AMENDMENT TO MERGER AGREEMENT
THIS AMENDMENT TO MERGER AGREEMENT ("Amendment") dated as of September 28,
2003 to that certain Merger Agreement dated March 30, 2001 ("Agreement"), by and
among, Envirokare Tech, Inc., a Nevada corporation ("Parent"), and Envirokare
Composite Corp., a Delaware corporation and wholly owned subsidiary of Parent
("Merger Sub"), on the one hand, and Thermoplastic Composite Designs, Inc., a
Florida corporation ("TCD"), ▇▇▇▇ ▇▇▇▇, ▇▇., an individual ("Polk Sr."), and
▇▇▇▇ ▇▇▇▇, ▇▇., an individual ("Polk Jr.") and, together with Polk Sr., the
"Shareholders"), on the other hand.
W I T N E S S E T H:
WHEREAS, Parent, Merger Sub, TCD and the Shareholders have agreed that TCD
merge with and into Merger Sub (the "Merger"), upon the terms and conditions set
forth in the Agreement and in accordance with the General Corporation Law of the
State of Delaware (the "DGCL") and the Florida Business Corporation Act
("FBCA"), with the result that Merger Sub shall continue as the surviving
corporation and the separate existence of TCD (except as it may be continued by
operation of law) shall cease and
WHEREAS, Parent, Merger Sub, TCD and the Shareholders are desirous of
modifying the terms of the Agreement to provide for an extension and
consolidation of closings.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions set forth
herein, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound hereby, agree as follows:
The Agreement shall be modified so that the paragraphs in the Agreement
with the numbers referred to hereinbelow shall be deleted and the paragraphs
with the same numbers set out in this Amendment to Merger Agreement shall be
substituted therefore as follows. In the event that there is not a corresponding
paragraph in the Agreement, that paragraph below is added as an additional
paragraph to the Agreement:
Section 1.6 The Closing.
(a) The consummation of the Merger and the other transactions contemplated
by this agreement (the "Closing") shall take place at the offices of counsel to
Parent and Merger Sub, Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, at The Chrysler
Building, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., local
time (or at such other date, time or place as may be agreed to in writing by the
parties hereto) on the date ("Market Price Date") that is either (i) five (5)
business days after the first date on which the Market Price (as defined in this
Section 1.6) of the common stock, $.001 par value per share, of Parent (the
"Parent Shares") is at or above $5.00 a share and to the extent such condition
shall occur on or prior to March 1, 2005 or (ii) ten (10) business days after
the date on which Parent has exercised its option pursuant to Section 1.7
hereof, provided, that in either case all of the conditions to Closing set forth
in Article VII have been satisfied or waived (the "Closing Date").
(b) For purposes of this Agreement, "Market Price" shall mean the average
of the reported closing bid and asked prices on the over-the-counter bulletin
board electronic quotation system maintained by the National Association of
Securities Dealers, Inc., or any principal national securities exchange on which
the security is listed or admitted to trading, or, in the absence or either, as
determined by the mutual agreement of the Shareholders and Parent's Board of
Directors.
Section 1.7 Parent Option.
(a) TCD and the Shareholders hereby grant to Parent (and its nominees) an
irrevocable option to cause the Merger to be consummated, exercisable only as
provided in this Section 1.7 (the "Parent Option"). In the event that the Merger
Shares (as defined in Section 2.1) shall not attain an aggregate Market Price of
Fifteen Million Dollars ($15,000,000), on or prior to March 1, 2005 (the "Peg
Date"), then on the Peg Date and for a period of ten (10) days thereafter (the
"Option Election Period"), Parent shall have the right to exercise the Parent
Option by delivering written notice (the "Option Notice") to TCD and the
Shareholders stating that it is exercising the Parent Option. If Parent shall
exercise the Parent Option, the Closing of the Merger shall take place as set
forth in Section 1.6(a)(ii).
(b) If Parent shall exercise the Parent Option, then Parent shall pay to
the Shareholders, in addition to the Merger Shares, the difference between
$15,000,000 and the aggregate Option Market Price (as defined in this Section
1.7) of the Merger Shares (the "Payment"), payable on the Closing Date or such
other date that shall be mutually agreed to by the Parent, on the one hand, and
TCD and the Shareholders, on the other hand (the "Payment Date"). Such Payment
shall be paid to the Shareholders, in Parent's sole and absolute discretion, (i)
in cash either by wire transfer of immediately available funds to the account(s)
provided to Parent by the Shareholders on the Closing Date, (ii) in additional
Parent Shares valued at the Option Market Price or (iii) in any combination of
cash and additional Parent Shares as provided in clauses (i) and (ii) above;
provided, however, that the amount of the Payment paid to the Shareholders in
cash shall not exceed $7,500,000. The Payment shall be allocated to each
Shareholder as set forth on Schedule 1.7.
(c) If Parent shall exercise the Parent Option, on the Payment Date, in
addition to the Payment, Parent shall provide to the Shareholders a written
notice setting forth in reasonable detail the calculation of the Payment,
including the Option Market Price of the Merger Shares, and balance sheets of
Parent and Merger Sub, including a calculation of the "Total Debt" (as defined
below).
(d) For purposes of this Section 1.7, the "Option Market Price" shall mean
the average of the reported closing bid and asked prices, during the eight week
period immediately prior to the Payment Date, on the on the over-the-counter
bulletin board electronic quotation system maintained by the National
Association of Securities Dealers, Inc., or any principal national securities
exchange on which the security is listed or admitted to trading, or, in the
absence or either, as determined by the mutual agreement of Shareholders and
Parent's Board of Directors.
Section 4.8 Additional Debt of the Parent and/or Merger Sub.
Neither the Parent nor the Merger Sub, shall incur or become contingently
liable with respect to indebtedness for borrowed money or guarantee any such
indebtedness if the Total Debt of Parent and Merger Sub will exceed One Million
Eight Hundred Thousand Dollars ($1,800,000.00). The "Total Debt of Parent and
Merger Sub" shall mean the aggregate of all "Debt" of Parent and Merger Sub as
of the Closing Date; "Debt" shall include all debts, liabilities and
obligations, of Parent and/or Merger Sub, including contingent liabilities,
other than (i) that amount of operating accounts payable and accrued expenses
which does not exceed the amount of collectible accounts receivable from
operations, and (ii) debt which is incurred to acquire, and is used to acquire,
tangible capital assets (for this purpose research and development costs shall
not be considered a part of any tangible capital asset). Any such Debt in excess
of One Million Eight Hundred Thousand Dollars ($1,800,000.00) shall be satisfied
or converted to equity of the Parent on or before the Peg Date.
Section 5.1 Conduct of Business of TCD Pending the Closing.
(d) declare, set aside, make or pay any unreasonable dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock or other equity securities, or subdivide, reclassify,
recapitalize, split, combine or exchange any of its capital stock or other
equity securities, except that TCD may pay dividends in an amount equal to the
taxable income of TCD generated during the period from March 30, 2001 to the
Closing Date (reduced by the amount of any federal and state income taxes, if
any, of TCD attributable to such taxable income).
(e) incur or become contingently liable with respect to any indebtedness
for borrowed money or guarantee any such indebtedness or issue any debt
securities, except for additional indebtedness incurred under existing debt
agreements or credit facilities, or new credit facilities, such additional
indebtedness not to exceed $300,000. However, notwithstanding anything in this
Agreement to the contrary, TCD may incur additional indebtedness associated with
the development, construction and/or purchase of capital facilities in an amount
not to exceed $2,000,000. Any advances by TCD shareholders toward such capital
facilities may be secured, at the option of the lending shareholder, by a
security interest in such facility with a priority subject only to any primary
institutional lender providing funding for that facility. Such amounts payable
to shareholders shall be repaid, with interest at a rate equal to the lowest
rate which may be utilized without incurring any "original issue discount" as
defined in Section 1273 of the Internal Revenue Code of 1986, as amended, within
12 months of closing or the date such funds are advanced, whichever is later.
Section 5.5 Employment Agreement.
At the Closing, ▇▇▇▇▇▇ ▇▇▇▇ shall enter into a three (3) year employment
agreement and Polk Jr. shall enter into a two (2) year employment agreement
(collectively, the "Employment Agreements") with the Surviving Corporation in
the forms attached hereto as Exhibits 5.5A and 5.5B, respectively except that
Exhibit 5.5B shall reflect a two (2) year Employment Agreement and not a three
(3) year Employment Agreement.
Section 5.6 Warrant.
At Closing, Parent shall grant to ▇▇▇▇ ▇▇▇▇, ▇▇. a warrant to purchase up
to One Million Five Hundred Thousand (1,500,000) Parent Shares at an exercise
price of $0.50 per share, upon the terms and conditions set forth in the Warrant
attached hereto as Exhibit 5.6. The term of the warrant shall be from the date
thereof until two years from the Closing Date.
Section 5.13 Conversion of Debt to Equity.
During the period from the Peg Date or five days after the first date on
which the Market Price of the common stock is at or above $5.00 a share,
whichever is applicable, until the Closing Date, neither Parent or Merger Sub
shall take any action to convert any of its debt to equity in Parent or Merger
Sub.
Section 8.3 No Continuing Right to Merge.
In the event that the Market Price of the Parent's Shares does not exceed
$5.00 per share on or prior to March 1, 2005 and Parent does not exercise the
Parent Option as provided in Section 1.7 above, then there shall be no extension
of the Merger Agreement and there shall be no right of Parent or Merger Sub to
cause a merger of TCD into Parent or Merger Sub or to acquire the assets or
stock of TCD.
The Agreement shall be read together and shall have the same force and
effect as if the provisions of the Agreement and this Amendment were contained
in one document. Except as expressly amended by this Amendment, the Merger
Agreement shall remain in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, each of the parties has signed this Agreement or caused
this Agreement to be executed on its behalf by its officer thereunto duly
authorized, all as of the day and year first above written.
ENVIROKARE COMPOSITE CORP.
Address: ▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
By : /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name : ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
THERMOPLASTIC COMPOSITE DESIGNS, INC.
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, #▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
By : /s/ ▇▇▇▇ ▇▇▇▇, ▇▇.
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Name : ▇▇▇▇ ▇▇▇▇, ▇▇.
Title: Vice President
ENVIROKARE TECH, INC.
Address: ▇▇▇▇ ▇. ▇. ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
By : /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name : ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
By : /s/ ▇▇▇▇ ▇▇▇▇, ▇▇.
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▇▇▇▇ ▇▇▇▇, ▇▇.
Address: c/o Thermoplastic Composite Designs, Inc.
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▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
By : /s/ ▇▇▇▇ ▇▇▇▇, ▇▇.
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Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
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