EXHIBIT 10 (xx)


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                                   ----------

                              THE TIREX CORPORATION

                                   ----------

                     EQUIPMENT LEASE AND PURCHASE AGREEMENT

      Equipment  Lease  and  Purchase  Agreement,  made,  as of the  12th day of
December 1997, between:

                             750824 Alberta Ltd.
                             Calgary, Alberta
                             Canada T2G 2E6
                                                (the "Operator")

                                      and

                             The Tirex Corporation
                             740 St. Maurice, Suite 201
                             Montreal, Quebec
                             Canada H3C 1L5
                                                (the "Manufacturer")

1. DEFINITIONS

      1.1 "Acceptance Date" shall mean the first day following the completion of
the Test Period.

      1.2  "Anticipated  Delivery  Date" shall mean  September  15, 1998 or such
other date as the parties hereto shall mutually agree.

      1.3  "Leased  Proprietary  Equipment"  shall  mean  all of  the  following
constituent,   integral  parts  of  the  TCS-1  System  and  all  substitutions,
replacements,  and  improvements,  and all repair and  renewal  parts  installed
therein,  as specified  in the plans and  specifications  therefor,  attached as
Schedule 1.3 hereto:

      (a)   the disintegration  system including but not limited to all grinders
            contained therein, and

      (b)   the separation systems, including but not limited to:

            (i)    a magnetic separator;
            (ii)   a fiber/crumb separator;
            (iii)  fiber collector
            (iv)   crumb rubber sizing system; and
            (v)    all integrated conveyance and exit belts, chutes,  and  other
                   components

      1.4 "Maintenance  Agreement" shall mean the maintenance agreement of to be
entered  into  between  the  Manufacturer   and  the  Operator   respecting  the
maintenance of the TCS-1 System.


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      1.5 "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.

      1.6  "Non   Proprietary   Equipment"  shall  mean  all  of  the  following
constituent, integral parts of the TCS-1 System:

      (a)   all baling  systems  contained in the TCS-1  System,  including  all
            associated ancillary equipment and conveyance and exit belts, chutes
            and/or  other  components  combined  or  integrated  therewith,   as
            specified in the pertinent plans and specifications therefore; and

      (b)   freezing  chambers  and  cryogenic  systems  and all  substitutions,
            replacements,  and  improvements,  and all repair and renewal  parts
            installed  therein,  as  specified  in the plans and  specifications
            therefore;

      1.7  "Operator"  shall mean 750824  Alberta Ltd., a  corporation  existing
under  the  laws  of the  Province  of  Alberta,  and  all  other  corporations,
partnerships,  or other  entities,  now or in the future  controlled  by,  under
common  control  with,  or in control  of,  750824  Alberta  Ltd.,  jointly  and
severally.

      1.8  "Proprietary   Front-End   System"  shall  mean  the   manufacturer's
proprietary front-end tire preparation system, all substitutions,  replacements,
and  improvements,  and all repair  and  renewal  parts  installed  therein,  as
specified  in the plans and  specifications  therefor,  attached as Schedule 1.8
hereto.

      1.9 "Purchased  Equipment" shall mean the Proprietary Front-End System and
the NonLeased Proprietary Equipment,  as those terms are defined in Sections 1.8
and 1.6 (b), collectively.

      1.10 "Site" shall mean a site located in Calgary AB, to be  identified  by
the Operator.

      1.11 "TCS-1 System" shall mean the  Manufacturer's  proprietary  cryogenic
tire  disintegration  system,  patent  pending,  consisting  of the  Proprietary
Front-End  System,  the  Nonproprietary  Equipment  and the  Leased  Proprietary
Equipment,  as  specified in the plans and  specifications  attached as Schedule
1.3,  1.6  (b),  and  1.8  hereto  and  all  substitutions,   replacements,  and
improvements, and all repair and renewal parts installed therein.

      1.12 "Test Period" shall mean a three (3) day period which shall  commence
within ten (10) business days after  completion of the installation of the TCS-1
System, during which Test Period, the TCS-1 System shall be operated continually
for 22  hours  per  day  exclusive  of  any  time  devoted  to  adjustments  and
acclamation.

2. RECITALS

Whereas:

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      2.1 The Manufacturer has invented,  built, and patented (patent allowed as
of  October  23,  1997),  and is the  sole  and  exclusive  owner,  directly  or
indirectly, through one or more subsidiaries, of all right title and interest in
the TCS-1 System.

      2.2 The  Operator  is a  Corporation  incorporated  under  the laws of the
Province of Alberta,  Canada,  formed for the purpose of  engaging,  directly or
indirectly in the scrap tire disintegration business.

3. AGREEMENT FOR PURCHASE AND SALE OF PROPRIETARY FRONT-END
   AND NON PROPRIETARY EQUIPMENT

3.1 Purchase and Sale

      The Operator agrees to purchase,  and the Manufacturer agrees to sell, the
Proprietary  Front-End System and the Non Proprietary  Equipment,  as defined in
Sections 1.6 and 1.8, above (collectively, the "Purchased Equipment"), 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  affect 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 hereinafter provided.

3.2 Purchase Price

      The purchase price for the Purchased  Equipment  (the  "Purchase  Price"),
installed and set in operation pursuant to Section 7 and 8 hereof,  shall be the
sum of two  million,  two  hundred  fifty  thousand  United  States  dollars (US
$2,250,000), FOB Montreal, which shall be deemed allocated as follows:

       (a)      Freezing Chamber and
                 Cryogenic Systems                US $  1,500,000

       (b)      Front End Tire
                Preparation and
                Bailing Systems                           750,000
                                                    -------------
                                             Total  US $2,250,000

3.3 Payment Terms

      The Purchase Price shall be paid by the Operator to the  Manufacturer,  as
follows:

      (a)   $25,000 deposit on execution of this Agreement, to be held in escrow
            by the  Operator's  attorneys,  LaPointe &  Rosenstein  of Montreal,
            Canada (the "Escrow  Agent");  The Escrow  Agent shall  release such
            down payment to the  Manufacturer  upon Delivery of the TCS-1 System
            to the Operator's

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            Site, at which time such funds will be applied against the first and
            last months rental  payments under the Operating  Lease set forth in
            Section 4, below;

      (b)   $225,000  to be paid  within  sixty  days of the  execution  of this
            Agreement   by  way  of  a  certified   check  or  bank   instrument
            satisfactory to the Manufacturer;

      (c)   Balance to be paid on delivery by way of a certified  check or other
            bank instrument satisfactory to the Manufacturer.

4. AGREEMENT FOR OPERATING LEASE OF LEASED PROPRIETARY
   EQUIPMENT

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 Proprietary  Equipment,  as
defined in Section 1.3 above, 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 with renewal  terms,  as agreed
            by the parties;

      (b)   Continue to use the same equipment  installed  hereunder and thereby
            extend the term of this Lease at the a rental  rate of US $6,250 per
            month  for a period of one year with  further  successive  automatic
            one-year  extensions  subject to either  party's  right to terminate
            this  Lease  at the end of any  extension  year by at  least 90 days
            prior written notice of termination of the other; or

      (c)   Request that the Manufacturer exercise its right of first refusal to
            repurchase the Purchased  Equipment pursuant to Section 13.1 of this
            Agreement,  in which event the  Manufacturer  shall have thirty (30)
            days to either:  (i) notify the Operator of its intent to repurchase
            the Purchased  Equipment and, within sixty (60) days of such notice,
            effectuate  such  repurchase  and thereupon  enter upon the premises
            where the said TCS-1  System is located and remove the entire  TCS-1
            System from the

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            Operator's  premises at the Manufacturer's  expense,  or (ii) notify
            the Operator  that it does not intend to  repurchase  the  Purchased
            Equipment  and,  within thirty (30) days of such notice,  enter upon
            the premises where the TCS-1 System is located,  take  possession of
            the Leased  Proprietary  Equipment without previous demand or notice
            and without legal process, retrieve the Leased Proprietary Equipment
            from the TCS-1  System and remove the Leased  Proprietary  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 Proprietary Equipment at the rate of twelve
thousand,  five hundred United States dollars (US $12,500) per month, payable in
advance, as follows:

      (a)   the Rent Payment for the first 30-day period (the "Set-Off  Period")
            following the  Acceptance  Date shall be paid by way of a set-off in
            the amount of US $12,500 against the deposit  heretofore paid by the
            Operator;

      (b)   the Rent Payment for the period (the  "Partial-Month  Period") which
            commences on the first day following the Set-Off  Period 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, and shall be due and payable, in advance,
            on the first day of each of the remaining  months during the term of
            the Lease  except for the last  month.  Payment of the last  month's
            monthly Rent  Payment  shall be made by way of a set off against the
            remaining $12,500 of the deposit paid by the Operator upon execution
            of this Agreement.


EXAMPLE:

         Acceptance Date:         September 15th
                                 
         Set-Off Period:          September 16th through October 15th.
                                 
         Partial-Month           
          Period:                 October 15th through  October  31st, with Rent
                                  Payment  in  the  amount  of  $4,385  due  and
     `                            payable on October 15th.
                               
         Commencement of Regular

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         Monthly Rental Payments  November 1st, normal monthly Rent Payment of 
                                  $12,500  due and payable on such date.

      4.3.2 In the  event of that  payment  of any Rent  Payment  is made by the
Operator  more than ten (10) days  after the date when such  payment  shall have
been due, the Operator shall pay a late charge of one and a half percent (1.5 %)
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 TCS-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 TCS-1 System.

5.2 Title to Leased Proprietary Equipment

      5.2.1 The Leased Proprietary  Equipment shall at all times remain the sole
and exclusive  property of the Manufacturer  (which reserves the right to assign
or encumber the Leased  Proprietary  Equipment)  and the Operator  shall have no
right, title, or interest to the Leased Proprietary Equipment but only the right
to use such Equipment under this Lease. The Leased  Proprietary  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 Proprietary Equipment,  and this agreement may not
be assigned by the Operator either by its own act or by operation of law.

      5.2.2 The Leased Proprietary  Equipment shall remain personal property 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  Proprietary  Equipment  in a manner  which will not
lessen the utility of the Leased Proprietary Equipment;

      5.2.4 The Operator  shall not enter into,  remove,  tamper with, or breach
the security of, the Leased Proprietary 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 way similar to, or based upon,  the design or structure of the
Leased  Proprietary  Equipment,  or of any part thereof.  The Operator shall not
permit any Leased Proprietary  Equipment to be abused, not permit the removal of
any descriptions, instructions, warnings plate or markings, or other writings of
any kind whatsoever put on the Leased Proprietary Equipment by the Manufacturer,
nor attach anything to or remove anything from the Leased Proprietary Equipment.


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      5.2.5 In  accordance  with the  terms of the  Maintenance  Agreement,  the
Operator will not allow any repairs to the TCS-1 or  replacement  of parts to be
done by any person or persons except technicians authorized by the Manufacturer.

      5.2.6 The  Operator  agrees that,  in  consideration  of the  Manufacturer
entering into this Lease, it will not move the TCS-1 System, of which the Leased
Proprietary  Equipment  forms a part,  to any  location  outside of the state in
which the Site is located  or  outside of a fifty (50) mile  radius of the Site,
without the prior written consent of the Manufacturer.

6. SITE PREPARATION

6.1 Site Plan Specifications

      Within thirty (30) days of execution of this Agreement,  the  Manufacturer
will  furnish  to  the  Operator  "Site  Plan  Specifications"   respecting  the
electrical, ventilation, water supply and disposal, and any other specifications
required at the site for the installation and operation of the TCS-1 System.

6.2 Preparation of Site

      6.2.1 Prior to the  Delivery and  installation  of the TCS-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 TCS-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

6.3 Notice to Inspect

      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:  (i )  preparation  of the  site for the  installation  and
operation  of the  TCS-1 has been  completed  in  accordance  with the Site Plan
Specifications  and (ii)  all  applicable  governmental  regulations  have  been
complied  with and all  required  permits,  licenses,  and  standards  have been
obtained or met (together with copies of all documentary  evidence  thereof) and
request  that  the  Manufacturer  inspect  the  site in  order  to  confirm  the
foregoing.


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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 and that all legal requirements have been met.

      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
or that any legal  requirements  have not been met, 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 reschedule  the Delivery Date
after all such changes or additions are completed and/or all legal  requirements
are complied with. 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 or governmental regulations and that the Site is
in complete  conformance  with the Site Plan  Specifications  and all applicable
regulations.  The  Manufacturer  shall have the  right,  within two weeks of its
receipt of such Notice to reinspect the Site.  Such  procedures may be repeated,
and the Manufacturer shall have no obligation to deliver the TCS-1 System, until
the  Manufacturer  confirms upon inspection that the Site is in conformance with
the Site Plan  Specifications,  all governmental  regulations are complied with,
and the Delivery Date is rescheduled in accordance with this Paragraph 6.4.2.

7. DELIVERY AND INSTALLATION

7.1 Delivery

      7.1.1 If, by a date not later  than  fifteen  business  days  prior to the
Anticipated  Delivery  Date,  the Site is in  conformance  with  the  Site  Plan
Specifications  and all  legal  requirements  have been met in  accordance  with
Section 6.4, above, then the Manufacturer  shall deliver the TCS-1 System to the
Site on or before the  Anticipated  Delivery  Date set forth in  Paragraph  1.2,
above.

      7.1.2 In the event that the Operator  shall not meet the  requirements  of
Paragraph  7.1.1,  above,  for delivery not later than the Anticipated  Delivery
Date,  then,   within  ten  business  days  of  the  date  when  the  Site  Plan
Specifications  and all legal requirements have been met, the Manufacturer shall
reschedule a new delivery date,  which new delivery date shall not be later than
fourteen months from the date of such rescheduling.

      7.1.3  Delivery  shall be made  F.O.B.  Montreal,  Canada.  The  equipment
comprising the TCS-1 System shall be placed in suitably protected containers the
nature of which shall be determined by the Manufacturer.  The Operator shall pay
all  costs  of  transportation  and  delivery  of  the  TCS-1  System  from  the
Manufacturer's plant in Montreal to the Site.

      7.1.4 In the event that delivery of the TCS-1 System, or any part thereof,
for a period not exceeding sixty (60) days,  shall be prevented by causes beyond
the control of the Seller,


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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  rescheduled  after all of such causes have
been eliminated.  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.

7.2 Installation

      7.2.1 Within 5 days of the  delivery of the TCS-1 System to the Site,  the
Manufacturer  shall,  at its own  expense,  commence  installation  of the TCS-1
System at the Site.

      7.2.2 Upon  installation,  the TCS-1 System  shall be in complete  working
order  and shall  consist  of the  Nonproprietary  Equipment  and the  Purchased
Equipment,  as specified in the plans and  specifications set forth in Schedules
1.3,1.6 (b), and 1.8 hereto.

      7.2.3 All equipment and labor required for installation  shall be provided
by the Operator.  The Manufacturer  will provide to the Operator,  not less than
two  weeks  prior  to  delivery,  a  list  of  all  requirements  necessary  for
installation.

8. EQUIPMENT TESTING AND OPERATOR'S ACCEPTANCE

8.1 Notice of Availability for Testing

      Upon  completion of the  installation of the TCS-1 System at the Site, the
Manufacturer  shall give the  Operator  written  notice that the TCS-1 System is
available for testing operations.

8.2 Test Period

      8.2.1 Immediately upon giving notice to the Operator that the TCS-1 System
is available for testing operations, the Manufacturer shall, within ten business
days, at its own expense,  provide a technical  representative  to supervise the
operation  of the TCS-1 for a period  of three  (3) days  (the  "Test  Period").
During the Test Period,  the TCS-1 System shall operate in  accordance  with the
specifications  set forth in Schedule 8.2 hereto,  continually  for 22 hours per
day.

      8.2.2 All power, fuel, light,  water, oil, or other necessary supplies and
all necessary personnel (other than the engineering  technician furnished by the
Manufacturer)  for the  successful  operation  of the  TCS-1  System,  shall  be
provided by the Operator.

      8.2.3 The  Manufacturer  shall furnish to the Operator all data  regarding
the TCS-1  System in order to enable the Operator to operate such System and, in
addition to the training to be provided  pursuant to the Maintenance  Agreement,
the  Manufacturer  shall,  during the Test  Period,  instruct  at least 2 of the
Operator's employees with respect to the operation, and operating


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maintenance  of the TCS-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 TCS-1,  or any part of it, fails to operate in accordance
with the  specifications  set forth in Schedule 8.2 hereto,  the  Manufacturer's
offer to sell the  NonLeased  Proprietary  Equipment  and to  lease  the  Leased
Proprietary 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 TCS-1, or any part of it, fails to operate in accordance with
the specifications set forth in Schedule 8.2 hereto, the Manufacturer shall have
30 days in which to cure the problems responsible for such failure. Costs of all
parts and labor required to bring the TCS-1 into full working condition shall be
borne by the  Manufacture  unless the failure to operate in accordance  with the
specifications  set forth in Schedule 8.2.  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.

      8.3.3 Upon written  notice to the Operator that the problems  which caused
the TCS-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 (3) days, in which case the  acceptance  criteria of
Paragraph 8.2.1 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  Proprietary
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 NonLeased  Proprietary
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 TCS-1,  or any part of it,
after title to the  Nonproprietary  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:


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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
Manufacturer  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 applied for a patent in the United States and
Canada for the  Disintegration  System  forming  part of the Leased  Proprietary
Equipment.  On October 23, 1997, the said patent  application was allowed by the
United  States  Patent  Office.  Upon payment of certain  fees,  the patent will
therefore  be  issued.  The  Manufacturer  is the  sole  owner  of  such  patent
application  and,  upon  the  issuance  of a  patent  in  respect  thereof,  the
Manufacturer  shall  be 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  Leased
Proprietary Equipment,  or any part thereof,  constitutes an infringement of any
patent of the United States 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 TCS-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  TCS-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 patents  covering the
machine,  the  Manufacturer  shall  prosecute  diligently  any  infringer at the
Manufacturer's own expense.


                                                                             418
<PAGE>

10.4 Warranties

      Subject to any default on the part of the Operator  under the  Maintenance
Agreement,  the  Manufacturer  warrants  that  the  TCS-1  will  conform  to the
descriptions  contained  in Schedules  1.3,  1.6 (b), and 1.8. The  Manufacturer
further  warrants the TCS-1 System against  defects in workmanship and materials
or  failure  to  perform  in  accordance  with the  specifications  set forth in
Schedule 8.2 for one year after the Acceptance Date. No other representations or
warranties  have been made by the  Manufacturer  or relied upon by the Buyer. If
any defects in the  Manufacturer's  work or materials are discovered  within one
year of delivery  the Operator  shall give notice  within seven (7) 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 of 750824 Alberta Ltd.

      The Operator is (i) a duly organized corporation,  validly existing and in
good standing under the laws of the Province of Alberta;  (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.

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


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<PAGE>

      Prior to the date hereof,  the Board 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.

11.6 Insurance and Damage to Equipment

      11.6.1 The Operator, at its own cost and expense,  shall insure the Leased
Proprietary Equipment against burglary, theft, fire, and vandalism in the amount
of $500,000,  or such other amount that the parties  shall agree is required for
replacement costs, and obtain public liability  insurance with minimum limits of
$500,000 per occurrence and $1,000,000  collectively,  for bodily injury and 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 insured parties 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.

      11.6.2 In the  event  that the  Operator  shall  fail to  comply  with the
provisions  of  Paragraph  11.6.1,  above,  then the  Operator  shall pay to the
Manufacturer an adequate premium in advance per annum to enable the Manufacturer
to insure the Leased Proprietary Equipment and all such insurance policies shall
be held in the custody of the Manufacturer.

      11.6.3 In the event that all or any part of the TCS-1  System is  damaged,
due to any cause whatsoever, to the extent that the TCS-1 System is not useable,
notwithstanding   that  the  Manufacturer  may  have  been  partially  or  fully
compensated for the Leased  Proprietary  Equipment  forming part of such damaged
TCS-1  System  by  way  of  insurance  or  otherwise,   the  Manufacturer  shall
immediately  have  possession of the said Leased  Proprietary  Equipment and the
Manufacturer  may enter upon the  premises  where the TCS-1  System is  located,
remove the Leased  Proprietary  Equipment from the damaged TCS-1 System and take
possession of the said Leased  Proprietary  Equipment without previous demand or
notice and without legal process,  and remove it from the Operator's premises at
the Manufacturer's expense.

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 Proprietary 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


                                                                             420
<PAGE>

      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 TCS-1
System and, at all times during the term of the Lease of the Leased  Proprietary
Equipment,  the Operator shall pay all taxes and assessments which may be levied
upon or in respect of the TCS-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 TCS-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

      Not less than three (3) months prior to the anticipated Delivery Date, the
Operator shall procure from every owner, landlord,  mortgagee,  or other secured
party having any  interest in the real  property on which the TCS-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
Proprietary Equipment.

11.11 Ancillary Agreements

      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 by the  Operator  of rubber  crumb fiber and
            steel from scrap tires  disintegrated  by the  Operator  through the
            utilization of the TCS-1 System,  a copy of which Royalty  Agreement
            is attached as Schedule 11.11.1(a) hereto; and

      (b)   Rubber Crumb Purchase Agreement,  attached as Schedule 11.11.1(b) to
            this Agreement.

      11.11.2 In addition,  the Operator  will,  at such time during the term of
the Lease as the  Manufacturer  shall request,  in further  consideration of the
premises  and the mutual  promises  and  agreements  made  herein,  enter into a
Maintenance and Technical and Market Support Agreement


                                                                             421
<PAGE>

with the Manufacturer and/or such person,  corporation,  firm,  partnership,  or
other entity as the manufacturer  shall appoint as its "Service  Provider,  with
respect to the maintenance of the TCS-1 System and certain  technical and market
support  services to be provided to the Operator.  The terms of the  Maintenance
and Technical and Market Support  Agreement,  which have not yet been finalized,
will require the Manufacturer or Service Provider,  during the initial five-year
term of the Lease,  except as required for Routine  Maintenance  Procedures,  to
provide or be  responsible  for all technical and other labor  necessary for the
maintenance of the TCS-1 System at a performance level capable of disintegrating
the equivalent of one million  automobile  tires per year on a twenty-four  hour
per day, three hundred  sixty-five day per year basis.  The Manufacturer and the
Service  Provider will also provide  additional  technical  and market  support,
including:  (i) Pre-Operational  Support respecting  procedures and requirements
related to obtaining  all  licenses,  permits,  and other  requirements  for the
establishment and operation of a TCS-1 System Plant,  including the development,
documentation,   and  furnishing  of  all  required  technical,   environmental,
operational,  and other  information  and data; (ii)  installation  support with
respect to all Site  requirements  and installation and testing of the System in
accordance with the requirements of the Lease and all applicable federal, state,
and local  regulations;  (iii) Laboratory  Testing  Facilities and Services with
respect to the testing and  monitoring  of the  quality  and  properties  of the
rubber crumb  produced by the TCS-1  System,  including  but not limited to: (A)
total production  rates (B) the comparative  percentages of various crumb rubber
mesh  sizes  produced,  and (C)  wear  factors  existing  or  developing  in the
disintegration  mechanisms,  so as to  generate  a  continual  data base for the
anticipation   and   determination   of  the   maintenance,   remediation,   and
recalibration  requirements  of the  disintegration  mechanisms  and  all  other
constituent  components of the System under actual  operating  conditions;  (iv)
testing and monitoring, on a continuing basis, oil samples from the System so as
to  ascertain  and  monitor  the  wear  factors  on the  bearings  and on  other
components of the System and recording and maintaining all test data and records
for the System;  (v)  creating and  developing  new products and uses for rubber
crumb  produced  by the TCS-1  System;  and (v)  accounting  and record  keeping
services. The monthly fee under the Maintenance and Technical and Market Support
Agreement  will be nine thousand five hundred  United States dollars (US $9,500)
per month.

12. DEFAULTS

12.1 Default by Manufacturer

      12.1.1 Each of the following  events shall be deemed to constitute  breach
of this Agreement and, unless cured within ninety (90) days,  shall constitute a
default hereunder by the Manufacturer:

      (a)   If at any time  prior to the  delivery  of the  TCS-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


                                                                             422
<PAGE>

                  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 TCS-1
                  within ninety (90) of the anticipated Deliver Date.

      (b)   The  Manufacturer  fails to deliver the TCS-1  System in  accordance
            with the terms and  provisions  of Section 7, above,  within  ninety
            (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 TCS-1  System  fails to  operate  for a full  Test (or  re-test)
            Period, in accordance with Section 8.2 hereof, as specified Schedule
            8.2 hereto , within  ninety (90) days from the date the TCS-1 System
            is actually delivered to 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 ninety (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 any payment  required to
            be made by the Operator  under the  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 TCS-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 Schedule 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


                                                                             423
<PAGE>

            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  faithfully  and fully  perform  each of its
            obligations  under the Maintenance  Agreement 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 12.1.1 (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.  In such  event,  the  Manufacturer  shall,  at its own
expense,  remove the TCS-1 System not later than  forty-five (45) days following
its receipt of such Notice of Rescission and all monies  theretofore paid by the
Operator to the Manufacturer  pursuant to Section 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 it is alleged by the
Manufacturer  that 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 the tire  recycling  business,  either
directly or indirectly  through or in association  with any other person,  firm,
corporation, or organization during the term of this Agreement.


                                                                             424
<PAGE>

      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  Purchased  Equipment,  in
accordance  with the terms of Section 3.3 of this  Agreement,  the  Manufacturer
shall  immediately  have  possession  of  the  entire  TCS-1  System,   and  the
Manufacturer may enter upon the premises where the said TCS-1 System is located,
take  possession  of it  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  Proprietary  Equipment and the  Manufacturer may enter upon the premises
where the TCS-1 System is located,  remove the Leased Proprietary Equipment from
the said TCS-1 System and take  possession of the Leased  Proprietary  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 TCS-1
System or the Leased  Proprietary  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 damages including but not limited to
retention of the full  deposit paid by the Operator and all costs of  delivering
and removing and re-delivering the TCS- 1 System.

      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 damages  including  but not  limited to  retention  of the full
deposit  paid  by the  Operator,  all  costs  of  delivering  and  removing  and
re-delivering  the TCS-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,  including but not limited to immediate payment of the balance of all
Rent Payments due under the full term of the Lease,

      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 TCS-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.


                                                                             425
<PAGE>

      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 NONLEASED PROPRIETARY EQUIPMENT

13.1 Manufacturer's Right to Retrieve Leased Proprietary 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 TCS-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 TCS-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 TCS- 1 System,
at  its  fair  market   value,   within  a  thirty-day   period   following  the
Manufacturer's receipt of such notice;

14. ASSIGNMENT

      The Operator shall not transfer, deliver, sublease, or encumber the Leased
Proprietary  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


                                                                             426
<PAGE>

      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 TCS-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 Deliver 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 by or prior to the Delivery Date.

17.3 Collateral Agreements

      Simultaneously with the execution of this Agreement, the Operator will:


                                                                             427
<PAGE>

      (a)   enter into the following  agreements  with the  Manufacturer  or any
            joint venture to which the Manufacturer is a party:

            (i)   the Royalty Agreement, attached as Schedule 11.11.1(a) to this
                  Agreement; and

            (ii)  the Rubber  Crumb  Purchase  Agreement,  attached  as Schedule
                  11.11.1(b) to this Agreement.

      (b)   furnish the Manufacturer with a copy of the resolutions of the board
            of directors of the  Operator  authorizing  the Operator to purchase
            the NonLeased Proprietary Equipment and lease the Leased Proprietary
            Equipment pursuant to the terms and conditions of this Agreement;

17.4 Financing Arrangements

      The Operator will deliver to the  Manufacturer,  not less than one hundred
(100) days prior to the anticipated Delivery Date, to confirm the Delivery Date,
an  irrevocable  commitment  for  lease or letter  of  credit  financing,  which
commitment shall be:

      (a)   for the full  amount  of the  Purchase  Price of the  Nonproprietary
            Equipment then outstanding;

      (b)   subject  only to the  conditions  that the  TCS-1  will  consist  of
            Equipment  specified  in,  and will  operate  in  conformance  with,
            Schedules 1.3, 1.6 (b), and 1.8, and respectively.

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, pursuant
to the 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


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<PAGE>

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.

21. GENERAL

21.1 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.

21.2 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.

21.3 Brokers

      Neither  party has  employed  any  brokers or finders  with regard to this
Agreement, unless otherwise described in writing to all parties hereto.

21.4 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.

21.5 Governing Law

      This Agreement shall be governed by the laws of the State of Delaware.

21.6 Entire Agreement

      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.


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<PAGE>

21.7 Severability

      If any part of this Agreement is deemed to be unenforceable the balance of
this Agreement shall remain in full force and effect.

21.8 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 to the Manufacturer.

21.9 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/ Terence C. Byrne
                                  -----------------------------------
                                  Terence C. Byrne, President


                                750824 ALBERTA LTD.

                                By /s/ Michael Supple
                                   ----------------------------------
                                   Michael Supple, President


                                                                             430
<PAGE>

                              THE TIREX CORPORATION

                                   ----------

                                ROYALTY AGREEMENT

                                   ----------

      Royalty Agreement, made this day of December 1997, between:

                          Enviropower Industries Inc.
                          1509 Centre Street SW
                          Calgary, Alberta
                          Canada T2G 2E6
                                                (the "Operator")

                                      and

                          The Tirex Corporation
                          740 St. Maurice, Suite 201
                          Montreal, Quebec
                          Canada H3C 1L5
                                                (the "Manufacturer")

      Whereas,  the  Manufacturer  and the  Operator  are  parties  to a certain
equipment  lease and purchase  agreement,  of even date herewith (the "Equipment
Lease and  Purchase  Agreement"),  between  the  Manufacturer  and the  Operator
respecting the sale by the  Manufacturer and the Purchase by the Operator of the
"Proprietary Front-End System", the "Nonproprietary Equipment"(collectively, the
"Purchased  Equipment") and the operating lease,  between the  Manufacturer,  as
lessor,  and  the  Operator,  as  lessee,  respecting  the  "Leased  Proprietary
Equipment",  as those terms are defined in the said Equipment Lease and Purchase
Agreement.

      Whereas,  in  consideration  for the premises and the mutual promises made
therein,  the Operator has agreed,  pursuant to the Equipment Lease and Purchase
Agreement,  to enter into this Royalty  Agreement with the Manufacturer  whereby
the Operator will pay to the Manufacturer  certain royalties calculated upon the
gross proceeds from all sales of rubber crumb,  fiber and steel from scrap tires
disintegrated  by the TCS-1  System  which is the subject of the said  Equipment
Lease and Purchase Agreement (the "Subject TCS-1 System").

      Now, Therefore, it is agreed as follows:

1. Definitions

      1.1 "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.


                                                                             431
<PAGE>

      1.2 "Operator" shall mean Enviropower  Industries,  a corporation existing
under  the  laws  of the  Province  of  Alberta,  and  all  other  corporations,
partnerships,  or other  entities,  now or in the future  controlled  by,  under
common  control  with,  or in control of,  Enviropower  Industries,  jointly and
severally.

      1.3 All other  Capitalized  terms used  herein and not  otherwise  defined
shall have the respective meanings attributed thereto in the Equipment Lease and
Purchase Agreement.

2. Royalty Fee

      2.1 The Operator shall pay to the Manufacturer, not more than fifteen (15)
days after the end of each month,  a royalty fee equal to three  percent (3%) of
the gross proceeds from all sales of rubber crumb,  fiber,  and steel from scrap
tires disintegrated by the Subject TCS-1 System (the "Royalty Fee").

      2.2 For  purposes of this  Royalty  Agreement,  the term "gross  proceeds"
shall  mean all  revenues  from the sale of rubber  crumb,  fiber and steel from
scrap tires disintegrated by the Subject TCS-1 System.

3. Payment Periods

      Royalty   Fees  shall  be  reported  and  paid  by  the  Operator  to  the
Manufacturer  every month from the  Acceptance  Date  throughout the life of the
Subject TCS-1 System.

4. Royalty Reports

      The Operator shall prepare  royalty  reports  ("Royalty  Reports"),  to be
delivered by the Operator to the Manufacturer, together with the Royalty Fee due
thereunder,  covering the  immediately  preceding  "Reporting  Periods",  in the
following manner:

      The initial  Reporting Period shall be  the  Reporting Period in which the
          Acceptance  Date  falls.  For  example,  if  the  Acceptance  Date  is
          September  15, 1997,  the initial  Reporting  Period is  the  two-week
          period which  commenced on September 15, 1997 and  ended  on September
          30, 1997, and the Royalty Report  and Royalty Fee  for such "Reporting
          Period" is due on October 15, 1997.

      (b) Each Royalty Report shall disclose the gross revenues from all sales
          of steel,  fiber,  and rubber crumb produced by the operation of the
          Subject  TCS-1  System and the amount of the Royalty Fee  calculated
          upon the gross proceeds therefrom.

5. Inspection of Books

                                                                             432
<PAGE>

      Upon written request, the Manufacturer or his designated agent may examine
the books and records of the  Operator  insofar as they  relate to this  Royalty
Agreement. Such examination shall take place at the offices of the Operator.

6. Assignment

      6.1 This Royalty  Agreement may not be assigned by the Operator  except as
part of the assignment of the Equipment Lease and Purchase Agreement,  which may
only be assigned  pursuant to the express written  consent of the  Manufacturer,
and any such  assignment  shall not  relieve  the  Operator  of its  liabilities
hereunder unless expressly waived in writing by the Manufacturer.

      6.2 This Royalty  Agreement  may be  transferred,  assigned,  pledged,  or
hypothecated  by the  Manufacture  as  part  of the  sale  of  its  business  or
otherwise.

7. 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.

8. Binding Effect.

      8.1 This  Royalty  Agreement  shall  bind and inure to the  benefit of the
parties  hereto  and their  respective  legal  representatives,  successors  and
assigns,  provided,  however,  that this Royalty Agreement cannot be assigned by
the  Operator  except in  accordance  with  Section 6.1 hereof.  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 Royalty Agreement.

      8.2 All the right,  title,  and  interest of the  Manufacturer  under this
Royalty  Agreement  may be enforced by the  Manufacturer,  its  successors,  and
assigns.  This  Royalty  Agreement  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.

9. Further Assurances


                                                                             433
<PAGE>

      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.

10. 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.

11. Brokers

      Neither  party has  employed  any  brokers or finders  with regard to this
Agreement, unless otherwise described in writing to all parties hereto.

12. 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.

13. Governing Law

      This Agreement shall be governed by the laws of the State of Delaware.

14. Entire Agreement

      This Agreement and the premises and mutual promises in the Equipment Lease
and Purchase  Agreement  constitute the entire agreement of the parties covering
everything agreed upon or understood with respect to the Royalty Fees. There are
no oral promises, conditions, representations,  understandings,  interpretations
or terms of any kind as conditions or inducements to the execution hereof.

15. Severability

      If any part of this Agreement is deemed to be unenforceable the balance of
this Agreement shall remain in full force and effect.

16. 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 to the Manufacturer.

17. Counterparts


                                                                             434
<PAGE>

      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 Royalty Agreement
to be executed the day and year first above written.

                                            THE TIREX CORPORATION

                                            By /s/ Terence C. Byrne
                                               --------------------------------
                                                Terence C. Byrne, President

                                            ENVIROPOWER INDUSTRIES INC.

                                            By /s/ Michael Supple
                                               --------------------------------
                                                Michael Supple, President


                                                                             435