EXHIBIT 10 (oo)
302
THE TIREX CORPORATION
----------
TRUCK TIRE
EQUIPMENT LEASE AND PURCHASE AGREEMENT
----------
Truck Tire Lease and Purchase Agreement, made this 19th day of August 1998,
among
ENERCON America Distribution Limited
000 Xxxxx Xxxx
Xxxxxxxxxxx, Xxxx 00000
(the "Operator")
and
The Tirex Corporation
000 Xx. Xxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx X0X 0X0
(the "Manufacturer")
1. DEFINITIONS
1.1 "Acceptance Date" shall mean the first day following the completion of
the Test Period.
1.2 Delivery Date shall mean March 30, 1999 or such other date as the
parties hereto shall mutually agree.
1.3 "Leased Equipment shall mean Items 010 and 011 of the Proprietary
Equipment, as set forth on Schedule 1.8 hereto.
1.4 "Manufacturer" shall mean The Tirex Corporation and Tirex-Canada Inc.,
and all other corporations, partnerships, or other entities, now or in the
future controlled by, under common control with, or in control of, The Tirex
Corporation, jointly and severally.
1.5 "Nonproprietary Equipment" shall mean the constituent, integral, and
inseparable parts of the TCTS-1 System specified in Schedule 1.5 hereto.
1.6 "Operator" shall mean ENERCON America Distribution Limited and all
other corporations, partnerships, or other entities, now or in the future
controlled by, under common control with, or in control of, ENERCON America
Distribution Limited, jointly and severally.
1.7 "Projected Maintenance Agreement" shall mean the agreement for the
maintenance of the TCTS-1 System, which the Manufacturer and the Operator will
prepare on mutually agreeable terms.
1.8 "Proprietary Equipment" shall mean the constituent, integral, and
inseparable parts of the TCTS- 1 System specified in Schedule 1.8 hereto.
1.9 "Purchased Equipment shall mean Items 001 through 009 of the
Proprietary Equipment, as specified on Schedule 1.8 hereto, and the
Nonproprietary Equipment, as specified on Schedule 1.5 hereto.
1.10 "Site" shall mean the premises of Blackstar LLC in Woodburne, Indiana
or such other site as the Operator shall specify.
303
1.11 "TCTS-1 System" shall mean the Manufacturer's proprietary cryogenic
truck tire disintegration system, consisting of: (i) the patented "Leased
Equipment" and the (ii) "Purchased Equipment" which includes but is not limited
to a front-end tire preparation system and a freezing chamber which the
Manufacturer believes are proprietary to it and for which the Manufacturer
intends to apply for patents. This System will accept whole truck tires with an
inside diameter not exceeding twenty-four (24) inches and will process the tire
in such a manner as to allow the System to separate the steel and fiber from the
rubber which will be reduced to a size no larger than 5 mesh. The TCTS-1 System
shall meet or exceed all applicable U.S. permitting and operating rules and
regulations including but not limited to those promulgated by OSHA and EPA.
1.12 "Test Period" shall mean a three day period which shall commence
within ten days after completion of the installation of the TCTS-1 System,
during which Test Period, the TCTS-1 System shall be operated continually for up
to 24 hours per day.
2. RECITALS
Whereas:
2.1 The Manufacturer has invented, designed, developed, built, and
patented part of, and is the sole and exclusive owner, directly or indirectly,
through one or more subsidiaries, of all right title and interest in, the TCTS-1
System.
2.2 The Operator is a corporation organized for the principal purpose of
commercially exploiting, directly or indirectly, through one or more
subsidiaries, the TCTS-1 System by: (i) purchasing the Nonproprietary Equipment
and Items 001 - 009 of the Proprietary Equipment (referred to herein,
collectively, as the "Purchased Equipment"); (ii) leasing Items 010 and 011 of
the Proprietary Equipment (referred to herein, collectively, as the "Leased
Equipment"); and (iii) operating the TCTS-1 System.
3. AGREEMENT FOR PURCHASE AND SALE OF THE PURCHASED EQUIPMENT
3.1 Purchase and Sale
The Operator agrees to purchase, and the Manufacturer agrees to sell, the
Purchased Equipment, as defined in Section 1.7, above, in accordance with the
terms and conditions of this Agreement. The Operator may at its election take
title to the Purchased Equipment in a wholly owned subsidiary corporation to be
formed by it for such purpose. Such election by the Operator shall nowise
modify, diminish, or otherwise effect the Operator's liability hereunder to the
Manufacturer. The purchase and payment for the Purchased Equipment by the
Operator, and the sale, assignment, transfer, and delivery thereof by the
Manufacturer, shall take place subject to the fulfillment of the conditions
herein after provided.
3.2 Purchase Price
The purchase price for the Purchased Equipment (the "Purchase Price"),
installed and set in operation pursuant to Section 7 hereto, shall be the sum of
two million, two hundred fifty thousand United States dollars (US $2,250,000),
FOB Montreal.
3.3 Payment Terms
In the absence of arrangements for lease or letter of credit financing,
satisfactory to the Manufacturer, the Purchase Price for the Purchased Equipment
shall be paid as follows:
(a) 15% (US $337,500) upon execution of this Agreement;
304
(b) 15% (US $337,500) upon acceptance by the Operator of equipment
drawings, layout drawings, and other written
specifications, such acceptance to be based upon
local permitting and applicable operating
requirements and shall not be unreasonably withheld
(c) 30% (US $675,000) two months after Manufacturer's giving notice of
commencement of manufacture.
(d) 10% (US $225,000) two months prior to the anticipated Delivery Date.
(e) 15% (US $337,500) on the Delivery Date; and
(f) 15%(US $337,500) on the Acceptance Date.
3.4 Taxes
Manufacturer and Operator acknowledge that there are a variety of country, state
and/or local taxes that may be assessed on the Purchased Equipment, the Leased
Equipment, and the purchase, sale, and operation thereof. The Manufacturer shall
be responsible for the prompt payment of all taxes, assessments, levies, export
taxes, or other governmental or regulatory payments that may be assessed by the
government of Canada or any political sub-division therein. The Operator shall
be responsible for the prompt payment of all taxes, assessments, levies, import
taxes, or other governmental or regulatory payments that shall be assessed by
the government of the United States of America or any political sub-division
therein.
4. AGREEMENT FOR OPERATING LEASE
4.1 Agreement to Lease Equipment
The Manufacturer, as lessor, and the Operator, as lessee, hereby enter
into an operating lease (the "Lease") for the Leased Equipment, consisting of
Items 010 and 011 specified on Schedule 1.8 hereto, subject to the following
terms and conditions:
4.2 Term of the Lease
4.2.1 The term of the Lease shall be sixty (60) months commencing on the
Acceptance date.
4.2.2 At the expiration of the full original term hereof, if this Lease
has remained in effect and the Operator has duly performed all its obligations
thereunder during the entire such term, then the Operator shall have the option
to either:
(a) Obtain a new lease agreement in the form then being generally offered by
the Operator to the trade under which the Operator shall replace the
Leased Equipment or the entire TCTS-1 System, as the case may be, with new
equipment, free of any installation charge payable by the Operator;
(b) Continue to use the same equipment installed hereunder and thereby extend
the term of this Lease at a reduced rental rate of US $6,250 per month for
a period of one year with further successive automatic one-year extensions
subject only to the Operator's right to terminate this Lease at the end of
any extension year upon prior written notice of not less than 90 days; or
(c) Request that the Manufacturer exercise its right of first refusal to
repurchase the Purchased Equipment pursuant to Section 13.2 of this
Agreement, in which event the Manufacturer shall have sixty (60) days
following the Manufacturer's receipt of such notice to either: (i) notify
the Operator of its intent to repurchase the Purchased Equipment and,
within ninety (90) days of such
305
notice, effectuate such repurchase and thereupon enter upon the premises
where the said TCTS-1 System is located and remove the entire TCTS-1
System from the Operator's premises at the Manufacturer's expense, or (ii)
notify the Operator that it does not intend to repurchase the Purchased
Equipment and, as soon as practicable thereafter, enter upon the premises
where the TCTS-1 System is located, take possession of the Leased
Equipment without previous demand or notice and without legal process,
retrieve the Leased Equipment from the TCTS-1 System and remove the Leased
Equipment from the Operator's premises at the Manufacturer's expense.
4.3 Rent Payments
4.3.1 The Operator shall pay to the Manufacturer monthly rental payments
(the "Rent Payments") for the Leased Equipment at the rate of twelve thousand,
five hundred United States dollars (US $12,500) per month, payable in advance,
as follows:
(a) 30 days prior to the Delivery Date: (i) the first month's rent and;
(ii) as a security deposit, the last two months rent.
(b) One calendar month following the Delivery Date: the Rent Payment for
the period (the "Partial-Month Period") which commences one calendar
month following the Delivery Date and ends on the last day of the
calendar month in which such Partial-Month Period falls, will be
payable in cash on the first day of such Partial-Month Period, on a
pro rata basis.
(c) Normal monthly Rent Payments of US $12,500 will commence and be
payable on the first day of the first full calendar month following
the Partial-Month Period.
306
EXAMPLE: If the Delivery Date is September 15, 1998:
================================================================================
Referenced Terms Period Covered Date Payment Due Amount of Payment
--------------------------------------------------------------------------------
"First Month" September 15, 1998 August 17, 1998 US $12,500
through
October 14, 1998
--------------------------------------------------------------------------------
"Security Last two monthly August 17, 1998 US $25,000
Deposit" rent payments
payable under lease
--------------------------------------------------------------------------------
"Partial Month October 15, 1998 October 15, 1998 US $ 6,250
Period through
October 31, 1998
--------------------------------------------------------------------------------
"First Regular November 1, 1998 November 1, 1998 US $12,500
Monthly Rental through
Payment" November 30, 1998
================================================================================
4.3.2 In the event of that payment of any Rent Payment is made by the
Operator more than five days after the date when such payment shall have been
due, the Operator shall pay a late charge of one percent (1%) of the entire
amount of such Rent Payment for every month in which such delinquency occurs or
continues.
5. TITLE TO EQUIPMENT
5.1 Title to Purchased Equipment
5.1.1 Title to the Purchased Equipment shall pass to the Operator upon
payment in full of the balance of the Purchase Price, due on the Acceptance
Date.
5.1.2 No rights to any plans or designs respecting the TCTS-1 System shall
pass to the Operator and the Operator shall not copy, reproduce, design, or
build, or cause, assist, or suffer to be copied, reproduced, designed, or built
by any other person, firm, or corporation any equipment in any way similar to,
or based upon, the design or structure of the TCTS-1 System.
5.2 Title to Leased Equipment
5.2.1 The Leased Equipment shall at all times remain the sole and
exclusive property of the Manufacturer (which reserves the right to assign or
encumber the Leased Equipment subject to the rights of the Operator under the
Operating Lease contained in Section 4 of this Agreement) and the Operator shall
have no right, title, or interest to the Leased Equipment but only the right to
use such Equipment under this Lease. The Leased Equipment shall not be
transferred or sublet by the Operator to any other person, firm or corporation,
the Operator shall not permit any other person, firm, or corporation to use the
Leased Equipment, and the said operating lease contained herein may not be
assigned by the Operator without the prior written consent of the Manufacturer.
In the event that the Manufacturer shall assign or encumber the Leased
Equipment, it shall give the Operator prompt written notice of such assignment
or encumbrance.
5.2.2 The Leased Equipment shall remain personal property of the
Manufacturer and shall not be deemed otherwise by reason of becoming attached to
the premises.
5.2.3 The Manufacturer shall have the right at any time or from time to
time to modify the Leased Equipment in a manner which will not lessen the
utility of the Leased Equipment;
5.2.4 The Operator shall not enter into, remove, tamper with, or breach
the security of, the Leased Equipment. The Operator shall not copy, reproduce,
design, or build, or cause, assist, or suffer to be copied, reproduced,
designed, or built by any other person, firm, or corporation any equipment in
any
307
way similar to, or based upon, the design or structure of the Leased Equipment,
or of any part thereof. The Operator shall not permit any Leased Equipment to be
abused, not permit the removal of any plate or markings put on the Leased
Equipment by the Manufacturer, nor attach anything to or remove anything from
the Leased Equipment.
5.2.5 The Operator will not allow any repairs to the TCTS-1 or replacement
of parts to be done by any person or persons except technicians authorized by
the Manufacturer and/or as trained by the Manufacturer pursuant to Section 8.2.3
of this Agreement.
5.2.6 The Operator agrees that, in consideration of the Manufacturer
entering into this Lease, it will not move the TCTS-1 System from the Site
without the prior written consent of the Manufacturer.
6. SITE PREPARATION
6.1 Site Plan Specifications
6.1.1 Within 45 days of the execution of this Agreement, the Manufacturer
will furnish to the Operator "Site Plan Specifications" respecting the
electrical, ventilation, water supply, equipment drawings, layout drawings, and
disposal, and any other specifications required at the site for the installation
and operation of the TCTS-1 System. Delivery of the foregoing specifications
will be made by the Manufacturer to the Operator at the Manufacturer's plant in
Montreal.
6.1.2 Within 15 days of the delivery of the Site Plans Specifications in
accordance with Subparagraph 6.1.1, above, the Operator will notify the
Manufacturer of any failure of such Specifications to comply with all applicable
regulations and requirements. Unless such notice of failure to comply is
received by the Manufacturer, the said Site Plans Specifications will be deemed
to have been accepted by the Manufacturer.
6.2 Preparation of Site
Prior to the Delivery and installation of the TCTS-1 System, the Operator
shall make, at its own expense, all alterations to and changes in its premises
and equipment required to bring the site into complete conformance with the
above referenced Site Plan Specifications, with respect to which the Operator
shall obtain all necessary permissions and inspections, and which shall include
but not be limited to making any required structural changes and the
installation of:
(a) electrical equipment and power lines up to the electrical inputs or
control boxes attached to the TCTS-1 System, as designated on the
Site Plan Specifications;
(b) water supply sources and equipment up to the water inflow points
designated on the Site Plan Specifications;
(c) water drainage and disposal sites and equipment from the water
outflow points designated on the Site Plan Specifications;
(d) air ventilation sources and equipment as designated on the Site Plan
Specifications
(e) a "front-end loader" capable of moving and depositing the tires onto
the trommel screen specified in Schedule 1.5 hereto.
6.3 Notice to Inspect
308
6.3.1 The Operator shall, not later than one month prior to the
anticipated Delivery Date, give written notice to the Manufacturer (the "Notice
to Inspect") that preparation of the site for the installation and operation of
the TCTS-1 has been completed in accordance with the Site Plan Specifications
and request that the Manufacturer inspect the site in order to confirm its
conformance with the Site Plan Specifications.
6.4 Manufacturer's Right to Inspect Site
6.4.1 The Manufacturer shall have the right, at any time within two weeks
of its receipt of the Notice to Inspect, to inspect the site and notify the
Operator in writing (the "Notice of Approval") that the Site is in conformance
with the Site Plan Specifications.
6.4.2 In the event that, after inspecting the Site, the Manufacturer
determines that the Site is not in conformance with the Site Plan
Specifications, then the Manufacturer shall have the right to require that the
Operator make any and all changes or additions required to bring the Site into
such conformance, at the sole expense of the Operator prior to the Delivery Date
and to postpone the Delivery Date until all such changes or additions are
completed. In such event, the Operator shall, upon completion of the required
changes or additions, give written notice to the Manufacturer ("Notice to
Re-inspect") that such changes or additions have been made in accordance with
the Manufacturer's instructions and that the Site is in complete conformance
with the Site Plan Specifications. The Manufacturer shall have the right, within
two weeks of its receipt of such Notice to re-inspect the Site. Such procedures
may be repeated, and the Manufacturer shall have no obligation to deliver the
TCTS-1 System, until the Manufacturer confirms upon inspection that the Site is
in conformance with the Site Plan Specifications or the Manufacturer fails to
inspect the Site within a reasonable time in light of the Manufacturer's
commitments to other customers.
7. DELIVERY AND INSTALLATION
7.1 Delivery
7.1.1 Unless the Delivery Date is rescheduled in accordance with the
provisions of paragraph 6.4.2 above, the Manufacturer shall deliver the TCTS-1
System to the site not later than 30 days after the Manufacturer determines that
the Site is in conformance with the Site Plan Specifications and that all legal
requirements have been met, in accordance with Section 6.4, above.
7.1.2 Delivery shall be made F.O.B. Montreal, Canada. The equipment
comprising the TCTS-1 System shall be placed in suitably protected containers
the nature of which shall be determined by mutual agreement of the parties. The
TCTS-1 System shall be delivered to the Site via a commercial transporter and
routing acceptable to the Manufacturer and the Operator. The Operator shall pay
all costs of transportation and delivery of the TCTS-1 System from the
Manufacturer's plant in Montreal to the Site.
7.1.3 In the event that delivery of the TCTS-1 System, or any part
thereof, for a period not exceeding thirty (30) days, shall be prevented by
causes beyond the control of the Manufacturer, including but not limited to acts
of God, labor troubles, failure of essential means of transportation, or changes
in policy with respect to exports or otherwise by the government of the
jurisdiction in which the Operator is located, the Delivery Date shall be
postponed for an additional period equal to the period of delay. In the event,
however, that such nondelivery continues after such extended period, the
Operator and the Manufacturer shall each have the right to cancel this agreement
by written notice, and in such case there shall be no obligation or liability on
the part of either party with respect to such undelivered equipment.
309
7.2 Installation
7.2.1 The Manufacturer shall, at its own expense, install the TCTS-1
System at the Site.
7.2.2 Upon installation, the TCTS-1 System shall be in complete working
order and shall consist of the Purchased Equipment and the Leased Equipment.
8. EQUIPMENT TESTING AND OPERATOR'S ACCEPTANCE
8.1 Notice of Availability for Testing
Upon completion of the installation of the TCTS-1 System at the Site, the
Manufacturer shall give the Operator written notice that the TCTS-1 System is
available for testing operations.
8.2 Test Period
8.2.1 Immediately upon giving notice to the Operator that the TCTS-1
System is available for testing operations, the Manufacturer shall, at its own
expense, furnish an engineer (technician?) to supervise the operation of the
TCTS-1 for a period of three days (the "Test Period"). During the Test Period,
the TCTS-1 System shall demonstrate the capability of disintegrating scrap truck
tires at the rate of the equivalent of one million (1,000,000) passenger car
tires per year on a twenty-four hour per day, seven-day per week, continuous
operating basis.
8.2.2 All power, fuel, light, water, oil, or other necessary supplies and
all personnel (other than the engineer or technician furnished by the
Manufacturer), authorizations, permits, real and personal property, contracts,
equipment, reports, etc. necessary for the successful operation of the TCTS-1
System, as set forth on Schedule 8.2.2, shall be provided by the Operator.
8.2.3 The Manufacturer shall furnish to the Operator all data regarding
the TCTS-1 System in order to enable the Operator to operate such System and, in
addition to the training to be provided pursuant to the Projected Maintenance
Agreement or otherwise, the Manufacturer shall, during the Test Period, instruct
at least two of the Operator's employees in accordance with Section 5.2.5 of
this Agreement with respect to the operation, and operating maintenance of the
TCTS-1 System, and use reasonable care in training such employee, provided that
if in the Manufacturer's sole opinion any employee is not adequately qualified,
the Operator shall designate another of its employees to receive such
instruction.
8.3 Acceptance
8.3.1 Unless the TCTS-1, or any part of it, fails to operate in accordance
with the specifications set forth in Paragraph 8.2.1, above, the Manufacturer's
offer to sell the Purchased Equipment and to lease the Leased Equipment to the
Operator shall automatically be deemed to have been accepted by the Operator as
of the Acceptance Date, which shall occur on the first day following the
completion of the Test Period and the Operator shall have no right to revoke
such acceptance for any reason.
8.3.2 If the TCTS-1, or any part of it, fails to operate in accordance
with the specifications set forth in Paragraph 8.2.1, above, the Manufacturer
shall have ninety (90) days in which to cure the problems responsible for such
failure. Costs of all parts and labor required to bring the TCTS-1 into full
working condition shall be borne by the Manufacture unless the failure to
operate in accordance with the specifications set forth in Paragraph 8.2.1,
above, shall have been caused by any act or failure to act on the part of the
Operator or its personnel, including but not limited to the failure of the
Operator to have brought the Site into conformance with the Site Plan
Specifications.
310
8.3.3 Upon written notice to the Operator that the problems which caused
the TCTS-1 System to fail to operate as required during the Test Period have
been cured, the Manufacturer shall, at the request of the Operator, commence a
second Test Period for up to three days, in which case the acceptance criteria
of Paragraph 8.3.1 shall pertain to such second Test Period (or any subsequent
Test Period) with the same force and effect as to the initial Test Period.
9. RISK OF LOSS
9.1 The risk of loss, injury, or destruction of the Leased Equipment from
any cause whatsoever, except negligence or willful destruction by the Operator
shall be borne by the Manufacturer during the term of the Lease therefor
provided hereunder.
9.2 The risk of loss, injury, or destruction of the Purchased Equipment
from any cause whatsoever, except negligence or willful destruction by the
Operator shall be borne by the Manufacturer only until title passes to the
Operator.
9.3 Any loss, injury, or destruction to the TCTS-1, or any part of it,
after title to the Purchased Equipment passes to the Operator, shall not serve
in any manner to release the Operator from the obligation to pay the Rent
Payments provided for Section 4.3, above.
10. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE MANUFACTURER
The Manufacturer hereby represents, warrants, and covenants to the
Operator, as follows:
10.1 Corporate Status
The Tirex Corporation is (i) duly organized corporation, validly existing
and in good standing under the laws of the State of Delaware; (ii) has full
power to own all of its properties and carry on its business; and (iii) is
qualified to do business as a foreign entity in each of the jurisdictions in
which it operates, if any, unless the character of the properties owned by it or
the nature of the business transacted by it, does not make qualification
necessary in any other jurisdiction or jurisdictions.
10.2 Corporate Action
Prior to the date hereof, the board of directors of the Manufacturer has
duly adopted resolutions approving the execution and delivery to the Operator of
this Agreement and authorizing and consenting to each and every one of the
terms, warranties, representations, covenants and conditions herein contained.
10.3 Patents
10.3.1 The Manufacturer has obtained a patent in the United States and
Canada for the Disintegration System which constitutes the "Leased Equipment".
The Manufacturer is the sole owner of such patent and of all rights thereunder.
10.3.2 The Manufacturer shall defend, to the best of its ability and at
its own expense, all actions, suits, or proceedings instituted against the
Operator insofar as the same are based on any claims that the said Proprietary
Equipment, or any part thereof, constitutes an infringement of any patent of the
000
Xxxxxx Xxxxxx or Canada and shall indemnify the Operator against all damages,
costs, and expenses which the Operator may incur as a result of any action which
may be brought or threatened against the Operator with respect to the equipment
covered by such patent, provided that:
(a) The Manufacturer shall have the right at any time or from time to
time to modify the TCTS-1 System in a manner which will not lessen
the utility thereof;
(b) The Operator gives the Manufacturer immediate notice in writing of
the institution of the action, suit, or proceeding and permits the
Manufacturer, through its counsel, to defend same, and gives the
Manufacturer all information, assistance, and authority to enable
the Manufacturer to do; and
(c) The Operator has made no change of any kind in the TCTS-1 System
without obtaining the prior written permission of the Manufacturer.
10.3.3 When information is brought to the attention of the Manufacturer or
the Operator that others are unlawfully infringing on the patent covering the
Leased Equipment, or on any other patent granted to the Manufacturer in the
future on any other component or part of the TCTS-1, the Manufacturer shall
prosecute diligently any infringer at the Manufacturer's own expense.
10.3.4 The Manufacturer has designed, developed, and built a fully
computerized front-end tire preparation system and a freezing chamber. The
Manufacturer believes that such equipment is proprietary to it and intends, as
promptly as practicable, to file patent applications therefor. The Manufacturer
has no present knowledge of any information which would adversely affect the
validity of its outstanding patent or the issuance of additional patents
pursuant to the above described projected patent applications. However, nothing
in this Paragraph shall constitute a warranty by the Manufacturer that further
patents will granted or that, in the absence of a final court determination, any
particular patent is valid and enforceable or that any patent may not be the
subject of patent infringement claims.
10.4 Warranties
Subject to the failure of the Operator to maintain the TCTS-1 in
accordance with standards and procedures to be specified in the Projected
Maintenance Agreement or otherwise, the Manufacturer warrants that the TCTS-1
will be capable of disintegrating scrap truck tires at the rate of the
equivalent of one million (1,000,000) passenger car tires per year on a
twenty-four hour, seven day per week operating basis. The Manufacturer further
warrants and represents that the TCTS-1 System will meet or exceed all
applicable U.S. permitting and operating rules and regulations including but not
limited to those promulgated by OSHA and the EPA. The Manufacturer further
warrants the TCTS-1 System against defects in workmanship and materials or
failure to perform in accordance with the specifications set forth in Paragraph
8.2.1, above for one year after the Acceptance Date. No other representations or
warranties have been made by the Manufacturer or relied upon by the Operator. If
any defects in the Manufacturer's work or materials are discovered within one
year of delivery the Operator shall give notice within five days of such
discovery. THIS WARRANTY IS EXPRESSLY IN LIEU OF ANY AND ALL OTHER WARRANTIES.
11. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE OPERATOR
The Operator hereby represents, warrants, and covenants to the
Manufacturer, as follows:
11.1 Corporate Status
ENERCON America Distribution Limited is (i) duly organized corporation,
validly existing and in good standing under the laws of the State of Ohio; (ii)
has full power to own all of its properties and carry on its business; and (iii)
is qualified to do business as a foreign entity in each of the jurisdictions in
which it operates, if any, unless the character of the properties owned by it or
the nature of the
312
business transacted by it, does not make qualification necessary in any other
jurisdiction or jurisdictions.
11.2 Financial Condition of the Operator
The books and records of the Operator are complete and accurate and fairly
present the financial condition and the results of operations of the Operator as
of the date hereof. There are no material liabilities, either fixed or
contingent, not reflected in such books and records other than contracts or
obligations in the ordinary and usual course of business; and no such contracts
or obligations in the usual course of business constitute liens or other
liabilities which, if disclosed, would alter substantially the financial
condition of the Operator as reflected in such books and records.
11.3 Defaults and Conflicts
There are no defaults on the part of the Operator under any contract,
lease, mortgage, pledge, credit agreement, title retention agreement, security
agreement, lien, encumbrance or any other commitment, contract, agreement or
undertaking to which the Operator is a party. The execution of this Agreement
will not violate or breach any material agreement, contract, or commitment to
which the Operator is a party.
11.4 Corporate Action
Prior to the date hereof, the boards of directors of the Operator has duly
adopted resolutions approving the execution and delivery to the Manufacturer of
this Agreement and authorizing and consenting to each and every one of the
terms, warranties, representations, covenants and conditions herein contained,
and the Operator will, within 30 days of the execution of this Agreement,
furnish the Manufacturer with a copy of the resolutions of the board of
directors of the Operator authorizing the Operator to purchase the Purchased
Equipment and lease the Leased Equipment pursuant to the terms and conditions of
this Agreement;
11.5 Insurance
11.5.1 The Operator, at its own cost and expense, shall insure the Leased
Equipment against burglary, theft, fire, and vandalism in the amount of US
$1,000,000 and obtain public liability insurance with minimum limits, as the
parties shall mutually agree, for property damage in such form and with such
insurance companies as shall be satisfactory to the Manufacturer. All insurance
policies shall name both the Operator and the Manufacturer as insureds and
copies of the policies and the receipts for the payment of premiums shall be
furnished to the Manufacturer. Each damage policy shall provide for payment of
all losses directly to the Manufacturer. Each liability policy shall provide
that all losses be paid on behalf of the Operator and the Manufacturer, as their
respective interests appear.
11.5.2 In the event that the Operator shall fail to comply with the
provisions of Paragraph ll.5.1, above, then the Operator shall pay to the
Manufacturer an adequate premium in advance per annum to enable the Manufacturer
to insure the Leased Equipment and all such insurance policies shall be held in
the custody of the Manufacturer.
11.6 Indemnification
The Operator agrees to indemnify, protect, save, and keep harmless the
Manufacturer, its agents, employees, successors, and assigns from and against
all losses, damages, injuries, claims, demands, and expenses, including legal
expenses , of whatsoever nature arising out of the use, condition
313
(including but not limited to latent and other defects and whether or not
discoverable by it), or operation of the TCTS-1 System, or any part of it, by
any person who used, operated, or came into contact with such TCTS-1 System at
the Site and to defend any suit seeking such damages even though the allegations
of such suit are groundless, false, or fraudulent, provided however that the
Operator agrees to give prompt notice to the Manufacturer once the Operator has
actual knowledge of any claims as to which indemnity shall be sought, and shall
permit the Manufacturer (at the Operator's expense) to assume the defense of any
such claim or any litigation resulting therefrom; provided that counsel for the
Manufacturer, who shall conduct the defense of said claim or litigation, shall
be reasonably satisfactory to the Operator; The Operator shall not, in the
defense of any such claim or litigation, except with the consent of the
Manufacturer, consent to the entry of any judgment or enter into any settlement
that does not include as an unconditional term, the giving by the claimant or
plaintiff to Manufacturer of a release from all liability in respect to such
claim or litigation.
11.7 Access
The Operator shall insure that the Manufacturer, and its agents and
employees, shall at all times have free access to the Operator's premises for
the purpose of inspecting the Leased Equipment and observing its use and
operation, and making alterations, improvements, or additions thereto; and the
Operator shall afford all reasonable facilities therefor, and shall allow the
Manufacturer to make such reasonable alterations, improvements, or additions as
the Manufacturer shall deem necessary, at the expense of the Manufacturer.
11.8 Taxes
The Operator shall pay all taxes, assessments, penalties, and fees which
may be levied or assessed on or with respect to the installation of the TCTS-1
System and, at all times during the term of the Lease of the Leased Equipment,
the Operator shall pay all taxes and assessments which may be levied upon or in
respect of the TCTS-1 System or its operation, and shall pay any other liability
of any character which may be imposed or incurred as an incident to the physical
possession or operation of such System.
11.9 Compliance with Applicable Law
The Operator shall provide, at its own expense, all requisite permits and
licenses necessary for the installation and operation of the TCTS-1 System at
the Site and shall exercise its best efforts to maintain its compliance with all
applicable federal, state, and local laws, statutes, rules, and regulations and,
in the event of any non-compliance which renders impossible the operation of the
Site as a tire recycling facility, the Operator shall exercise its best efforts
to cure such non-compliance promptly.
11.10 Subordination
The Operator shall procure from every owner, landlord, mortgagee, or other
secured party having any interest in the real property on which the TCTS-1
System is to be installed or in the Operator's place of business or the
equipment therein, and deliver to the Manufacturer, a written consent to such
installation and a writing to the effect that the lien of any such mortgage or
other interest is subordinate to the rights of the Manufacturer with respect to
the Leased Equipment.
11.11 Ancillary Agreements
314
11.11.1 The Operator will, simultaneously with the execution of this
Agreement, and in consideration of the premises and the mutual promises and
agreements made herein, enter into the following agreements with the
Manufacturer or such person, corporation, firm, partnership, or other entity as
the Manufacturer shall appoint in its stead:
(a) The Royalty Agreement, of even date herewith, between the
Manufacturer and the Operator providing for the Operator to pay to
the Manufacturer a royalty of three percent (3%) of the gross
proceeds from the sale, other than to the Manufacturer pursuant to
the Crumb Rubber Purchase Option Agreement, by the Operator of
rubber crumb and steel from scrap tires disintegrated by the
Operator through the utilization of the TCTS-1 System, a copy of
which Royalty Agreement is attached as Schedule 11.11(a) hereto; and
(b) The Crumb Rubber Purchase Option Agreement, of even date herewith,
between the Operator and the Manufacturer or such person,
corporation, firm, partnership, or other entity as the Manufacturer
shall appoint in its stead, granting an option to the Manufacturer
to purchase up to 40% of the crumb rubber produced by the TCTS-1
System, a copy of which Agreement is attached as Schedule 11.11(b)
hereto
11.11.2 It is the intention of the parties that within sixty days after
payment of the first payment due under Paragraph 3.3, above, the Manufacturer
and the Operator, jointly, shall commence the development of a mutually
acceptable Projected Maintenance Agreement and that within five business days of
the completion of the said Projected Maintenance Agreement, the Operator will,
in consideration of the premises and the mutual promises and agreements made
herein, enter into the Projected Maintenance Agreement with the Manufacturer or
such person, corporation, firm, partnership, or other entity as the Manufacturer
and the Operator shall jointly agree to and appoint in its stead, on mutually
agreed upon terms. Notwithstanding the foregoing, the failure of the parties to
enter into the Projected Maintenance Agreement will not constitute a breach of
this Agreement or otherwise affect the respective rights and obligations of the
parties hereunder.
12. DEFAULTS
12.1 Default by Manufacturer
Each of the following events shall be deemed to constitute breach of this
Agreement and, unless cured within 90 days, shall constitute a default hereunder
by the Manufacturer:
(a) If at any time prior to the delivery of the TCTS-1 System to the
Site:
(i) The Manufacturer makes an assignment for the benefit of
creditors;
(ii) A voluntary or involuntary petition is filed by or against the
Manufacturer under any law having for its purpose and
adjudication of the Manufacturer a bankrupt or the extension
of the time of payment of, adjustment of, or other arrangement
affecting the liabilities of the Manufacturer, or the
reorganization of the Manufacturer and such petition is not
discharged or dismissed within one hundred twenty (120) days
after such petition is filed;
(iii) A Receiver is appointed for the property of the Manufacturer
and is not discharged or dismissed within one hundred twenty
(120) days after such appointment;
or
(iv) Any distress, execution, or attachment is levied upon the
Manufacturer's property to the extent that the Manufacturer is
not able to fulfill its obligations to deliver the TCTS-1
within 90 days of the anticipated Deliver Date.
(a)
315
(b) The Manufacturer fails to deliver the TCTS-1 System in accordance
with the terms and provisions of Section 7, above, within 90 days of
the Delivery Date unless prior thereto, the Operator has failed to
meet the payment provisions set forth above in Section 3.3 of this
Agreement;
(c) The TCTS-1 System fails to operate for a full Test (or re-test)
Period, in accordance with Section 8.2 hereof, within ninety (90)
days from the date the TCTS-1 System is completely installed at the
Site.
12.2 Default by Operator
Each of the following events shall be deemed to constitute breach of this
Agreement and, unless cured within 90 days, shall constitute a default hereunder
by the Operator:
(a) The Operator fails to make any payment required to be made pursuant
to Sections 3.3 or 4.3 of this Agreement or, if the parties shall
enter into the Projected Maintenance Agreement, any payment required
to be made by the Operator under the Projected Maintenance Agreement
and such failure to make payment shall have continued for a period
of ten (10) days after written notice from the Manufacturer;
(b) The Operator refuses to accept or allow the Manufacturer to install
or test the TCTS-1 System in accordance with Sections 7.2, 8.2, and
8.3 of this Agreement, notwithstanding that such System has been:
(i) delivered to the Operator's Site on a timely basis or (ii)
delivered to the Site and has performed in accordance with the
specifications set forth in Section 8.2 hereof for the prescribed
Test Period;
(c) The Operator makes an assignment for the benefit of creditors;
(d) A voluntary or involuntary petition is filed by or against the
Operator under any law having for its purpose and adjudication of
the Operator a bankrupt or the extension of the time of payment of,
adjustment of, or other arrangement affecting the liabilities of the
Operator, or the reorganization of the Operator and such petition is
not discharged or dismissed within one hundred twenty (120) days
after such petition is filed;
(e) A Receiver is appointed for the property of the Operator;
(f) Any distress, execution, or attachment is levied upon the machines
or the Operator's property; or
(g) The Operator fails to faithfully and fully comply with the terms and
provisions of Section 5.2 of this Agreement, with any such failure
deemed to be an irremediable material breach of this Agreement
immediately upon its occurrence.
(h) The Operator fails to reasonably, faithfully, and fully maintain the
TCTS-1 in accordance with standards and procedures to be specified
in the Projected Maintenance Agreement or otherwise, and fails to
cure such breach within the time period specified therein with
respect to such failure.
12.3 Remedies Available to the Operator upon Default by Manufacturer
If the Manufacture shall be in default pursuant to Paragraphs 12.1 (a),
(b), or (c) of this Agreement, unless such default shall have been caused by any
act or failure to act on the part of the Operator or its personnel, including
but not limited to the failure of the Operator to have brought the Site into
conformance with the Site Plan) Specifications, the Operator shall have the
right to rescind this agreement by serving written notice ("Notice of
Rescission") upon the Manufacturer and the Operator
316
shall thereupon be entitled to stipulated damages in the agreed to amount of one
million dollars (US $1,000,000). In such event, the Manufacturer shall, at its
own expense, remove the TCTS-1 System as promptly as practicable following its
receipt of such Notice of Rescission and all monies theretofore paid by the
Operator to the Manufacturer pursuant to Sections 3.3 and 4.3, above, shall be
returned by the Manufacturer to the Operator.
12.4 Remedies Available to the Manufacturer upon Default by the Operator
12.4.1 The Operator acknowledges and agrees that its breach of any
provision contained in Section 5.2 of this Agreement will cause irreparable harm
to the Manufacturer. The Operator therefore agrees that, if the Operator or any
of the Operator's affiliates, agents, employees, or associates has breached, or
is attempting or threatening to breach, any provision contained hereinabove in
the said Section 5.2, then the Manufacturer shall have the right to obtain from
any court or arbitrator having jurisdiction, such equitable relief as may be
appropriate, including a decree enjoining the Operator from any further such
breach of such provisions, and enjoining the Operator from engaging in any
aspect of the tire recycling business which is in competition with tire
recycling businesses which utilize tire disintegration equipment manufactured by
the Manufacturer, either directly or indirectly through or in association with
any other person, firm, corporation, or organization during the term of this
Agreement. Notwithstanding the foregoing, for purposes of this Agreement, the
parties agree that a tire recycling business utilizing a microwave tire
recycling system will not be deemed to be in competition with tire recycling
businesses which utilize tire disintegration equipment manufactured by the
Manufacturer
12.4.2 In the event of any default by the Operator under this Agreement,
the Manufacturer may at its option, at any time thereafter terminate this
Agreement by written notice ("Notice of Termination"), given in Accordance with
Section 16 hereof. Such termination may be made effective, at the option of the
Manufacturer, simultaneously with or at any time after the happening of any such
default.
12.4.3 Upon any termination of this Agreement prior to payment in full of
the entire Purchase Price of US $2,250,000 for the Purchased Equipment, in
accordance with the terms of Section 3.3 of this Agreement, the Manufacturer
shall immediately have possession of the entire TCTS-1 System, and the
Manufacturer may enter upon the premises where the said TCTS-1 System is
located, take possession of the Leased Equipment and without previous demand or
notice and without legal process, and remove it from the Operator's premises at
the Operator's expense.
12.4.4 Upon any termination of this Agreement after payment in full of the
entire Purchase Price of US $2,250,000 for the Purchased Equipment has been made
by the Operator, the Manufacturer shall immediately have possession of the
Leased Equipment and the Manufacturer may enter upon the premises where the
TCTS-1 System is located, remove the Leased Equipment from the said TCTS-1
System and take possession of the Leased Equipment without previous demand or
notice and without legal process, and remove it from the Operator's premises at
the Operator's expense.
12.4.5 The Operator acknowledges and agrees that any refusal on its part
to permit the Manufacturer to enter its premises and remove either the TCTS-1
System or the Leased Equipment in accordance with Paragraph 12.4.3 or 12.4.4 of
this Agreement will cause irreparable harm to the Manufacturer. The Operator
therefore agrees that in the event of any such refusal on its part, the
Manufacturer shall have the right to obtain from any court or arbitrator having
jurisdiction, such equitable relief as may be appropriate, including a decree
enjoining the Operator from any further such refusal of entry and removal.
12.4.6 In the event of any default by the Operator prior to the Acceptance
Date, the Manufacturer shall be entitled to liquidated damages including but not
limited to retention of up to one million dollars (US $1,000,000) out of the
monies paid by the Operator pursuant to Paragraph 3.3 and all costs of
delivering and removing and re-delivering the TCTS-1 System.
317
12.4.7 In the event of any default by the Operator after the Acceptance
Date or pursuant to Paragraph 12.2(b) of this Agreement, the Manufacturer shall
be entitled to liquidated damages including but not limited to retention of up
to one million dollars (US $1,000,000) out of the monies paid by the Operator
pursuant to Paragraph 3.3, all costs of delivering and removing and
re-delivering the TCTS-1 System, and damages for the Operator's failure to
perform for the full term of the Lease provided in Section 4.2 of this
Agreement.
12.4.8 In the event of any default on the part of the Operator pursuant to
Paragraphs 12.2(a) or 12.2(b) of this Agreement, the Manufacturer shall have the
right to allow the Operator, for a period of sixty (60) days, to obtain a buyer
for the TCTS-1 System, satisfactory to the Manufacture, provided however that,
unless specifically waived in writing by the Manufacturer, the Operator shall
continue liable under this Agreement lease for the full term of the Lease
provided for in Section 4.2 of this Agreement. In the event that the Operator
shall fail to obtain a buyer for the TCTS-1 System, satisfactory to the
Manufacture, the Manufacturer shall use its best efforts to dispose of the
equipment, either as a single TCTS-1 System or as separate components in any
appropriate public disposal manner. In the event of a sale of the equipment to a
Buyer located by either the Operator or the Manufacturer, the Manufacturer shall
return to the Operator all funds received from such disposal in excess of: (i)
liquidated damages under Paragraphs 12.4.6 or 12.4.7, above, (b) any monies
owing to Manufacturer by Operator under Section 3.3, and any costs incurred by
the Manufacturer for the removal and public disposal of the repossessed TCTS-1.
12.4.9 In the event of any default on the part of the Operator, the
Manufacturer shall not be deemed to have waived any of its rights hereunder by
reason of its failure to assert its rights or its failure to take cognizance of
such breach.
12.4.10 The foregoing remedies provided herein for the benefit of the
Manufacturer shall not be exclusive but in addition to any other remedies the
Manufacturer may have by virtue of the breach by the Operator, in law or in
equity, from any court or arbitration proceeding having jurisdiction over such
matter.
13. OPERATOR'S SALE OF Purchased Equipment
13.1 Manufacturer's Right to Retrieve Leased Equipment Prior to Sale
In the event that, during or after the term of the Lease provided in
Section 4.2 of this Agreement, the Operator wishes to divest itself of the
TCTS-1 System, pursuant to the discontinuance of its business, or otherwise, the
Operator will give to the Manufacturer written notice to that effect and the
Manufacturer shall have all rights of entry and removal provided above in
Paragraphs 12.4.4 and 12.4.5 of this Agreement, provided however that in
addition to such rights, if such event shall occur during the term of the said
Lease, the Manufacturer shall also have the rights provided to it in Paragraph
12.4.7 of this Agreement.
13.2 Manufacturer's Right of First Refusal
In the event that, during or after the term of the Lease provided in
Section 4.2 of this Agreement, the Operator wishes to divest itself of the
TCTS-1 System, pursuant to the discontinuance of its business, or otherwise, the
Operator will give to the Manufacturer written notice to that effect and the
Manufacturer will have a right of first refusal to repurchase the TCTS-1 System,
at its fair market value, within a sixty (60) day period following the
Manufacturer's receipt of such notice;
14. ASSIGNMENT
318
The Operator shall not transfer, deliver, sublease, or encumber the Leased
Equipment to any person, corporation, or firm, and the Lease provided in Section
4.2 of this Agreement may not be assigned by the Operator except with the
Manufacturer's express prior written consent.
15. FAILURE OF PERFORMANCE
Delays in or failure of performance occasioned by war, fire, flood,
embargo, car shortage, accident, explosion, expropriation of plant or product by
federal or state authority, or other like cause beyond the control of the
Manufacturer, or Act of God, or by strike, lockout, or other labor trouble, or
inability to obtain sufficient labor interfering with the production or
transportation of the TCTS-1 System, or any part thereof, or any replacement
therefor, whether because of governmental action affecting the Manufacturer or
its suppliers, or by any action or proceeding at law or in equity, or otherwise,
shall not subject the Manufacturer to any liability.
16. NOTICES
All notices required or permitted to be given hereunder shall be mailed by
certified mail, or delivered by hand or by recognized overnight courier to the
party to whom such notice is required or permitted to be given hereunder at the
address set forth above for such party, in all cases with written proof of
receipt required. Any such notice shall be deemed to have been given when
received by the party to whom notice is given, as evidenced by written and dated
receipt of the receiving party. Either party may change the address to which
notice to it is to be addressed, by written notice to the other party, as
provided herein.
17. CONDITIONS PRECEDENT TO MANUFACTURER'S OBLIGATION
The obligations of the Manufacturer hereunder are subject to fulfillment,
prior to the Delivery Date, of the following conditions:
17.1 Truth of Representation
The representations and warranties by or on behalf of Operator contained
in this Agreement or in any document delivered to the Manufacturer pursuant to
the provisions hereof shall be true in all material respects at and as of the
Delivery Date as though such representations and warranties were made at and as
of such time.
17.2 Compliance with Covenants
The Operator shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with prior or simultaneously with to the Delivery Date.
(ii) 17.3 Financing Arrangements
The Operator will deliver to the Manufacturer within sixty (60) days of
the execution of this Agreement, evidence satisfactory to the Manufacturer that
the Operator has arranged for adequate financing to meet the payment schedule
set forth in Section 3.3, above.
319
18. ARBITRATION
All controversies arising out of or relating to this Agreement, or any
modification thereof, shall be settled by arbitration in New York City in
accordance with the Arbitration Rules then obtaining of the American Arbitration
Association.
19. BINDING EFFECT.
19.1 This agreement shall bind and inure to the benefit of the parties
hereto and their respective legal representatives, successors and assigns,
provided, however, that this Agreement cannot be assigned by the Operator except
in accordance with Section 14 of this Agreement. Nothing herein expressed or
implied is intended or shall be construed to confer upon or to give any person,
firm or corporation other than the parties hereto and their respective legal
representatives, successors and assigns any rights or benefits under or by
reason of this Agreement.
19.2 All the right, title, and interest of the Manufacturer under the
Lease may be enforced by the Manufacturer, its successors, and assigns. The
Lease shall continue in full force and effect notwithstanding the death,
incapacity, or dissolution of the Operator or the increase, decrease, or change
in the personnel of or members of the Operator, and shall be binding upon the
Operator and the Operator's estate, legal representatives, heirs, and
successors.
20. GENERAL
20.1 Further Assurances
At any time, and from time to time, after the execution of this Agreement,
each party will execute such additional instruments and take such action as may
be reasonably requested by the other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the intent and purposes
of this Agreement.
20.2 Waiver
Any failure on the part of any party hereto to comply with any of its
obligations, agreements or conditions hereunder may be waived in writing by the
party to whom such compliance is owed.
20.3 Brokers
Neither party has employed any brokers or finders with regard to this
Agreement, unless otherwise described in writing to all parties hereto.
20.4 Headings
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
20.5 Governing Law
This Agreement shall be governed by the laws of the State of Delaware.
20.6 Entire Agreement
320
This Agreement is the entire agreement of the parties covering everything
agreed upon or understood in the transaction. There are no oral promises,
conditions, representations, understandings, interpretations or terms of any
kind as conditions or inducements to the execution hereof.
20.7 Severability
If any part of this Agreement is deemed to be unenforceable the balance of
this Agreement shall remain in full force and effect.
20.8 Publicity
All notices to third parties and all other publicity concerning the
transactions contemplated by this Agreement shall be subject to the prior
approval of counsel of the Manufacturer and the Operator, provided however, that
any failure of the Operator or its counsel to approve any such notices or other
publicity shall in no way prevent the Manufacturer from complying fully with its
public disclosure obligations under the rules and regulations of the United
States Securities and Exchange Commission or any other governmental body or
agency in the United States or in any other applicable jurisdiction.
20.9 Counterparts
This Agreement may be executed in any number of counterparts and by each
party on a separate counterpart, each of which when so executed and delivered
shall be an original, but all of which together shall constitute one Agreement.
In Witness Whereof, the parties hereto have caused this Amendment to be
executed the day and year first above written.
THE TIREX CORPORATION
By/s/ Xxxxxxx X. Xxxxx
----------------------------------------
Xxxxxxx X. Xxxxx, President
ENERCON AMERICA DISTRIBUTION LIMITED
By/s/ Xxxxx X. Xxxxxx
----------------------------------------
Xxxxx X. Xxxxxx
321
