
Warrants and the Common Stock are not and will not be subject to the preemptive
rights of any stockholder of the Company; and all corporate action required to
be taken for the authorization, issuance and sale of the Warrants and the
underlying Common Stock has bee duly and validly taken by the Company.
5. This Warrant shall not entitle the holder hereof to any voting
rights or other rights as a shareholder of the Company, or to any other rights
whatsoever except the rights herein expressed, and no dividends shall be
payable or accrue in respect of this Warrant or the interest represented hereby
or the shares purchasable hereunder until or unless, and except to the extent
that, this Warrant shall be exercised.
6. This Warrant is exchangeable upon the surrender hereof by the holder
hereof to the Company for new Warrants of like tenor representing in the
aggregate the right to purchase the number of shares purchasable hereunder,
each of such new Warrants to represent the right to purchase such number of
shares as shall be designated by the holder hereof at the time of such
surrender. This Warrant may be transferred in whole or in part to officers,
directors, shareholders, partners or affiliates (as such term is defined in the
Securities Act of 1934, as amended) of the holder.
7. The Company will transmit to the holder of this Warrant such
information, documents and reports as are generally distributed to shareholders
of the Company concurrently with the distribution thereof to such shareholders.
8. Notices to be given to the holder of this Warrant shall be deemed to
have been sufficiently given if delivered personally or sent by overnight
courier or messenger or sent by registered or certified mail (air mail if
overseas), return receipt requested, or by telex, facsimile transmission,
telegram or similar means of communication. Notices shall be deemed to have
been received on the date of personal delivery, facsimile transmission, or if
sent by certified or registered mail, return receipt requested, shall be deemed
to be delivered on the third business day after the date of mailing. The
address of the Company is 895 Waverly Avenue, Holtsville, New York 11742, and
the Company shall give written notice of any change of address to the holder
hereof.
<PAGE>
9. The Company consents to the jurisdiction of any court of the State
of New York and of any federal court located in New York. The Company waives
personal service of any summons, complaint or other process in connection with
any such action or proceeding and agrees that service thereof may be made, by
certified mail directed to the Company or, in the alternative, in any other
form or manner permitted by law.
10. This Warrant shall be governed, construed and interpreted under the
laws of the State of New York without giving effect to the rules governing
conflicts of law.
11. This Warrant shall not be assignable without the written consent of
the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by the signature of its President and its seal affixed and attested by its
Secretary.
Dated: ____________
ECOTYRE TECHNOLOGIES, INC.
By:
--------------------
[Corporate Seal] PRESIDENT
ATTEST:
- -------------------------------
Secretary
EXHIBIT 99.7
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE UNITED
STATED SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER REGULATION D
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, TOGETHER WITH THE
REGULATIONS PROMULGATED THEREUNDER (THE "SECURITIES ACT"), AND MAY NOT BE
SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT AND
ANY APPLICABLE STATE SECURITIES LAWS, UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. THIS SUBSCRIPTION AGREEMENT SHALL NOT CONSTITUTE
AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT
AS PERMITTED UNDER THE SECURITIES ACT PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.
COMMON STOCK SUBSCRIPTION AGREEMENT
ECOTYRE TECHNOLOGIES, INC.
THIS SUBSCRIPTION AGREEMENT (the "Agreement") is executed in
reliance upon the transaction exemption afforded by Regulation D,
("Regulation D") promulgated by the Securities and Exchange Commission
("SEC") under the Securities Act of 1933, as amended (together with the
regulations promulgated thereunder, (the "Securities Act").
This Agreement has been is made this 24th day of March, 1998,
between ECOTYRE TECHNOLOGIES, INC., (NASDAQ Small Cap Stock Market symbol
"ETTI"), located at 895 Waverly Avenue, Holtsville, New York 11742, a
corporation organized under the laws of Delaware, USA (hereinafter referred
to as the "Company") and the entities specified in Schedule A attached
hereto (collectively referred to as the "Subscribers" or the "Subscriber"),
with their respective principal offices at the addresses specified in
Schedule A, in connection with the private placement of the Company's
Common Stock (hereinafter referred to as the "Common Stock"). Subject to
the terms and conditions set forth below, the Company will sell to the
Subscribers Six Hundred Thousand (600,000) shares of Common Stock, and a
warrant to purchase Fifty Thousand (50,000) shares of Common Stock, as per
the terms of the Stock Purchase Warrant in the form of Exhibit A annexed
hereto (the "Warrant"). Such number of shares of Common Stock, and such
number of shares of Common Stock underlying the Warrant, will be
distributed pro rata amongst the Subscribers. This Agreement, the offer
and sale of the Common Stock and Warrants, and of the Common Stock
underlying the Warrants (the "Underlying Shares", and, together with the
Common Stock and Warrants, collectively, the "Securities"), are being made
in reliance upon the provisions of Regulation D.
<PAGE>
The undersigned, Subscribers, all being organized under the laws
of NON-USA jurisdictions hereby represents and warrants to, and agrees with
the Company as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) PURCHASE AND SALE OF COMMON STOCK AND WARRANTS. Upon the
terms and subject to the conditions set forth herein, the Company shall
issue and sell to Subscribers, and Subscribers will buy the Securities from
the Company, at an aggregate purchase price of One Hundred Fifty Thousand
(US$150,000) Dollars (the "Purchase Price").
(b) FORM OF PAYMENT. Subscribers shall pay the Purchase Price
by delivering good funds in United States Dollars by wire transfer to
Goldstein, Goldstein & Reis, LLP, Escrow Agent, against delivery of the
original Common Stock and Warrants. The parties have entered into an
Escrow Agreement annexed hereto as Exhibit B (as amended, supplemented or
otherwise modified from time to time, the "Escrow Agreement"). The
Purchase Price shall be paid to the Company as provided in such Escrow
Agreement
(c) WIRE INSTRUCTIONS. Wire instructions for Goldstein,
Goldstein & Reis, LLC are as follows:
Chase Manhattan Bank, N.A.
ABA No. 021000021
For the Account of:
United States Trust Company of New York
Account No. 920-1-073195
In favor of:
Goldstein, Goldstein & Reis, LLP Attorney Escrow Account
Account No. 59-01383
2. REPRESENTATION AND WARRANTIES OF SUBSCRIBERS. Subscribers
acknowledge, represent, warrant and agree as follows:
(a) ORGANIZATIONS AND AUTHORIZATIONS. Subscribers are duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and have all requisite power and authority to
purchase and hold the Securities. This Agreement has been duly authorized,
executed and delivered by the Subscribers. The decision to invest and the
execution and delivery of this Agreement by the Subscribers, the
performance by the Subscribers of its obligations hereunder and the
consummation by the Subscribers of the transactions contemplated hereby
have been duly authorized and requires no other proceedings, consent or
authorization of the Subscribers or their respective Board of Directors,
stockholders, partners, managers or others, as the case may be. Each
Subscriber's signatory has all right, power and authority to execute and
2
<PAGE>
deliver this Agreement on behalf of the Subscriber. This Agreement has
been duly executed and delivered by each Subscriber and, assuming the
execution and delivery hereof and acceptance thereof by the Company, will
constitute the legal, valid and binding obligations of each Subscriber,
enforceable against each Subscriber in accordance with its terms.
(b) EVALUATION OF RISKS. Each Subscriber has such knowledge and
experience in financial and business matters so as to be capable of
evaluating the merits and risks of, and bearing the economic risks entailed
by, an investment in the Company and of protecting its interests in
connection with this Agreement and the transactions contemplated hereby.
It recognizes that its investment in the Company involves a high degree of
risk. Each Subscriber can afford the complete loss of Subscriber's
investment, and each Subscriber will have sufficient capital to enter into
and perform this Agreement and to purchase the Securities to be sold
hereunder.
(c) LEGALITY. This Agreement and the consummation of the
transactions contemplated hereby comply with all applicable laws of each
Subscriber's jurisdiction, including (i) the legal requirements within such
jurisdiction for the purchase of the Securities and other applicable
securities laws (if any), (ii) any foreign exchange restrictions applicable
to such purchase, (iii) any governmental or other consent that may need to
be obtained, and (iv) the income tax and other tax consequences, if any,
that may be relevant to the purchase, holding, sale or transfer of any
Securities.
(d) INDEPENDENT COUNSEL. Each Subscriber acknowledges that it
has been advised to consult with its own attorney regarding legal matters
concerning the Company and to consult with its tax advisor regarding the
tax consequences of acquiring the Securities.
(e) DISCLOSURE DOCUMENTATION. Each Subscriber has received and
reviewed copies of the Company's reports filed under the Securities
Exchange Act of 1934, as amended (together with the regulations promulgated
thereunder, the 1934 Act), including Form 10-KSBs, Form 10-QSBs and Form 8-Ks
filed by the Company for at least twelve (12) months immediately
preceding the Closing Date, as will as the Company's Risk Factors attached
hereto as Exhibit E (collectively, the SEC Filings). Except for the SEC
Filings, the Subscribers are not relying on any other information relating
to the offer and sale of the Securities. Each Subscriber acknowledges that
the Company has offered to make available any additional public information
that the Subscriber may reasonably request, including technical
information, and other material information about the Company and each
Subscriber has been offered Company's full and unconditional cooperation in
making such information available to Subscriber and acknowledges that the
Company has recommended that each Subscriber request and review such
information prior to making an investment decision. No oral or written
representations have been made, or oral or written information furnished to
each Subscriber or its advisors, if any, in connection with the offering of
the Securities which were or are in any way inconsistent with the SEC
Filings.
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<PAGE>
(f) OPPORTUNITY TO ASK QUESTIONS. Each Subscriber has had a
reasonable opportunity to review the SEC Filings, obtain such additional
information concerning the Company and its business, and to ask questions
of and receive answers from the Company concerning the Company, the
offering hereunder and the Securities, as the Subscriber deems necessary to
make an informed investment decision and to evaluate the merits and risks
of the investments contemplated by this Agreement, and, without limitation
to Section 2(e) above, all such questions, if any, have been answered to
the full satisfaction of each Subscriber.
(g) SEC FILINGS CONSTITUTE SOLE REPRESENTATIONS. Without
limitation to Sections 2(e) and (f) above, except as set forth in the SEC
Filings, no representations or warranties have been made to the Subscribers
by (a) the Company or any agent, employee or affiliate of the Company, or
(b) any other person, and in entering into this transaction the Subscribers
are not relying upon any information, other than that contained in the SEC
Filings and the results of independent investigation by the Subscribers.
(h) SUBSCRIBERS ARE ACCREDITED INVESTORS. Each Subscriber is an
Accredited Investor as defined in Rule 501(a) of the Securities Act.
Subscribers have no present intention to sell any Securities, and
Subscribers have no present arrangement (whether or not legally binding) at
any time to sell any Securities to or through any person or entity.
Subscribers have such business and financial experience as is required to
give it the capacity to protect its own interests in connection with the
purchase of the Securities.
(i) NO REGISTRATION, REVIEW OR APPROVAL. Subscribers
acknowledge and understand that the limited private offering and sale of
the Securities pursuant to this Agreement have not been reviewed or
approved by the Securities and Exchange Commission (the "Commission") or by
any state securities commission, authority or agency, and is not registered
under the Securities Act or under the securities or "blue sky" laws, rules
or regulations of any state. The Subscribers understand and agree that the
Securities are being offered and sold hereunder pursuant to (i) a private
placement exemption to the registration provisions of the Securities Act
pursuant to Section 3(b) or Section 4(2) of such Securities Act and
Regulation D promulgated thereunder, and (ii) a similar exemption to the
registration provisions of applicable state securities laws. Subscribers
understand that the Securities will be imprinted with a legend that
prohibits the transfer of the Securities unless (i) they are registered or
such registration is not required, and (ii) if the transfer is pursuant to
an exemption from registration other than Rule 144 under the Securities
Act.
(j) INVESTMENT INTENT. Without limiting its ability to resell
the Securities pursuant to an effective registration statement, Subscribers
represent that they are acquiring the Securities solely for their own
account and not with a view to the distribution. Subscribers understand
and agree that they may bear the economic risk of their investment in the
Securities for an indefinite period of time. Subscribers understand that
the Securities are being issued in reliance upon the exemption afforded by
Regulation D. As a result, the Securities may not be
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<PAGE>
transferred except as permitted under various exemptions contained in the
Securities Act or upon satisfaction of the registration and prospectus
delivery requirements of the Securities Act.
(k) REGISTRATION OR EXEMPTION REQUIREMENTS. Subscribers
acknowledge and understand that the Securities may not be resold or
otherwise transferred except in a transaction registered under the
Securities Act and any applicable state securities laws or unless an
exemption from such registration is available. Subscribers understand that
the Securities will be printed with the following legend unless (i) they
are registered or such registration is not required, and (ii) if the
transfer is pursuant to an exemption from registration other than Rule 144
under the Securities Act:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (TOGETHER WITH
THE REGULATIONS PROMULGATED THEREUNDER, THE "SECURITIES ACT"), AND MAY
NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE."
The certificates representing the Securities, and each certificate
issued in transfer thereof, will also bear any legend required under any
applicable state securities law.
(l) REGISTRATION RIGHTS. The parties have entered into a
Registration Rights Agreement (Exhibit C).
(m) NO ADVERTISEMENTS. Subscribers are not subscribing for
Securities as a result of or subsequent to any advertisement, article,
notice or other communication published in any newspaper, magazine, or
similar media or broadcast over television or radio, or presented at any
seminar or meeting.
(n) BACKUP WITHHOLDING. Each Subscriber certifies, under
penalty of perjury, that it is NOT subject to the backup withholding
provisions of Section 3406(a)(1)(c) of the Internal Revenue Code of 1986,
as amended.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents, warrants and agrees as follows:
(a) ORGANIZATION AND AUTHORIZATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry
on its business as currently conducted. The Company is qualified to do
business as a
5
<PAGE>
foreign corporation in each jurisdiction in which the ownership of its
property or the nature of its business requires such qualification, except
where the failure to so qualify would not have a material adverse effect on
the Company. The Company is not in default or violation of any material
term or provision of its Certificate of Incorporation, as amended, or By-laws
nor will the consummation of the transactions contemplated by this
Agreement cause any such default or violation. The Company has all
requisite corporate right, power and authority to enter into this
Agreement, to sell the Securities hereunder and to carry out and perform
its obligations under the terms of this Agreement. This Agreement is a
valid and binding obligation of the Company, enforceable in accordance with
its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws effecting the
rights of creditors generally and available equitable remedies. Upon their
issuance and delivery pursuant to this Agreement, the Securities will be
validly issued, fully paid and nonassessable and will be free of any liens
or encumbrances; provided, however, that the Securities are subject to
restrictions on transfer under state and/or federal laws.
(b) CAPITALIZATION. The authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock $0.01 par value, of which
4,175,000 are outstanding, 1,325,000 shares of Class A Preferred Stock,
$0.001 par value, of which 224,937 are outstanding, and 675,000 shares of
Class B Preferred Stock, $0.001 par value, of which 450,000 are
outstanding.
(c) REPORTING ISSUER COMPANY STATUS. The Company is in full
compliance, to the extent applicable, with all reporting obligations under
either Section 12(b), 12(g) or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and shall use its best efforts to
maintain such status on a timely basis. The Company has registered its
Common Stock pursuant to Section 12 of the Exchange Act, and Common Stock
trades on the NASDAQ Small Cap Stock Market.
(d) COMPANY TO RESERVE SHARES. The Company will reserve from
its authorized but unissued shares of Common Stock a sufficient number of
shares of Common Stock to permit the conversion in full of the outstanding
Warrants;
(e) TRADING MARKET. The Company will maintain the listing of
its Common Stock on the NASDAQ Small Cap Stock Market, and is not subject
to, nor aware of any proceeding threatening its listing with the NASDAQ
Small Cap Stock Market, nor has it received any notice threatening its
continued listing.
(f) COMPANY TO HONOR TELECOPIED NOTICES. The Company will permit
Subscribers to exercise their right to exercise the Warrants by telecopying
an executed and completed Notice of Exercise to the Company and delivering
the original Notice of Exercise and the certificate representing the
Warrant to the Company by express courier. The Company will transmit the
certificates representing Underlying Shares issuable upon exercise of the
Warrants
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<PAGE>
(together with the certificates representing any then-remaining unexercised
Warrants) to Subscriber(s) via express courier, at the address set forth
herein, by electronic transfer or otherwise within three business days
after the applicable Conversion Date (defined below) if the Company has
received the original Notice of Exercise, and the Warrant certificate being
so exercised by such date. In addition to any other remedies which may be
available to Subscribers, in the event that the Company fails for any
reason to transmit such shares of Common Stock within such three business
day period, Subscriber(s) will be entitled to revoke the relevant Notice of
Exercise by delivering a notice to such effect to the Company whereupon the
Company and Subscriber shall each be restored to their respective positions
immediately prior to delivery of such Notice of Exercise.
In the event that the Underlying Stock is not delivered within
five (5) business days of receipt by the Company of a valid Notice of
Exercise (such date of receipt referred to as the Exercise Date), and the
Warrant to be exercised is received within three (3) business days from the
Exercise Date, the Company shall pay to the Subscriber, in immediately
available funds, upon demand, as liquidated damages for such failure and
not as a penalty, for each thousand (1,000) shares of Common Stock sought
to be exercised under the Warrant, $7.50 for each of the first ten (10)
business days and $15 per day thereafter that the Underlying Shares are not
delivered, which liquidated damages shall run from the sixth calendar day
after the Exercise Date. Any and all payments required pursuant to this
paragraph shall be payable only in cash.
(g) SEC FILINGS/FULL DISCLOSURE. For a period of twelve (12)
months immediately preceding this offer and sale (i) none of the Company's
filings with the Securities and Exchange Commission contained any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein or necessary to make the statement therein in light of
the circumstances under which they were made, not misleading, and (ii) the
Company has timely filed all requisite forms, reports and exhibits thereto
with the Securities and Exchange Commission.
There is no fact known to the Company (other than general
economic conditions known to the public generally) that have not been
publicly disclosed by the Company or disclosed in the SEC Filings provided
to the Subscriber which (i) could reasonably be expected to have a material
adverse effect on the condition (financial or otherwise) or on earnings,
business affairs, properties or assets of the Company, or (ii) could
reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement.
(h) OPINION OF COMPANY COUNSEL. The Company agrees that it will
immediately obtain, and the Subscribers shall, upon purchase of the
Securities, receive, at the Company's expense, an opinion letter from
counsel to the Company, as set forth in Exhibit D.
(i) OTHER CONVERTIBLE INTERESTS. Except as described in the SEC
Filings, (i)
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<PAGE>
there are no other outstanding debt or equity securities presently
convertible into shares of Common Stock or that could be convertible into
shares of Common Stock, (ii) the Company has no outstanding restricted
shares of Common Stock, or shares of Common Stock sold under Regulation S
or Regulation D under the Securities Act or outstanding under any other
exemption from registration, which are available for sale as unrestricted
free trading stock, (iii) the Company has no other liabilities or
obligations, (iv) the Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which its property is
bound, (v) the Company has sufficient trademarks, trade names, patent
rights, copyrights and licenses to conduct its business as presently
conducted, (vi) the Company has good and marketable title to all properties
and material assets described in the aforementioned reports as owned by it,
or (vii) the Company does not presently own control, directly or
indirectly, any interest in any other corporation, partnership, association
or other business entity.
(j) DILUTION. The Company is aware and acknowledges that the
issuance of the Common Stock, and the exercise of the Warrants would cause
dilution to existing shareholders and will significantly increase the
outstanding number of shares of Common Stock.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
SUBSCRIBER. Each of the Subscribers, and the Company represent, warrant
to, and agree with, the other as follows, in each case with respect to
itself alone:
(a) AGREEMENT. This Agreement has been duly authorized, validly
executed and delivered on behalf of such party and is a valid and binding
agreement in accordance with its terms, subject to general principles of
equity and to bankruptcy or other laws affecting the enforcement of
creditors' rights generally.
(b) NON-CONTRAVENTION. The execution and delivery of this
Agreement and the consummation of the issuance of the Securities and the
transaction contemplated by this Agreement do not and will not conflict
with or result in a breach by such party of any of the terms or provisions
of, or constitute a default under, the articles of incorporation or by-laws
of such party, or any indenture, mortgage, deed of trust of other material
agreement or instrument to which such party is a party or by which it or
any of its properties or assets are bound, or any existing applicable law,
rule or regulation or any applicable decree, judgment or order of any
court, Federal or State regulatory body, administrative agency or other
governmental body having jurisdiction over such party or any of its
properties or assets. The execution, delivery and performance of this
Agreement and the consummation by such party of the transactions
contemplated hereby or relating hereto do not and will not (i) result in a
violation of such party's charter documents, by-laws, partnership
agreement, certificate of limited partnership or other governing documents,
as the case may be, or (ii) conflict with, or constitute a default (or an
event which with notice of lapse of time or both would become a default)
under, or give to others any
8
<PAGE>
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which such party is a party, or
result in a violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to such
party or any of its properties. Such party is not required to obtain any
consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver
or perform any of its obligations under this Agreement or the transactions
contemplated hereby; provided that for purposes of the representation made
in this sentence, each party is assuming and relying upon the accuracy of
the relevant representations and agreements of the other party herein.
(c) APPROVALS. Neither the Company nor any Subscriber is aware
of any authorization, approval or consent of any governmental body which is
legally required for the issuance and sale of the Securities, with the
exception of SEC Form D.
(d) INDEMNIFICATION. Each of the Company, and each Subscriber,
agrees to indemnify the other and to hold the other harmless from and
against any and all losses, damages, liabilities, costs and expenses
(including reasonable attorneys' fees) which the other may sustain or incur
in connection with the breach by the indemnifying party of any
representation, warranty or covenant made by it in this Agreement.
(e) TIME OF REPRESENTATIONS AND WARRANTIES. Each representation
and warranty made by each party hereunder shall be deemed made as of the
date hereof and as of the Closing Date, unless the context shall clearly
require otherwise.
5. PERMISSIVE REDEMPTION. At any time prior to the effective
date of the registration statement to be filed by the Company pursuant to
the terms of the Registration Rights Agreement, the Company has the right
to redeem up to seventy five (75%) percent of the shares of Common Stock
issued hereunder, in cash, at a price of fifty cents per share of Common
Stock being redeemed (the "Redemption Price"). The Company also has the
right to redeem, at any time after the effective date of the Registration
Statement to be filed by the Company, any shares of the Common Stock issued
hereunder which are held by any Subscriber, in cash, at the Purchase Price.
The number of shares of Common Stock being redeemed shall be taken pro rata
amongst each Subscriber. Upon receipt by the Subscribers of a notice by
the Company (the "Redemption Notice") of its right to redeem the Common
Stock (the "Redemption Date"), the Company shall wire transfer the
appropriate amount of funds into an escrow account mutually agreed upon by
both the Company and each Subscriber within three (3) business days of the
Redemption Date. After the escrow agent is in receipt of the Redemption
Price, he shall notify each Subscriber to surrender the appropriate number
of shares of Common Stock.
6. STOCK DELIVERY INSTRUCTIONS. The Common Stock Certificate
and Warrant Certificate shall be delivered to the Subscribers on a delivery
versus payment basis as set forth in the Escrow Agreement.
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<PAGE>
7. CLOSING DATE. The Closing Date (the "Closing Date") shall
be mutually agreed upon as to time and place when the Escrow Agent receives
the Securities and Purchase Price, the conditions set forth in Sections 11
and 12 and the terms and conditions of the Escrow Agreement herein are
satisfied or waived.
8. UNDERWRITER. The Company understands that each Subscriber
disclaims being an "underwriter" (as such term is defined under the
Securities Act and the rules and regulations promulgated thereunder (an
"Underwriter")), but Subscriber being deemed an Underwriter shall not
relieve the Company of any obligation it has hereunder.
9. INFORMATION AVAILABLE. So long as any registration
statement is effective covering the Securities, the Company will furnish to
each Subscriber, as soon as possible after available (but in no case of the
Company's Annual Report to Stockholders, within 150 days after the end of
each fiscal year of the Company), one copy of (i) its Annual Report to
Stockholders (which Annual Report shall contain financial statements
audited in accordance with generally accepted accounting principles in the
United States of America by a national firm of public accountants); (ii) if
not included in substance in the Annual Report to Stockholders, its Annual
Report on Form 10-KSB within 100 days after the end of each fiscal year of
the Company; (iii) each of its Quarterly Reports to Stockholders, if any,
and its Quarterly Report on Form 10-QSB; (iv) a full copy of the
registration statement covering the Securities (the foregoing, in each
case, including exhibits, and amendments thereto), and (v) such other
information that is generally available to the public.
10. RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Securities to the public without registration, the
Company agrees to :
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all
time after the effective date on which the Company becomes subject to the
reporting requirements of the Securities Act or the Exchange Act;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act;
(c) furnish to each Subscriber forthwith upon request, a written
statement by the Company as to its compliance with the reporting
requirements of Rule 144, and of the Securities Act and the Exchange Act,
a copy of the most recent annual or quarterly report of the Company, and
such other reports or documents of the Company and other information in the
possession of, or reasonably obtainable by, the Company as Subscriber may
reasonably request in availing itself of any rule or regulation of the SEC
allowing Subscriber to sell any such Securities without registration.
10
<PAGE>
11. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. Company's
obligation to sell the Securities are conditioned upon:
(a) The execution and delivery of this Agreement and all
Exhibits hereto by the Company; and
(b) Delivery into escrow by Subscribers of good cleared funds as
payment in full for the purchase of the Common Stock and Warrants, and
written notification to the Company by the Escrow Agent of receipt of
payment in full for the Common Stock and Warrants; and
(c) All representations and warranties of the Subscribers shall
remain true and correct as of the Closing Date.
12. CONDITIONS TO EACH SUBSCRIBER'S OBLIGATION TO PURCHASE.
Each Subscriber's obligation to purchase the Common Stock and Warrants is
conditioned upon:
(a) The execution and delivery of this Agreement by the Company;
(b) Delivery of the Common Stock, Warrant, Escrow Agreement, and
Registration Rights Agreement;
(c) All representations and warranties of the Company shall
remain true and correct as of the Closing Date;
(d) Receipt of opinion of counsel in substantially the form of
Exhibit D hereto.
13. REPRICING EVENT. Upon the effective date of the Registration
Statement to be filed (pursuant to the Registration Rights Agreement), the
Company agrees to issue that number of additional shares of Common Stock
(if any) resulting from the deficiency between that number of shares of
Common Stock which would have been issued had the Reset Price (defined as
sixty (60%) percent of the closing bid price of the Common Stock as
reported by Bloomberg, LP on the date the Registration Statement (as
defined in the Registration Rights Agreement) is deemed effective by the
Securities and Exchange Commission) been utilized and the shares of Common
Stock actually issued upon the Closing. Such shares shall be delivered
within three (3) trading days following the effective date. The Company
hereby represents that it can only issue up to 200,000 additional shares of
Common Stock for all Subscribers. In the event the number of additional
shares of Common Stock to be issued upon repricing exceeds 200,000, the
Company agrees that it will take any and all actions necessary for such
issuance including, but not limited to, requesting shareholder approval,
which the Company agrees to file a proxy statement within thirty (30) days
after the effective date of the registration statement.
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14. LEGAL FEES AND EXPENSES. Each of the parties shall pay its
own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this
Agreement and the transactions contemplated hereby except that the Company
shall pay to GGR Associates for legal, administrative and escrow fees
Fifteen Thousand (15,000) shares of Common Stock.
15. MISCELLANEOUS.
(a) This Agreement will be construed and enforced in accordance
with and governed by the laws of the State of New York, except for matters
arising under the Securities Act, without reference to principles of
conflicts of law. Any dispute under this Agreement or any Exhibit attached
hereto shall be submitted to arbitration through the American Arbitration
Association (the "AAA") in New York City, New York, and shall be finally
and conclusively determined by the decision of a board of arbitration
consisting of three (3) members (hereinafter referred to as the "Board of
Arbitration") selected as according to the rules governing the AAA. The
Board of Arbitration shall meet on consecutive business days in New York
City, New York, and shall reach and render a decision in writing (concurred
in by a majority of the members of the Board of Arbitration) with respect
to the amount, if any, which the losing party is required to pay to the
other party in respect of a claim filed. In connection with rendering its
decisions, the Board of Arbitration shall adopt and follow the laws of the
State of New York. To the extent practical, decisions of the Board of
Arbitration shall be rendered no more than thirty (30) calendar days
following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on the parties to the
dispute, and entitled to be enforced to the fullest extent permitted by law
and entered in any court of competent jurisdiction. Each party to any
arbitration shall bear its own expense in relation thereto, including but
not limited to such party's attorneys' fees, if any, and the expenses and
fees of the Board of Arbitration shall be divided amongst the parties in
the dispute in the same proportion as the portion of the related claim
determined by the Board of Arbitration to be payable to the winning party
bears to the portion of such claim determined not to be so payable. Each
party to this Agreement irrevocably consents to the service of process in
any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth
herein. Nothing herein shall affect the right of any party to serve
process in any other manner permitted by law.
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(b) If for any reason the transactions contemplated by this
Agreement are not consummated, each of the parties hereto shall keep
confidential any information obtained from any other party (except
information publicly available or in such party's domain prior to the date
hereof, and except as required by court order) and shall promptly return to
the other parties all schedules, documents, instruments, work papers or
other written information, without retaining copies thereof, previously
furnished by it as a result of this Agreement or in connection herewith.
(c) In lieu of the original, a facsimile transmission or copy of
the original shall be as effective and enforceable as the original. This
Agreement may be executed in counterparts which shall be considered an
original document and which together shall be considered a complete
document.
(d) This Agreement and Exhibits hereto constitute the entire
agreement between the Subscribers and the Company with respect to the
subject matter hereof. This Agreement may be amended only by a writing
executed by both of them.
(e) Subscribers represent to the Company that the
representations and warranties of Subscriber contained herein are complete
and accurate and may be relied upon by the Company in determining the
availability of an exemption from registration under federal and state
securities laws in connection with a private offering of securities.
(f) In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction or Arbitration to be
illegal, unenforceable or void, this Agreement shall continue in full force
and effect without said provision; provided that no such severability shall
be effective if it materially changes the economic benefit of this
Agreement to any party.
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(g) Each of the Company and each Subscriber agrees to keep
confidential and not to disclose to or use for the benefit of any third
party the terms of this Agreement or any other information which at any
time is communicated by the other party as being confidential without the
prior written approval of the other party; provided, however, that this
provision shall not apply to information which, at the time of disclosure,
is already part of the public domain (except by breach of this Agreement)
and information which is required to be disclosed by the Exchange Act or
other applicable law.
(h) Each of the parties shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Agreement and the
transactions contemplated hereby.
(i) Each notice and communication delivered hereunder from time
to time, shall be delivered as follows:
If to the Company:
Ecotyre Technologies, Inc.
895 Waverly Avenue
Holtsville, NY 11742
Attention:
Tele: (516) 289-4756
Fax: (516) 289-4545
If to Subscribers at their respective addresses listed on
Schedule A annexed hereto.
Provided, that each party may specify an address for notices and
communications to such party different from the one then specified in this
Agreement by so notifying the other party at the address then operative.
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<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement was duly executed on the
date first written below.
Agreed to and Accepted on
this day of March, 1998
Ecotyre Technologies, Inc.
By____________________________
Title:
SUBSCRIBER:
By___________________________
Title:
Executed at
this day of March, 1998
SUBSCRIBER:
By___________________________
Title:
Executed at
this day of March, 1998
SUBSCRIBER:
By___________________________
Title:
Executed at
this day of March, 1998
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FULL NAME AND ADDRESS OF SUBSCRIBER FOR REGISTRATION PURPOSES:
NAME:
ADDRESS:
TEL NO:
FAX NO:
CONTACT
NAME:
DELIVERY INSTRUCTIONS (IF DIFFERENT FROM REGISTRATION NAME):
NAME:
ADDRESS:
TEL NO:
FAX NO:
CONTACT
NAME:
SPECIAL
INSTRUCTIONS: ________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
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EXHIBIT A
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE UNITED
STATED SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER REGULATION D
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, TOGETHER WITH THE
REGULATIONS PROMULGATED THEREUNDER (THE "SECURITIES ACT"), AND MAY NOT BE
SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT AND
ANY APPLICABLE STATE SECURITIES LAWS, UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. THIS SUBSCRIPTION AGREEMENT SHALL NOT CONSTITUTE
AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
THIS WARRANT IS "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.
STOCK PURCHASE WARRANT
To Purchase Shares of Common Stock of
ECOTYRE TECHNOLOGIES, INC.
THIS CERTIFIES that, for value received, _______________________,
or its assigns (the "Holder"), is entitled, upon the terms and subject to
the conditions hereinafter set forth, at any time on or after one day after
the date hereof and on or prior to March 24, 2001 (the Termination Date)
but not thereafter, to subscribe for and purchase from Ecotyre
Technologies, Inc., a Delaware corporation (the Company), __________ shares
of Common Stock (the Warrant Shares). The purchase price of one share of
Common Stock (the Exercise Price) under this Warrant shall be equal to one
hundred and twenty (120%) percent of the closing bid price of the Company's
Common Stock on the NASDAQ Small Cap Stock Market on the Closing Date
(defined below). The closing bid price shall be deemed to be as reported
by Bloomberg, LP. The Exercise Price and the number of shares for which
the Warrant is exercisable shall be subject to adjustment as provided
herein. This Warrant is being issued in connection with the Common Stock
Subscription Agreement dated on or about March 24, 1998, in the amount of
One Hundred Fifty Thousand ($150,000.00) Dollars (the "Agreement") between
the Company and Investor and is subject to its terms. In the event of any
conflict between the terms of this Warrant and the Agreement, the Agreement
shall control.
<PAGE>
1. TITLE OF WARRANT. Prior to the expiration hereof and
subject to compliance with applicable laws, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of
the Company by the holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form annexed
hereto properly endorsed.
2. AUTHORIZATION OF SHARES. The Company covenants that all
shares of Common Stock which may be issued upon the exercise of rights
represented by this Warrant will, upon exercise of the rights represented
by this Warrant, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
3. EXERCISE OF WARRANT. Exercise of the purchase rights
represented by this Warrant may be made at any time or times after the date
hereof, in whole or in part, before the close of business on the
Termination Date, or such earlier date on which this Warrant may terminate
as provided in paragraph 11 below, by the surrender of this Warrant and the
Subscription Form annexed hereto duly executed, at the office of the
Company (or such other office or agency of the Company as it may designate
by notice in writing to the registered holder hereof at the address of such
holder appearing on the books of the Company) and upon payment of the
Exercise Price of the shares thereby purchased; whereupon the holder of
this Warrant shall be entitled to receive a certificate for the number of
shares of Common Stock so purchased. Certificates for shares purchased
hereunder shall be delivered to the holder hereof within five business days
after the date on which this Warrant shall have been exercised as
aforesaid. Payment of the Exercise Price of the shares may be by certified
check or cashier's check or by wire transfer to an account designated by
the Company in an amount equal to the Exercise Price multiplied by the
number of shares being purchased.
4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of
this Warrant.
5. CHARGES, TAXES AND EXPENSES. Issuance of certificates for
shares of Common Stock upon the exercise of this Warrant shall be made
without charge to the holder hereof for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such
certificates shall be issued in the name of the holder of this Warrant or
in such name or names as may be directed by the holder of this Warrant;
PROVIDED, HOWEVER, that in the event certificates for shares of Common
Stock are to be issued in a name other than the name of the holder of this
Warrant, this Warrant when surrendered for exercise shall be accompanied by
the Assignment Form attached hereto duly executed by the holder hereof; and
PROVIDED FURTHER, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.
2
<PAGE>
6. RESTRICTIONS ON TRANSFER. The holder of the Warrant agrees
and acknowledges that the Warrant is being purchased for the holder's own
account, for investment purposes only, and not for the account of any other
person, and not with a view to distribution, assignment, pledge or resale
to others or to fractionalization in whole or in part. The holder further
represents, warrants and agrees as follows: no other person has or will
have a direct or indirect beneficial interest in this Warrant and the
holder will not sell, hypothecate or otherwise transfer the Warrant except
in accordance with the Securities Act and Regulation D thereunder and
applicable state securities laws or unless, in the opinion of counsel for
the holder acceptable to the Company, an exemption from the registration
requirements of the Securities Act and such laws is available.
7. CLOSING OF BOOKS. The Company will at no time close its
shareholder books or records in any manner which interferes with the timely
exercise of this Warrant.
8. NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise thereof. If, however, at
the time of the surrender of this Warrant and purchase the holder hereof
shall be entitled to exercise this Warrant, the shares so purchased shall
be and be deemed to be issued to such holder as the record owner of such
shares as of the close of business on the date on which this Warrant shall
have been exercised.
9. ASSIGNMENT AND TRANSFER OF WARRANT. This Warrant may be
assigned by the surrender of this Warrant and the Assignment Form annexed
hereto duly executed at the office of the Company (or such other office or
agency of the Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the
books of the Company); provided, however, that this Warrant may not be
resold or otherwise transferred except with the prior consent of the
Company and (i) in a transaction registered under the Securities Act, or
(ii) in a transaction pursuant to an exemption, if available, from such
registration and whereby, if requested by the Company, an opinion of
counsel reasonably satisfactory to the Company is obtained by the holder of
this Warrant to the effect that the transaction is so exempt.
10. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The
Company represents and warrants that upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any Warrant or stock certificate, and in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new Warrant
or stock certificate of like tenor and dated as of such cancellation, in
lieu of this Warrant or stock certificate.
11. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed
day for the
3
<PAGE>
taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may
be taken or such right may be exercised on the next succeeding day not a
legal holiday.
12. EFFECT OF CERTAIN EVENTS.
(a) If at any time the Company proposes (i) to sell or otherwise
convey all or substantially all of its assets, or (ii) to effect a
transaction (by merger or otherwise) in which more than 50% of the voting
power of the Company is disposed of (collectively, a Sale or Merger
Transaction), in which the consideration to be received by the Company or
its shareholders consists solely of cash, the Company shall give the holder
of this Warrant thirty (30) days' notice of the proposed effective date of
the transaction specifying that the Warrant shall terminate if the Warrant
has not been exercised by the effective date of the transaction.
(b) In case the Company shall at any time effect a Sale or
Merger Transaction in which the consideration to be received by the Company
or its shareholders consists in part of consideration other than cash, the
holder of this Warrant shall have the right thereafter to purchase, by
exercise of this Warrant and payment of the aggregate Exercise Price in
effect immediately prior to such action, the kind and amount of shares and
other securities and property which it would have owned or have been
entitled to receive after the happening of such transaction had this
Warrant been exercised immediately prior thereto.
(c) REGISTRATION. The Company agrees to include all of the
shares of Common Stock underlying this Warrant (the "Registrable
Securities") as part of the Registration Statement to be filed by the
Company pursuant to the Registration Rights Agreement of even date entered
into between the Holder and the Company.
(d) "PIGGY-BACK" REGISTRATION. The holder of this Warrant shall
also have the right to include all of the shares of Common Stock underlying
this Warrant (the "Registrable Securities") as part of ANY registration of
securities filed by the Company (other than in connection with a
transaction contemplated by Rule 145(a) promulgated under the Act or
pursuant to Form S-8) and must be notified in writing of such filing;
PROVIDED, HOWEVER, that the holder of this Warrant agrees it shall not have
any piggy-back registration rights pursuant to this Section 12(c) if the
shares of Common Stock underlying this Warrant may be sold in the United
States pursuant to the provisions of Rule 144. The holder of this Warrant
shall have five (5) business days to notify the Company in writing as to
whether the Company is to include Holder or not include Holder as part of
the registration; PROVIDED, HOWEVER, that if any registration pursuant to
this Section shall be underwritten, in whole or in part, the Company may
require that the Registrable Securities requested for inclusion pursuant to
this Section be included in the underwriting on the same terms and
conditions as the securities otherwise being sold through the underwriters.
If in the good faith judgment of the underwriter evidenced in writing of
such offering only a limited number of Registrable Securities should be
included in such offering, or no such shares should be included, the
Holder, and all other selling stockholders, shall be limited
4
<PAGE>
to registering such proportion of their respective shares as shall equal
the proportion that the number of shares of selling stockholders permitted
to be registered by the underwriter in such offering bears to the total
number of all shares then held by all selling stockholders desiring to
participate in such offering. Those Registrable Securities which are
excluded from an underwritten offering pursuant to the foregoing provisions
of this Section (and all other Registrable Securities held by the selling
stockholders) shall be withheld from the market by the Holders thereof for
a period, not to exceed one hundred eighty (180) days, which the
underwriter may reasonably determine is necessary in order to effect such
underwritten offering. The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section 12(c) prior to
the effectiveness of such registration whether or not any Warrant holder
elected to include securities in such registration. All registration
expenses incurred by the Company in complying with this Section 12(c) shall
be paid by the Company, exclusive of underwriting discounts, commissions
and legal fees and expenses for counsel to the holders of the Warrants.
13. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The number and kind of securities purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to
time upon the happening of any of the following: in case the Company shall
(i) declare or pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to holders of its outstanding Common
Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine
its outstanding shares of Common Stock into a smaller number of shares of
Common Stock or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall
be adjusted so that the holder of this Warrant shall be entitled to receive
the kind and number of Warrant Shares or other securities of the Company
which he would have owned or have been entitled to receive had such Warrant
been exercised in advance thereof. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
14. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may at its
discretion, at any time during the term of this Warrant, reduce the then
current Exchange Price to any amount and for any period of time deemed
appropriate by the Board of Directors of the Company.
15. NOTICE OF ADJUSTMENT. Whenever the number of Warrant shares
or number or kind of securities or other property purchasable upon the
exercise of this Warrant or the Exercise Price is adjusted, as herein
provided, the Company shall promptly mail by registered or certified mail,
return receipt requested, to the holder of this Warrant notice of such
adjustment or adjustments setting forth the number of Warrant Shares (and
other securities or property) purchasable upon the exercise of this Warrant
and the Exercise Price of such Warrant Shares after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
5
<PAGE>
setting forth computation by which such adjustment was made. Such notice,
in absence of manifest error, shall be conclusive evidence of the
correctness of such adjustment.
16. AUTHORIZED SHARES. The Company covenants that during the
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the
issuance of Common Stock upon the exercise of any purchase rights under
this Warrant. The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are charged
with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of the Company's Common Stock upon the
exercise of the purchase rights under this Warrant. The Company will take
all such reasonable action as may be necessary to assure that such shares
of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the NASDAQ Small
Cap Stock Market or any domestic securities exchange upon which the Common
Stock may be listed.
17. MISCELLANEOUS.
(a) ISSUE DATE; JURISDICTION. The provisions of this Warrant
shall be construed and shall be given effect in all respects as if it had
been issued and delivered by the Company on the date hereof. This Warrant
shall be binding upon any successors or assigns of the Company. This
Warrant shall constitute a contract under the laws and jurisdictions of New
York and for all purposes shall be construed in accordance with and
governed by the laws of said state without regard to its conflict of law,
principles or rules.
(b) RESTRICTIONS. The holder hereof acknowledges that the
Common Stock acquired upon the exercise of this Warrant, if not registered,
may have restrictions upon its resale imposed by state and federal
securities laws.
(c) MODIFICATION AND WAIVER. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of the
same is sought.
(d) NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof of the Company
shall be delivered or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books
of the Company or to the Company at the address set forth in the Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated: March ___, 1998
ECOTYRE TECHNOLOGIES, INC.
By:_____________________________________
Title:__________________________________
7
<PAGE>
NOTICE OF EXERCISE
------------------
To: ECOTYRE TECHNOLOGIES, INC.
(1) The undersigned hereby elects to purchase ________ shares of
Common Stock of ECOTYRE TECHNOLOGIES, INC. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price in
full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name
as is specified below:
_______________________________
(Name)
_______________________________
(Address)
_______________________________
Dated:
______________________________
Signature
NOTE: Signature must conform in all respects to holder's name as specified
on the face of the attached warrant.
8
<PAGE>
ASSIGNMENT FORM
---------------
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights
evidenced thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, 1997
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: _________________________________________
NOTE: The signature to this Assignment Form must correspond with the name
as it appears on the face of the Warrant, without alteration or enlargement
or any change whatsoever, and must be guaranteed by a bank or trust
company. Officers of corporations and those acting in an fiduciary or
other representative capacity should file proper evidence of authority to
assign the foregoing Warrant.
9
<PAGE>
EXHIBIT B
ESCROW AGREEMENT
THIS AGREEMENT is made as of the 24th day of March, 1998 by and
between ECOTYRE TECHNOLOGIES, INC., with its principal office at 895
Waverly Avenue, Holtsville, New York 11742, (hereinafter the "Company"),
the Subscribers listed on Schedule A (hereinafter referred to as the
"Subscriber" or "Subscribers") and GOLDSTEIN, GOLDSTEIN & REIS, LLP, 65
Broadway, 10th Fl., New York, NY 10006 (hereinafter the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the Subscription Agreement dated March 24,
1998 (the "Agreement"), Subscribers will be purchasing shares of Common
Stock, and Warrants of the Company (the "Securities") at a purchase price
as set forth in the Agreement, signed by the Company and Subscribers; and
WHEREAS, the Company has requested that the Escrow Agent hold the
funds of the Subscribers in escrow until the Escrow Agent has received the
Securities and had the opportunity to speak with the Company to confirm
their issuance. The Escrow Agent will then immediately wire transfer or
otherwise deliver at the Company's direction immediately available funds to
the Company or the Company's account and arrange for delivery of the
Securities to each Subscriber per the Subscriber's written instructions.
NOW, THEREFORE, in consideration of the covenants and mutual
promises contained herein and other good and valuable consideration, the
receipt and legal sufficiency of which are hereby acknowledged and
intending to be legally bound hereby, the parties agree as follows:
ARTICLE 1
---------
TERMS OF THE ESCROW
-------------------
1.1 The parties hereby agree to establish an escrow account with
the Escrow Agent whereby the Escrow Agent shall hold the funds for the
purchase of the Securities.
1.2 Upon Escrow Agent's receipt of cleared funds into his
attorney trustee account, he shall notify in writing the Company, or the
Company's designated attorney or agent, of the amount of funds he has
received into his account.
1.3 The Company, upon receipt of said notice and acceptance of
<PAGE>
Subscriber's Subscription Agreement, as evidenced by the Company's
execution thereof, shall deliver to Escrow Agent the Securities being
purchased. Escrow Agent shall then communicate with the Company to confirm
the validity of its issuance.
1.4 Once Escrow Agent reasonably confirms the validity of the
issuance of the Securities, he shall immediately wire that amount of funds
necessary to purchase the Securities, per the written instructions of the
Company. Once the funds have been received per the Company's instructions,
the Escrow Agent shall then arrange to have the Securities delivered as per
instructions from each Subscriber.
1.5 This Agreement may be altered or amended only with the
consent of all of the parties hereto. Should the Company attempt to change
this Agreement in a manner which, in the Escrow Agent's discretion, shall
be undesirable, the Escrow Agent may resign as Escrow Agent by notifying
the Company and each Subscriber in writing. In the case of the Escrow
Agent's resignation or removal pursuant to the foregoing, his only duty,
until receipt of notice from the Company and each Subscriber or its agent
that a successor escrow agent shall have been appointed, shall be to hold
and preserve the Securities and/or funds. Upon receipt by the Escrow Agent
of said notice from the Company and each Subscriber of the appointment of
a successor escrow agent, the name of a successor escrow account and a
direction to transfer the Securities and/or funds, the Escrow Agent shall
promptly thereafter transfer all of the Securities and/or funds held in
escrow to said successor escrow agent. Immediately after said transfer of
Securities, the Escrow Agent shall furnish the Company and each Subscriber
with proof of such transfer. The Escrow Agent is authorized to disregard
any notices, requests, instructions or demands received by it from the
Company or the Subscribers after notice of resignation or removal shall
have been given, unless the same shall be the aforementioned notice from
the Company and the Subscribers to transfer the Securities and funds to a
successor escrow agent or to return same to the respective parties.
1.6 The Escrow Agent shall be reimbursed by the Company and the
Subscriber for any reasonable expenses incurred in the event there is a
conflict between the parties and the Escrow Agent shall deem it necessary
to retain counsel.
1.7 The Escrow Agent shall not be liable for any action taken or
omitted by him in good faith in accordance with the advice of the Escrow
Agent's counsel; and in no event shall the Escrow Agent be liable or
responsible except for the Escrow Agent's own gross negligence or willful
misconduct.
1.8 The Company and each Subscriber warrant to and agree with
the Escrow Agent that, unless otherwise expressly set forth in this
Agreement:
(i) there is no security interest in the Securities or any part
thereof;
(ii) no financing statement under the Uniform Commercial Code is
on file in any jurisdiction claiming a security interest or
in describing (whether specifically or generally) the
Securities or any part thereof; and
<PAGE>
(iii) the Escrow Agent shall have no responsibility at any time to
ascertain whether or not any security interest exists in the
Securities or any part thereof or to file any financing
statement under the Uniform Commercial Code with respect to
the Securities or any part thereof.
1.9 The Escrow Agent has no liability hereunder to either party
other than to hold the Securities and funds and to deliver them under the
terms hereof. Each party hereto agrees to indemnify and hold harmless the
Escrow Agent from and with respect to any suits, claims, actions or
liabilities arising in any way out of this transaction including the
obligation to defend any legal action brought which in any way arises out
of or is related to this Escrow.
ARTICLE 2
---------
MISCELLANEOUS
-------------
2.1 No waiver or any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No
extension of time for performance of any obligation or act shall be deemed
any extension of the time for performance of any other obligation or act.
2.2 All notices or other communications required or permitted
hereunder shall be in writing, and shall be sent by fax, overnight courier,
registered or certified mail, postage prepaid, return receipt requested,
and shall be deemed received upon receipt thereof, as follows:
(i) Ecotyre Technologies, Inc.
895 Waverly Avenue
Holtsville, NY 11742
Attn:
Tel: (516) 289-4545
Fax: (516) 289-4756
(ii) Goldstein, Goldstein & Reis, LLP
65 Broadway
New York, NY 10006
Attn: Sheldon E. Goldstein, Esq.
Tel: (212) 809-4220
Fax: (212) 809-4228
(iii) To the Subscribers, at their respective addresses listed on
Schedule A attached to the Agreement.
2.3 This Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and assigns of the parties hereto.
<PAGE>
2.4 This Agreement is the final expression of, and contains the
entire Agreement between, the parties with respect to the subject matter
hereof and supersedes all prior understandings with respect thereto. This
Agreement may not be modified, changed, supplemented or terminated, nor may
any obligations hereunder be waived, except by written instrument signed by
the parties to be charged or by its agent duly authorized in writing or as
otherwise expressly permitted herein.
2.5 Whenever required by the context of this Agreement, the
singular shall include the plural and masculine shall include the feminine.
This Agreement shall not be construed as if it had been prepared by one of
the parties, but rather as if both parties had prepared the same. Unless
otherwise indicated, all references to Articles are to this Agreement.
2.6 The Company acknowledges and confirms that it is not being
represented in a legal capacity by Goldstein, Goldstein & Reis, LLC and it
has had the opportunity to consult with its own legal advisors prior to the
signing of this Agreement.
2.7 The parties hereto expressly agree that this Agreement shall
be governed by, interpreted under and construed and enforced in accordance
with the laws of the State of New York. Any action to enforce, existing
out of, or relating in any way to, any provisions of this Agreement shall
be brought through the American Arbitration Association at the designated
locale of New York, New York.
[Remainder of page intentionally left blank]
--------------------------------------------
[Signature page follows]
------------------------
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 24th day of March, 1998.
ECOTYRE TECHNOLOGIES, INC.
By______________________________
Officer
SUBSCRIBER:
By_____________________________
Officer
SUBSCRIBER:
By_____________________________
Officer
SUBSCRIBER:
By_____________________________
Officer
GOLDSTEIN, GOLDSTEIN & REIS, LLP,
Escrow Agent
By_____________________________
<PAGE>
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated the 24th day of March,
1998, between the entities listed on Schedule A (collectively referred to
the "Subscribers" or "Subscriber"), GGR ASSOCIATES, a partnership organized
under the laws of the State of New York, ("GGR") (the Subscribers and GGR
are collectively referred to as "Holder" or "Holders"), issued pursuant to
the Common Stock Subscription Agreement of even date herewith (the
"Subscription Agreement"), and ECOTYRE TECHNOLOGIES, INC., a Delaware
corporation having its principal place of business at 895 Waverly Avenue,
Holtsville, New York 11742 (the "Company").
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Holders are purchasing from the Company, pursuant to the
Subscription Agreement six hundred thousand (600,000) shares of the
Company's common stock, $0.01 par vale (the "Common Stock"), and a Warrant
to purchase fifty thousand (50,000) shares of Common Stock. The Common
Stock of the Company underlying the Warrants is referred to as the "Warrant
Shares" (capitalized terms defined in the Subscription Agreement and not
otherwise defined herein have the meanings specified in the Subscription
Agreement); and
WHEREAS, simultaneously with the execution and delivery of this
Agreement, GGR is receiving from the Company, pursuant to the Subscription
Agreement, Fifteen Thousand (15,000) shares of Common Stock; and
WHEREAS, the Company desires to grant to the Holders the
registration rights set forth herein.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. REGISTRABLE SECURITIES. As used herein the term
Registrable Securities means the Common Stock issued to the Subscribers and
GGR, and the Underlying Shares; provided, however, that with respect to any
particular Registrable Security, such security shall cease to be a
Registrable Security when, as of the date of determination, (i) it has been
effectively registered under the Securities Act of 1933, as amended (the
Securities Act) and disposed of pursuant thereto, (ii) registration
under the Securities Act is no longer required for the immediate public
distribution of such security as a result of the provisions of Rule 144, or
(iii) it has ceased to be outstanding. In the event of any merger,
reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be
made in the definition of Registrable Security as is appropriate in order
to prevent any dilution or enlargement of the rights granted pursuant to
this Section 1.
Section 2. RESTRICTIONS ON TRANSFER. The Holder acknowledges
and understands
<PAGE>
that prior to the registration of the Securities as provided herein, the
Securities are "restricted securities" as defined in Rule 144 promulgated
under the Securities Act. The Holder understands that no disposition or
transfer of the Securities may be made by Holder in the absence of (i) an
opinion of counsel reasonably satisfactory to the Company that such
transfer may be made or (ii) a registration statement under the Securities
Act is then in effect with respect thereto.
Section 3. REGISTRATION RIGHTS.
(a) The Company agrees that it will prepare and file with the
Securities and Exchange Commission ("SEC"), as soon as possible after the
Closing Date, on one occasion a registration statement with the SEC (the
"Registration Statement"), at the sole expense of the Company (except as
provided in Section 3(c) hereof), in respect of all holders of Registrable
Securities, so as to permit a non-underwritten public offering and sale of
the Registrable Securities under the Securities Act, provided, the Company
shall not be obligated to take any action to effect any such registration,
qualification or compliance pursuant to this Section 3(a) in any
jurisdiction in which the Company would be required to qualify as a dealer
in securities, under the securities or blue sky laws of such jurisdiction.
The Company agrees that it will use its best efforts to cause the
Registration Statement to become effective within ninety (90) days after
the Closing Date. The number of Registrable Securities to be registered
shall be six hundred thirty thousand shares of Common Stock, plus two
hundred (200%) percent of the number of Underlying Shares that would be
required if all of the Warrants were exercised in accordance with the terms
of the Warrant, on the day immediately preceding the date the Registration
Statement is filed.
(b) The Company will maintain the Registration Statement or
post-effective amendment filed under this Section 3 hereof current under
the Securities Act until the earlier of (i) the date that all of the
Registrable Securities have been sold pursuant to the Registration
Statement, (ii) the date that the Registrable Securities may be sold under
the provisions of Rule 144 or (iii) two (2) years after the effective date
of the Registration Statement.
(c) All fees, disbursements and out-of-pocket expenses and
costs incurred by the Company in connection with the preparation and
filing of the Registration Statement under Section 3(a) and in complying
with applicable securities and Blue Sky laws (including, without
limitation, all attorneys' fees) shall be borne by the Company. The Holder
shall bear the cost of underwriting discounts and commissions, if any,
applicable to the Registrable Securities being registered and all of other
the fees and expenses of such registration, including of its counsel and
such other expenses as are necessary to qualify the sale of Securities in
compliance with any state Blue Sky laws. The Company shall use its best
efforts to qualify any of the securities for sale in such states as such
Holder reasonably designates and shall furnish indemnification in the
manner provided in Section 9 hereof. However, the Company shall not be
required to qualify in any state which will require an escrow or other
restriction relating to the Company and/or the sellers. The Company at its
expense will supply the Holder with copies of such Registration Statement
and the prospectus or offering circular included therein and other related
documents in such quantities as may be reasonably requested by the Holder.
(d) The Company shall not be required by this Section 3 to
include Holder's
<PAGE>
Registrable Securities in the Registration Statement which is to be filed
if, in the opinion of counsel for both the Holder and the Company (or,
should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holder and the
Company) the proposed offering or other transfer as to which such
registration is requested is exempt from applicable federal and state
securities laws and would result in all Subscribers or transferees
obtaining securities which are not restricted securities, as defined in
Rule 144 under the Securities Act.
(e) In the event the Registration Statement to be filed by the
Company pursuant to Section 3(a) above is not filed by the Company by the
thirtieth (30th) day after the Closing Date, or if the Registration
Statement is not declared effective by the SEC by the ninetieth (90th) day
after the Closing Date (the Effective Date), then the Company will pay, in
cash, to the Holder on a pro-rata basis by wire transfer, as liquidated
damages for such failure and not as a penalty, five (5%) percent of the
Purchase Price for the first each month thereafter until the Registration
Statement has been filed and/or declared effective. The liquidated
damages shall be paid only in cash.
If the Company does not remit the damages to the Holder as set
forth above, the Company will pay the Holder reasonable costs of
collection, including attorneys fees, in addition to the liquidated
damages. Such payment shall be made to the Holder in cash immediately if
the registration of the Securities are not effected; provided, however,
that the payment of such liquidated damages shall not relieve the Company
from its obligations to register the Securities pursuant to this Section.
The registration of the Securities pursuant to this provision shall not
affect or limit Holder's other rights or remedies as set forth in this
Agreement.
(f) No provision contained herein shall preclude the Company
from selling securities pursuant to any registration statement in which it
is required to include Registrable Securities pursuant to this Section 3.
Section 4. COOPERATION WITH COMPANY. Holders will cooperate
with the Company in all respects in connection with this Agreement,
including, timely supplying all information reasonably requested by the
Company and executing and returning all documents reasonably requested in
connection with the registration and sale of the Registrable Securities.
Section 5. REGISTRATION PROCEDURES. Whenever the Company is
required by the provisions of this Agreement to effect the registration of
any of the Registrable Securities under the Securities Act, the Company
shall (except as otherwise provided in this Agreement), as expeditiously as
possible:
(a) prepare and file with the Commission such amendments and
supplements to such registration statement and the Prospectus used in
connection therewith as may be necessary to keep such registration
statement effective as per Section 3(b) herein and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of all securities covered by such registration statement when
the Holder or Holders of such securities
<PAGE>
shall desire to sell or otherwise dispose of the same (including prospectus
supplements with respect to the sales of securities from time to time in
connection with a registration statement pursuant to Rule 415 under the
Securities Act);
(b) furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as such
Holder may reasonably request in order to facilitate the public sale or
other disposition of the securities owned by such Holder;
(c) register and qualify the securities covered by such
registration statement under the blue sky laws of such jurisdictions as the
Company currently maintains blue sky registration which includes, but is
not limited to New York, and do any and all other acts and things which may
be necessary or advisable to enable each Holder to consummate the public
sale or other disposition in such jurisdiction of the securities owned by
such Holder, except that the Company shall not for any such purpose be
required to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or to file therein any general
consent to service of process;
(d) to list such securities on the NASDAQ Small Cap Stock Market
or any securities exchange on which any securities of the Company is then
listed, if the listing of such securities is then permitted under the rules
of such exchange or NASDAQ Small Cap Stock Market:
(e) enter into and perform its obligations under an underwriting
agreement, if the offering is an underwritten offering, in usual and
customary form, with the managing underwriter or underwriters of such
underwritten offering;
(f) notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto
covered by such registration statement is required to be delivered under
the Securities Act, of the happening of any event of which it has knowledge
as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing.
Section 6. ASSIGNMENT. The rights granted the Holder under this
Agreement shall not be assigned without the written consent of the Company,
which consent shall not be unnecessarily withheld. In the event of a
transfer of the rights granted under this Agreement, the Holder agrees that
the Company may require that the transferee comply with reasonable
conditions as determined in the discretion of the Company. This Agreement
is binding upon and inures to the benefit of the parties hereto and their
respective heirs, successors and permitted assigns.
Section 7. TERMINATION OF REGISTRATION RIGHTS. The rights
granted pursuant to this Agreement shall terminate as to each Holder (and
permitted transferees or assignees) upon the occurrence of any of the
following:
<PAGE>
(a) all Holder's securities subject to this Agreement have been
registered;
(b) such Holder's securities subject to this Agreement may be
sold without such registration pursuant to Rule 144 promulgated by the SEC
pursuant to the Securities Act;
(c) such Holder's securities subject to this Agreement can be
sold pursuant to Rule 144(k).
Section 8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the Holder
and each person, if any, who controls the Holder within the meaning of the
Securities Act (Distributing Holders) against any losses, claims, damages
or liabilities, joint or several (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), to which the Distributing Holders
may become subject, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, or
any related preliminary prospectus, final prospectus, offering circular,
notification or amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration
Statement, preliminary prospectus, final prospectus, offering circular,
notification or amendment, or supplement thereto in reliance upon, and in
conformity with, written information furnished to the Company by the
Distributing Holders, specifically for use in the preparation thereof.
This Section shall not inure to the benefit of any Distributing Holder with
respect to any person asserting such loss, claim, damage or liability who
purchased the Registrable Securities which are the subject thereof if the
Distributing Holder failed to send or give (in violation of the Securities
Act or the rules and regulations promulgated thereunder) a copy of the
prospectus contained in the Registration Statement to such person at or
prior to the written cofirmation to such person of the sale of such
Registrable Securities, where the Distributing Holder was obligated to do
so under the Securities Act or the rules and regulations promulgated
hereunder. This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
(b) Each Distributing Holder agrees that it will indemnify and
hold harmless the Company, and each officer, director of the Company or
person, if any, who controls the Company within the meaning of the
Securities Act, against any losses, claims, damages or liabilities (which
shall, for all purposes of this Agreement, include, but not be limited to,
all costs of defense and investigation and all attorneys' fees) to which
the Company or any such officer, director or controlling person may become
subject under the Securities Act or otherwise, insofar
<PAGE>
as such losses claims, damages or liabilities (or actions in respect
thereof); arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement prepared by the Company, or any related preliminary prospectus,
final prospectus, offering circular, notification or amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but in
each case only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such Registration
Statement, preliminary prospectus, final prospectus, offering circular,
notification or amendment or supplement thereto in reliance upon, and in
conformity with, written information furnished to the Company by such
Distributing Holder, specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which the
distributing Holders may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise than as to the particular item as to which
indemnification is then being sought solely pursuant to this Section. In
case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent
that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein
stated and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party under this Section for
any legal or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action to
its final conclusion. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the
indemnified party; provided that if the indemnified party is the
Distributing Holder, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has
been specifically authorized in writing by the indemnifying party, or (ii)
the named parties to any such action (including any impleaded parties)
include both the Distributing Holder and the indemnifying party and the
Distributing Holder shall have been advised by such counsel that there may
be one or more legal defenses available to the indemnifying party different
from or in conflict with any legal defenses which may be available to the
Distributing Holder (in which case the indemnifying party shall not have
the right to assume the defense of such action on behalf of the
Distributing Holder, it being understoo, however, that the indemnifying
party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable only for
the reasonable fees and expenses of one separate firm of attorneys for the
Distributing Holder, which firm shall be designated in writing by the
Distributing Holder). No settlement of any action against an indemnified
party shall be made without the prior written consent of the indemnified
party, which consent shall not be unreasonably withheld.
<PAGE>
Section 9. CONTRIBUTION. In order to provide for just and
equitable contribution under the Securities Act in any case in which (i)
the Distributing Holder, or the Company, makes a claim for indemnification,
but is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that the express
provisions of this Agreement provide for indemnification in such case, or
(ii) contribution under the Securities Act may be required on the part of
any Distributing Holder, or the Company, then the Company and the
applicable Distributing Holder shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall,
for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees), in either such
case (after contribution from others) on the basis of relative fault as
well as any other relevant equitable considerations. The relative fault
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company on the one hand or the applicable Distributing Holder, on the other
hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
Company and the Distributing Holder agree that it would not be just and
equitable if contribution pursuant to this Section were determined by pro
rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in this Section. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to
above in this Section shall be demed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
Section 10. NOTICES. Any notice pursuant to this Agreement by
the Company or by the Holder shall be in writing and shall be deemed to
have been duly given if delivered by (i) hand, (ii) by facsimile and
followed by mail delivery or (iii) if mailed by certified mail, return
receipt requested, postage prepaid, addressed as follows:
(a) If to the Subscriber, to its, his or her address set forth
on Schedule A.
(b) If to GGR, 65 Broadway, 10th Floor, New York, New York
10006.
(c) If to the Company, at the address set forth herein, or to
such other address as any such party may designate by notice to the other
party. Notices shall be deemed given at the time they are delivered
personally or five (5) days after they are mailed in the manner set forth
above. If notice is delivered by facsimile to the Company and followed by
mail, delivery
<PAGE>
shall be deemed given two (2) days after such facsimile is sent.
Section 11. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 12. HEADINGS. The headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 13. GOVERNING LAW, ARBITRATION. This Agreement will be
construed and enforced in accordance with and governed by the laws of the
State of New York, except for matters arising under the Securities Act,
without reference to principles of conflicts of law. Any dispute under this
Agreement or any Exhibit attached hereto shall be submitted to arbitration
through the American Arbitration Association (the "AAA") in New York City,
New York, and shall be finally and conclusively determined by the decision
of a board of arbitration consisting of three (3) members (hereinafter
referred to as the "Board of Arbitration") selected as according to the
rules governing the AAA. The Board of Arbitration shall meet on
consecutive business days in New York City, New York, and shall reach and
render a decision in writing (concurred in by a majority of the members of
the Board of Arbitration) with respect to the amount, if any, which the
losing party is required to pay to the other party in respect of a claim
filed. In connection with rendering its decisions, the Board of
Arbitration shall adopt and follow the laws of the State of New York. To
the extent practical, decisions of the Board of Arbitration shall be
rendered no more than thirty (30) calendar days following commencement of
proceedings with respect thereto. The Board of Arbitration shall cause its
written decision to be delivered to all parties involved in the dispute.
Any decision made by the Board of Arbitration (either prior to or after the
expiration of such thirty (30) calendar day period) shall be final, binding
and conclusive on the parties to the dispute, and entitled to be enforced
to the fullest extent permitted by law and entered in any court of
competent jurisdiction. Each party to any arbitration shall bear its own
expense in relation thereto, including but not limited to such party's
attorneys' fees, if any, and the expenses and fees of the Board of
Arbitration shall be divided amongst the parties in the dispute in the same
proportion as the portion of the related claim determined by the Board of
Arbitration to be payable to the winning party bears to the portion of such
claim determined not to be so payable. Each party to this Agreement
irrevocably consents to the service of process in any such proceeding by
the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party at its address set forth herein. Nothing herein
shall affect the right of any party to serve process in any other manner
permitted by law.
Section 14. SEVERABILITY/DEFINED TERMS. If any provision of
this Agreement shall for any reason be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provision hereof
and this Agreement shall be construed as if such invalid or unenforceable
provision had never been contained herein. Terms not otherwise defined
herein shall be defined in accordance with the Subscription Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed, on the day and year first above written.
<PAGE>
Attest: ECOTYRE TECHNOLOGIES, INC.
By:______________________ By:_________________________
Name: Name:
Title: Title:
GGR
By:_________________________
Name:
Title:
SUBSCRIBER
By:__________________________
Name:
Title:
SUBSCRIBER
By:__________________________
Name:
Title:
SUBSCRIBER
By:__________________________
Name:
Title:
<PAGE>
EXHIBIT D
_______________, 1998
Subscribers of
Ecotyre Technologies, Inc.
Re: Ecotyre Technologies, Inc.
Ladies and Gentlemen:
We have acted as counsel to Ecotyre Technologies, Inc., a corporation
incorporated under the laws of the State of (the Company), in
connection with the proposed issuance and sale of _______________________
(the Securities) pursuant to the Subscription Agreement (including all
Exhibits and Appendices thereto) (collectively, the Agreements) with
_____________________________ (Subscriber), dated _____________, ____
between the Company and Subscriber.
In connection with rendering the opinions set forth herein, we
have examined drafts of the Agreement, the Company's Certificate of
Incorporation and its Bylaws, as amended to date [other documents -
describe], the proceedings of the Company's Board of Directors taken in
connection with entering into the Agreements, and such other documents,
agreements and records as we deemed necessary to render the opinions set
forth below.
In conducting our examination, we have assumed the following: (i)
that each of the Agreements has been executed by each of the parties
thereto in the same form as the forms which we have examined, (ii) the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity and accuracy of all documents submitted to us as originals,
and the conformity to originals of all documents submitted to us as copies,
(iii) that each of the Agreements has been duly and validly authorized,
executed and delivered by the party or parties thereto other than the
Company, and (iv) that each of the Agreements constitutes the valid and
binding agreement of the party or parties thereto other than the Company,
enforceable against such party or parties in accordance with the
Agreements' terms.
Based upon and subject to the foregoing, we are of the opinion
that:
1. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
, is duly qualified to do
<PAGE>
business as a foreign corporation and is in good standing in all
jurisdictions where the Company owns or leases properties, maintains
employees or conducts business, except for jurisdictions in which the
failure to so qualify would not have a material adverse effect on the
Company, and has all requisite corporate power and authority to own its
properties and conduct its business;
2. The authorized capital stock of the Company consists of ____
shares of Common Stock, _____ par value per share (Common Stock) and _____
shares of Preferred Stock, par value $______ per shares; [describe classes
or Series if applicable]
3. The Common Stock is registered pursuant to Section 12(b) or
Section 12(g) of the Securities Exchange Act of 1934, as amended, and the
Company has timely filed all the material required to be filed pursuant to
Sections 13(a) or 15(d) of such Act for a period of at least twelve months
preceding the date hereof;
4. All issued and outstanding shares of Common Stock issued
since December 31, 1997 have been duly authorized and validly issued and
are fully paid and nonassessable.
5. The Securities which shall be issued at Closing is properly
issued under the Company's State of Incorporation.
6. When duly countersigned by the Company's transfer agent and
registrar, and delivered to you or upon your order against payment of the
agreed consideration therefor in accordance with the provisions of the
Agreements, the Securities [and any Common Stock to be issued upon the
exercise of the Securities] as described in the Agreements represented
thereby will be duly authorized and validly issued, fully paid and
nonassessable;
7. The Company has the requisite corporate power and authority
to enter into the Agreements and to sell and deliver the Securities and the
Common Stock to be issued upon the conversion of the Securities as
described in the Agreements; each of the Agreements has been duly and
validly authorized by all necessary corporate action by the Company to our
knowledge, no approval of any governmental or other body is required for
the execution and delivery of each of the Agreements by the Company or the
consummation of the transactions contemplated thereby; each of the
Agreements has been duly and validly executed and delivered by and on
behalf of the Company, and is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as enforceability may be
limited by general equitable principles, bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other laws affecting creditors
rights generally, and except as to compliance with federal, state and
foreign securities laws, as to which no opinion is expressed. All
Securities, upon delivery, shall be validly issued and outstanding, fully
paid and nonassessable.
8. To the best of our knowledge, after due inquiry, the
execution, delivery and performance of the Agreements by the Company and
the performance of its obligations thereunder do not and will not
constitute a breach or violation of any of the terms and provisions of, or
constitute a default under or conflict with or violate any provision of (i)
the Company's Certificate of Incorporation or By-Laws, (ii) any indenture,
mortgage, deed of trust, agreement or other instrument to which the Company
is a party or by which it or any of its property is bound,
<PAGE>
(iii) any applicable statute or regulation, (iv) or any judgment, decree or
other of any court or governmental body having jurisdiction over the
Company or any of its property.
9. To our knowledge, after due inquiry, there is no pending or
threatened litigation, investigation or other proceedings against the
Company [except as described in Exhibit A hereto].
10. To the best of our knowledge, after due inquiry, the Company
is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court of government agency or
instrumentality.
11. To the best of our knowledge, after due inquiry, there is
not action, suit, proceeding or investigation by the Company currently
pending or which the Company currently intends to initiate.
12. The issuance of Common Stock upon conversion of the
Securities in accordance with the terms and conditions of the Agreements,
will not violate the applicable listing agreement between the Company and
any securities exchange or market on which the Company's securities are
listed.
13. Assuming the accuracy of the representation and warranties
of the Company and the Subscriber set forth in this Agreement, the offer,
issuance and sale of the Common Stock and Warrants to be issued upon
conversion on exercise by the Subscriber pursuant to this Subscription
Agreement are exempt from the registration requirements of the Act.
This opinion is rendered only with regard to the matters set out
in the numbered paragraphs above. No other opinions are intended nor
should they be inferred. This opinion is based solely upon the laws of the
United States and the State of New York, as currently in effect, and the
[General] Corporation Law of the State of New York and does not include an
interpretation or statement concerning the laws of any other state or
jurisdiction. Insofar as the enforceability of the Agreements may be
governed by the laws of other states, we have assumed that such laws are
identical in all respects to the laws of the State of Delaware.
The opinions expressed herein are given to you solely for your
use in connection with the transaction contemplated by the Agreements and
may not be relied upon by any other person or entity or for any other
purpose without our prior consent.
Very truly yours,
By s/ Dennis Brovarone, Esq.
----------------------
