FORM 20-F REGISTRATION OF SECURITIES OF FOREIGN PRIVATE
ISSUERS PURSUANT TO SECTION 12(B) OR (G) AND ANNUAL AND
TRANSITION REPORTS PURSUANT TO SECTION 13 AND 15(D)
AMENDMENT NO.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark one)
[ X ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(g) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended ______________________________________________________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________________ to _________________________
Commission file number________________________________________________________
DURA PRODUCTS INTERNATIONAL INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DURA PRODUCTS INTERNATIONAL INC.
- --------------------------------------------------------------------------------
(Translation of Registrant's name into English)
Ontario, Canada
- --------------------------------------------------------------------------------
(Jurisdiction of incorporation or organization)
60 Carrier Drive, Etobicoke, Ontario, Canada, M9W 5R1
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Common Shares
-------------
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
Not applicable
--------------
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report. Not applicable.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12
1
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
Indicate by check mark which financial statement item the registrant has elected
to follow:
Item 17 X Item 18
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act or 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 20-F
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Part I
Item 1. Description of Business ....................................................
Item 2. Description of Property ....................................................
Item 3. Legal Proceedings ..........................................................
Item 4. Control of Registrant ......................................................
Item 5. Nature of Trading Market ...................................................
Item 6. Exchange Controls and Other Limitations Affecting Securities Holders .......
Item 7. Taxation ...................................................................
Item 8. Selected Financial Data ....................................................
Item 9. Management's Discussion and Analysis of Financial Condition and Results
of Operations .......................................................................
Item 10. Directors and Officers of Registrant .......................................
Item 11. Compensation of Directors and Officers .....................................
Item 12. Options of Purchase Securities from Registrant or Subsidiaries .............
Item 13. Interest of Management in Certain Transactions .............................
Part II
Item 14. Description of Securities to be Registered .................................
Part III
Item 15. Defaults Upon Senior Securities ............................................
Item 16. Changes in Securities and Changes in Security for Registered Securities.....
Part IV
Item 17. Financial Statements .......................................................
Item 18. Financial Statements .......................................................
Item 19. Financial Statements and Exhibits ..........................................
Signatures .................................................................
</TABLE>
3
CURRENCY TRANSLATION
The Company publishes its financial statements in Canadian dollars. Unless
otherwise specified, all references to "Cdn dollars", "dollars", "$", or Cdn $"
are to Canadian dollars and references to "US$" are to United States dollars. As
of October 6, 1997, the US dollar equivalent for Canadian dollars as based on
the Noon Buying Rate in New York City for cable transfers in foreign currencies
as certified for customs purposes by the Federal Reserve Bank of New York was US
$1.3717 per Cdn$1.00. No representation is made that the Canadian dollar or US$
amounts shown in this registration statement could have been or could be
converted into US$, as the case may be, at any particular rate or at all.
Fluctuations in the exchange rate between the Canadian dollar and the U.S.
dollar may affect the Company's earnings, the book value of its assets and
shareholders' equity as expressed in Canadian dollars and U.S. dollars.
The following table sets forth, for each period indicated, the high and low
exchange rates for one Canadian dollar expressed in United States dollars, based
on the inverse of the noon buying rate in New York City for cable transfers in
foreign currencies, the average of such exchange rates on the last Saturday of
each month during such period, and the exchange rate at the end of such period,
as certified for custom purposes by the Federal Reserve Bank of New York (the
"Noon Buying Rate"):
<TABLE>
<CAPTION>
- ---------------------- -------------------- --------------------- --------------------- --------------------
Average High Low Period end
- ---------------------- -------------------- --------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Y/E Dec 31/92 0.8835 0.8757 0.7761 0.7865
- ---------------------- -------------------- --------------------- --------------------- --------------------
Y/E Dec 31/93 0.7729 0.8046 0.7439 0.7544
- ---------------------- -------------------- --------------------- --------------------- --------------------
Y/E Dec 31/94 0.7300 0.7632 0.7103 0.7128
- ---------------------- -------------------- --------------------- --------------------- --------------------
Y/E Dec 31/95 0.7305 0.7527 0.7023 0.7323
- ---------------------- -------------------- --------------------- --------------------- --------------------
Y/E Dec 31/96 0.7332 0.7513 0.7235 0.7301
- ---------------------- -------------------- --------------------- --------------------- --------------------
P/E Mar 31/97 0.7357 0.7228 0.7487 0.7228
- ---------------------- -------------------- --------------------- --------------------- --------------------
P/E Jun 30/97 0.7285 0.7487 0.7145 0.7241
- ---------------------- -------------------- --------------------- --------------------- --------------------
</TABLE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
General
Dura Products International Inc. ("Dura Products or the Company") is a public
company, with 19,502,659 issued and outstanding common shares, as of September
30, 1997, trading over-the-counter on the Canadian Dealing Network under the
symbol "DURP."
Dura Products was incorporated on August 19, 1983 under the laws of the Province
of Ontario, Canada as Transway Exploration Inc. On July 7, 1993 the name was
changed to Transway Capital Inc. and on February 6, 1997 the Company changed its
name to Dura Products International Inc. Dura Products has two wholly-owned
subsidiaries, Dura Skid Inc. and Duraskid and Products, Inc. Dura Skid Inc. was
incorporated on July 13, 1995 under the laws of the Province of Ontario, Canada
as CanTech Investments Inc. On January 15,
4
1996 the name was changed to CanTech Composites Inc. ("CanTech"), the date on
which the Company concluded its acquisition of CanTech for $400,000. The
purchase price was settled by the issuance of 1,000,000 common shares of the
Company and the issuance of warrants exercisable for 500,000 common shares at
$0.40 per share (see Business Overview and Outlook below and Management's
Discussion and Analysis of Financial Condition and Results of Operations). On
February 7, 1997, Cantech changed its name to Dura Skid Inc. On September 19,
1997 the Company incorporated in Delaware a wholly-owned subsidiary, Duraskid
and Products, Inc. Dura Products is currently engaged in the manufacture of a
composite material which is further manufactured into pallets. No significant
revenues have been generated to date from operations.
From August 31, 1983 to December 31, 1995, the Company was involved in the
natural resource and investment industries. In 1983 the Company purchased 22
unpatented mining claims in the Klotz Lake area, Thunder Bay Mining Division,
Ontario, Canada. The Company purchased the claims for $62,332 and from 1983 to
1993 incurred $136,633 of exploration expenditures. In 1993 the claims were
allowed to lapse as no economically recoverable ore reserves were found. In
March 1994, Dura Products acquired 100% of the outstanding shares of 155433
Canada Ltd. ("155433"). 155433 owned a mining property in south Lorraine
Township, Timiskaming Mining Division Ontario, Canada. The Company spent
$512,416 on the acquisition of the mining claims and on exploration expenditures
from March 1994 to the end of 1995. In December 1995, 155433 wrote down the
carrying value of the Lorraine property to $1.00, as it did not intend to pursue
development of the property. In September 1996, Dura Products sold its entire
interest in 155433 for nominal consideration. Beginning in 1987, the Company
began to invest in marketable securities. These investments were generally in
junior mining companies and did not result in control or significant influence
of these companies. From 1987 to 1995, the Company invested approximately $1.5
million in marketable securities. All investments were disposed of by the end of
1995 and generally the disposition resulted in a loss. Of the net-capital loss
carry forward of approximately $2 million, as noted in the consolidated
financial statements, $1.5 million resulted from these investing activities. The
Company believes that there are no contingent liabilities as a result of the
disposition of these assets. During the prior one year period there have been no
changes in management or control of the company.
In the discussion that follows, Dura Products or the Company refers to the
operations of Dura Products International Inc. and its wholly owned
subsidiaries, Dura Skid Inc. and Duraskid and Products, Inc.
Technology Overview
The Company has developed a proprietary process that produces a composite
material made from a combination of post industrial cellulose fibre and post
consumer plastics. The process starts with a proprietary binding process, which
combines the two dissimilar materials into a composite material used as a feed
stock. Through a combination of heat, pressure and sophisticated die designs,
the composite material is extruded to produce continuous formed profiles, which
are then cut to length. Flow dynamics are continuously monitored to maintain
consistently high quality. The finished product is engineered to meet
requirements for impact strength, flexibility and other important performance
characteristics. (see Manufacturing Process and Product Description below)
5
Market Overview and Strategy
The Company intends to develop, manufacture and sell a number of commercially
viable products incorporating its proprietary composite material. All products
will be based on "green" design principles. The Company believes that its
composite material is superior to wood in almost any volume application. At this
time, management has specifically targeted the pallet market for the first
commercial introduction of its technology. The market for pallets is global in
nature. Purchasers of pallets are considering more cost effective and better
performing alternatives to wood as a standard structural material. According to
the National Wood Pallet and Container Association, the annual demand for
pallets is estimated at approximately US$7 billion in the United States and
US$700 million in Canada. The National Wood Pallet and Container Association
also estimates that the industry is growing faster than the North American
economy, having enjoyed almost 10% growth per annum since 1984. The pallet
market is confronted with a number of issues including widespread
dissatisfaction with the performance, quality and handling difficulties
associated with wood pallets. These concerns create an opportunity both for the
introduction of new technology and for individual participants with alternative
product offerings to obtain significant market share rapidly. Dura Products
plans to achieve market penetration through the use of joint ventures, licensing
agreements and direct sales efforts.
The Duraskid(TM) Pallet
The Duraskid(TM) pallet is made from Dura Products' proprietary composite
material and is designed to be safe, reusable, recyclable and manufactured to a
consistently high quality. Dura Products' proprietary process produces a
composite material with high load bearing characteristics which gives the
Duraskid(TM) pallet strength usually found only in much heavier and more
expensive plastic-reinforced and metal pallets. The Company's initial standard
product is a fully engineered four-way access 48" x 40" pallet. Block pallets
and other sizes of pallets may also be manufactured as required to fit specific
customer requirements. Based on the Company's initial market analysis, the
Duraskid(TM) pallet is priced to be competitive with a high quality reusable
hardwood pallet and in addition has many value-added features such as
recyclability, superior weight/strength characteristics and dimensional
stability. During the second quarter of 1997 the Company completed development
of a pallet that is comprised of a11 solid profiles. This pallet is highly
impact resistant, rackable and is able to carry a heavy load. This pallet is
expected to be available for sale in November of 1997 along with other pallet
designs previously developed.
Manufacturing Process
The material used in the manufacture of the Duraskid(TM) pallet is formulated
using a combination of 50% to 60% cellulose, 40% to 50% post consumer
high-density polyethelene ("HDPE") and a binding agent. The relative mix of the
basic raw material components is customized to meet specific customer needs such
as color, surface texture and load-bearing capability. The Company's sources for
its recycled raw materials include industrial manufacturers, brokers of recycled
materials and municipalities. The Company does not anticipate any shortage of
supplies of recycled raw materials. In the event that there is a shortage of
recycled raw materials, the Company could substitute virgin plastics and fibers.
The Company uses a variety of single screw extruders to produce the three
profiles
6
required to construct a Duraskid(TM). These machines range in barrel size from
4.5" to 6" with horsepower ranging from 150 to 300. Feedstock material is loaded
into the machine hoppers using a vacuum loading system, automatically feeding
into the barrel of the extruder by the rotation of the screw. To extrude the
thermoplastic, the compound must first be softened, which is done by heating the
length of the extruder barrel to 180(degrees) Celsius. As the screw rotates,
soft compound travels along the barrel, gets forced through a proprietary
multi-stage die, and is then cooled by water jackets to hold the desired
profile. The stringers used in the pallet are put into a notching machine, and
two 10" x 2" notches are machined to allow four way entry by forklifts. The
stringers and top and bottom boards are then loaded into a drilling machine to
precision drill the required holes for the bolts. The Duraskid(TM) is then
bolted together and shipped to customers.
The following is a process chart
[GRAPHIC OMMITTED]
Business Overview and Outlook
To date the Company has not generated any significant revenue from operations.
Reference should be made to Management's Discussion and Analysis of Financial
Condition and Results of Operations for a more detailed discussion. The
following is an overview of management's operational plans.
The fiscal year ended December 31, 1996 was dedicated to research and
development, property analysis, testing and pre-production engineering to
achieve a commercially viable product. As the development of the proprietary
composite material evolved, it became evident that the high load-bearing
characteristics of the composite would be suitable for a wide range of both
consumer and industrial applications.
7
After an analysis of a number of potential applications, management determined
that the pallet market represented a significant initial opportunity for the
Company. In addition, the Company is considering several other potential
products that incorporate the proprietary composite material such as door and
window framing and other construction materials such as fascia, base boards, and
paneling. The Company has made no decision at this time concerning any future
product lines.
Plant design and layout work for pallet production commenced in early 1996 and
equipment for three operating lines was ordered and installed. An operating line
consists of an extrusion machine, a profile die, a water cooling table, and a
travelling cut-off saw. By the end of 1996, Dura Products had substantially
completed process research and technology development and in the first quarter
of 1997 initiated preliminary field testing of prototype pallets. Initial pallet
production commenced in the second quarter of 1997 using the three operating
lines.
Once fully operational, the Company's first facility located in Etobicoke,
Ontario will consist of 14 lines of equipment capable of producing approximately
600,000 Duraskid(TM) pallets annually. Financing for the 11 additional lines of
equipment has been secured through Bombardier Finance Inc. with final delivery
of the equipment scheduled for the fourth quarter of 1997. By the end of 1997,
management expects to have all 14 production lines operating at its Etobicoke,
Ontario facility. As of September 30, 1997, the Company had 30 full-time
employees, 21 of whom were in manufacturing, four were in research and
development, one was in sales and marketing and four were in finance and
administration. It is expected that by the end of 1997 there will be
approximately 60 full-time employees, of whom 45 will be in manufacturing, five
in research and development, four in sales and marketing and six in finance and
administration.
In addition to the Etobicoke facility, the Company has completed a joint venture
arrangement with Wood Recycling Inc. The Massachusetts based joint venture will
manufacture the Duraskid(TM) pallet for sale in New England and upper New York
State. The joint venture will operate under the name Duraskid New England
L.L.C., a Massachusetts limited liability company owned 51% by Duraskid and
Products, Inc. Duraskid New England L.L.C., is currently investigating locations
in the Massachusetts area with the capacity to operate up to 30 lines of
equipment. Management expects that installation of equipment will begin in the
fourth quarter of 1997, with operations commencing in the first quarter of 1998.
The Company's business plan for the next five years contemplates the
establishment of up to ten additional plants in North America each with a
planned minimum capacity of approximately 500,000 pallets per plant per year.
The Company plans to own and operate these additional plants through
wholly-owned subsidiaries or joint venture arrangements.
The Company's policy is to expense monies spent on research and development
activities. During 1996 the Company focused its efforts primarily on research
and development and spent approximately $669,000 pursuing these efforts. During
the first six months of 1997, the Company spent an additional $647,000 on
research and development. The Company intends to continue to develop additional
products and devote significant resources to its research and development
efforts.
8
ITEM 2. DESCRIPTION OF PROPERTY
The Company is located at 60 Carrier Drive, Etobicoke, Ontario, Canada M9W 5R1.
The facility has approximately 65,000 square foot facility, 5,000 square feet
used for executive and administrative offices and the balance for manufacturing.
The facility is leased for a five-year term expiring in October 2,000 and the
Company has the option to renew for an additional five year period. The Company
also has an option to acquire the property for approximately $2.1 million.
ITEM 3. LEGAL PROCEEDINGS
During the fiscal year ended December 31, 1996, the Company was notified of a
filing of a statement of claim against the Company and its former President
relating to an alleged agreement to complete a private placement of shares of
the Company's common stock. It is the Company's position that if any such
agreement existed, it was an agreement soley between the plaintiff and the
former President. The former president has agreed to indemnify the Company from
any damages it suffers, if any, in connection with this action. The plaintiff
has completed discovery but has taken no further action to pursue this claim.
ITEM 4. CONTROL OF REGISTRANT
(a) Direct or Indirect Control by Another
To the best of the Company's knowledge, the Company is not directly or
indirectly owned or controlled by a single person, a group of persons or by
another corporation or by any foreign government.
(b) Ownership of Voting Securities
As of September 30, 1997, 19,502,659 common shares of the Company were issued
and outstanding. At such date, the persons or groups known to the Company to own
more than 10% of the Company's issued and outstanding shares and the number of
common shares owned by officers and directors of the Registrant as a group are
as follows:
<TABLE>
<CAPTION>
- --------------------------- -------------------------- -------------------------- --------------------------
Identity of Person or
Title of Class Group Amount owned Percent of Class
- --------------------------- -------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
- --------------------------- -------------------------- -------------------------- --------------------------
Common shares Officers and directors
as a group 3,061,800 (1) 14.63% (2)
- --------------------------- -------------------------- -------------------------- --------------------------
- --------------------------- -------------------------- -------------------------- --------------------------
</TABLE>
(1) Shares owned by officers and directors include currently excercisable
options to purchase up to 1,625,000 shares of Common Stock held by
directors and officers of the Company. Options to purchase up to 550,000
shares are exercisable at $0.70 per share until June 2001, options to
purchase up to 350,000 shares are exercisable at $1.10 per share until
January 2002 and options to purchase up to 725,000 shares are exercisable
at $2.00 per share until July 2002.
(2) The percentage of class is calculated based on a total number of shares
of 21,127,659 which includes the 19,502,659 common shares issued and
outstanding as at September 30, 1997 and the 1,625,000 currently
excercisable options held by the directors and officers of the Company.
(c) Change of Control Arrangements
There are no arrangements known to the Company, the operations of which
may, at a date subsequent to the date of this Registration Statement,
result in a change in control of the Company.
ITEM 5. NATURE OF TRADING MARKET
The common shares of the Company are quoted on the Canadian Dealing Network Inc.
under the symbol "DURP", CUSIP number 265904102. The Company has no other class
of securities which are publicly traded.
As at August 31, 1997, 29.86% of the issued and outstanding common shares were
held in the United States by approximately 60 record holders.
The U.S. Securities and Exchange Commission (the "Commission") has adopted
regulations which generally define "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. The Company's
securities are covered by the penny stock rules, which impose additional sales
practice requirements on broker-dealers who sell such securities to person other
than established customers and accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their
spouse). For transactions covered by the rule, the broker-dealers must make a
special suitability determination for the purchase and receive the purchaser's
written agreement of the transaction prior to the sale. Consequently, the rule
may affect the ability of purchasers to sell their shares in the secondary
market.
The trading history of the Company's Common Stock on the Canadian Dealing
Network, Inc. is as follows:
<TABLE>
<CAPTION>
- ------------------------------------ ----------------------------------- -----------------------------------
Quarter High sales prices Low sales prices
<S> <C> <C>
- ------------------------------------ ----------------------------------- -----------------------------------
03/31/95 $2.60 $0.80
- ------------------------------------ ----------------------------------- -----------------------------------
06/30/95 $0.90 $0.40
- ------------------------------------ ----------------------------------- -----------------------------------
9
- ------------------------------------ ----------------------------------- -----------------------------------
09/30/95 $0.45 $0.25
- ------------------------------------ ----------------------------------- -----------------------------------
12/31/95 $0.65 $0.28
- ------------------------------------ ----------------------------------- -----------------------------------
03/31/96 $0.75 $0.35
- ------------------------------------ ----------------------------------- -----------------------------------
06/30/96 $1.19 $0.50
- ------------------------------------ ----------------------------------- -----------------------------------
09/30/96 $1.10 $0.65
- ------------------------------------ ----------------------------------- -----------------------------------
12/31/96 $1.10 $0.75
- ------------------------------------ ----------------------------------- -----------------------------------
03/31/97 $4.40 $0.75
- ------------------------------------ ----------------------------------- -----------------------------------
06/30/97 $2.45 $1.75
- ------------------------------------ ----------------------------------- -----------------------------------
</TABLE>
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
(a) Governmental Laws or Decrees
There is no law, governmental decree or regulation in Canada that restricts the
export or import of capital, including foreign exchange controls, or that
affects the remittance of dividends, interest or other payments to non-resident
holders of common shares, other than withholding tax requirements and potential
capital gains on the disposition of the common shares under certain
circumstances. See Item 7. Taxation.
(b) Limitation on Voting Rights
There is no limitation imposed by Canadian law or by the charter or other
constituent documents of the Company on the right of a non-resident to hold or
vote common shares of the Company, other than as provided in the Investment
Canada Act (Canada) (the "Investment Act"). The following discussion summarizes
the principal features of the Investment Act for a non-resident who proposes to
acquire common shares of the Company. It is general only, it is not a substitute
for independent advice from an investor's own advisor, and it does not
anticipate statutory or regulatory amendments. To the Company's knowledge, no
amendments are pending or contemplated at this time.
The Investment Act generally prohibits implementation of a reviewable investment
by an individual, government or agency thereof, corporation, partnership, trust
or joint venture that is not a "Canadian" as defined in the Investment Act (a
"non-Canadian"), unless after review the minister responsible for the Investment
Act (the "Minister") is satisfied that the investment is likely to be of net
benefit to Canada.
An investment in common shares of a company by a non-Canadian other than an
"American" (as that term is defined in the Investment Act and used in this
discussion) when a company was not controlled by an American, would be
reviewable under the Investment Act if it was an investment to acquire control
of a company and the value of the assets of a company was $5,000,000 or more, or
if an order for review was made by the federal cabinet on the grounds that the
investment related to Canada's cultural heritage or national identity.
An investment in common shares of a company by an American, or by a non-Canadian
when a company is controlled by an American, would be reviewable under the
Investment Act if it were an investment to acquire control of a company and the
value of the assets of a company was not less than a specified amount which for
1994 is $150,000,000, and for subsequent years is $153,000,000 in terms of
"constant 1992 dollars". A non-Canadian would acquire control of a company for
the purposes of the Investment Act if he acquired a majority of the common
shares of that company. The acquisition of less than a majority but one third or
more of the common shares of a company would be presumed to be an acquisition of
control of that company unless it could be established that, on the acquisition,
a company was not controlled in fact by the acquiror through the ownership of
common shares.
Certain transactions relating to common shares of a company would be exempt from
the Investment Act, including:
(a) acquisition of common shares of a company by a person in the ordinary
course of that person's business as a trader or dealer in securities,
(b) acquisition of control of a company in connection with the realization of
security granted for a loan or other financial assistance and not for a
purpose related to the provisions of the Investment Act, and
(c) acquisition of control of a company by reason of an amalgamation, merger,
consolidation or corporate reorganization following the ultimate direct or
indirect control in fact of a company.
ITEM 7. TAXATION
The following is a summary of certain material Canadian federal income tax
provisions applicable to United States corporations, citizens and resident alien
individuals purchasing, holding and disposing of common shares. The discussion
is only a general summary and does not purport to deal with all aspects of
Canadian federal taxation that may be relevant to shareholders, including those
subject to special treatment under the income tax laws. Shareholders are advised
to consult their own tax advisors regarding the Canadian federal income tax
consequences of holding and disposing of the Company's common shares, as well as
any consequences arising under U.S. federal, state or local tax laws of other
jursiductions outside the United States. The summary is based on the assumption
that, for Canadian tax purposes, the purchasers or shareholders (i) deal at
arm's length with the Company, (ii) are not residents of Canada, (iii) hold the
common shares as capital property, and (iv) do not use or hold common shares in,
or in the course of, carrying on business in Canada (a "Non-Resident Holder").
This summary is not exhaustive of all possible income tax considerations and
shareholders and prospective purchasers of the Company's shares of Common Stock
are advised to consult with their own tax advisors with respect to their
particular circumstances.
Dividends paid to U.S. residents by the Company on the common shares generally
will be subject to Canadian non-resident withholding taxes. For this purpose,
dividends will include amounts paid by the Company in excess of the paid-up
capital of the common shares on a redemption or a purchase for cancellation of
such shares by the Company (other than purchases on the open market). For U.S.
corporations owning at least 10% of
10
the voting stock of the Company, the dividends paid by the Company are subject
to a withholding tax of 5% under the Canada-U.S. Income Tax Convention (1980),
as amended by Protocol signed on March 17, 1995 (the "Treaty"). For all other
U.S. shareholders, the Treaty reduces the withholding tax rate from 25% to 15%
of the gross dividend. Other applicable tax treaties may reduce the Canadian tax
rate for other Non-Resident Holders. Any amounts paid for Canadian withholding
taxes may be taken as a credit against U.S. taxes.
A Non-Resident Holder will generally not be subject to tax in Canada on capital
gains realized from disposition of common shares, unless such shares are
"taxable Canadian property" within the meaning of the Income Tax Act (Canada).
Generally, the common shares would not be taxable Canadian property unless the
Non-Resident Holder, together with related parties, at any time during the five
years prior to the disposition of the common shares owned not less than 25% of
the issued shares of any class of the capital stock of the Company. Under the
Treaty, a resident of the United States will not be subject to tax under the
Income Tax Act (Canada) in respect of gains realized on the sale of common
shares which constitute "taxable Canadian property", provided that the value of
the common shares at the time of disposition is not derived principally from
real property located in Canada.
ITEM 8. SELECTED FINANCIAL DATA
The selected financial data set forth in the following table is expressed in
Canadian dollars. For a history of the exchange rates for Canadian dollars in
terms of U.S. Dollars see Item 1, "Description of Business", above. The
financial information set forth in the following table includes the accounts of
the Company and subsidiaries on a consolidated basis. This financial information
was prepared in accordance with accounting principles generally accepted in
Canada, the application of which conforms in all material respects for the
periods presented with accounting principles generally accepted in the United
States, except to the extent noted in Note 12 to the Consolidated Financial
Statements appearing elsewhere in this Registration Statement. The selected
financial data should be read in conjunction with and is qualified by such
Consolidated Financial Statements and the Notes thereto.
<TABLE>
<CAPTION>
- --------------- ------------- ------------ ------------ ------------ ------------ ------------ -------------
Six Six
months months Year ended Year ended Year ended Year ended Year ended
ended June ended Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, 1992
30, 1997 June 30, 1996 (1) 1995 1994 1993
-------- ---------- -------- ---- ---- ----
1996
----
$ $ $ $ $ $ $
- - - - - - -
- -------------- - ------------- ------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue 13,912 Nil Nil Nil Nil Nil Nil
- -------------- - ------------- ------------ ------------ ------------ ------------ ------------ -------------
Net loss 1,004,012 414,620 1,314,126 615,315 813,610 (32,115) 242,374
Net loss per
share 0.063 0.053 0.137 0.107 0.141 (0.042) 0.046
- -------------- - ------------- ------------ ------------ ------------ ------------ ------------ -------------
Total assets
3,154,852 1,625,887 1,877,391 31,496 611,123 182,400 726
- -------------- - ------------- ------------ ------------ ------------ ------------ ------------ -------------
Capital stock
7,579,709 4,396,150 4,901,150 2,372,154 2,372,154 1,372,154 1,372,154
- -------------- - ------------- ------------ ------------ ------------ ------------ ------------ -------------
</TABLE>
(1) Effective January 15, 1996, the Company purchased Dura Skid Inc. and changed
its business focus. Reference should be made to Item 1. Description of
Business and to Item 9. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
11
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Set out below is management's discussion and analysis of financial condition and
results of operations for the six-month period ended June 30, 1997 and for the
year ended December 31, 1996. Reference should be made to the consolidated
financial statements contained elsewhere in this document and to Note 12 of
those financial statements which set forth any differences between accounting
principles generally accepted in Canada and those generally accepted in the
United States.
SIX-MONTH PERIOD ENDED JUNE 30, 1997
For the six-month period ended June 30, 1997 the Company incurred a loss of
$1,004,019 or $0.063 per share compared to a loss of $414,620 and a loss per
share of $0.053 for the corresponding period in 1996. The loss increased
primarily as a result of increased research and development, general and
administrative and marketing expenses totaling $1,007,405 compared to $414,620
in the corresponding period in 1996. The increases reflect the Company's product
development efforts combined with an increase in marketing and administrative
costs associated with the commercialization of the Company's initial product.
The increase in the loss per share was partly reduced as a result of an increase
in the number of common shares outstanding from 12.5 million to 17.1 million.
During the six-month period ended June 30, 1997, 540 standard sized pallets were
sold which generated revenues of $12,862. There were no sales during the
corresponding period in 1996.
12
YEAR ENDED DECEMBER 31, 1996
RESULTS OF OPERATIONS
Prior to 1996 the focus of the Company was in the natural resources and
investment industries. The Company invested in marketable securities and mining
properties and, through a wholly-owned subsidiary, owned a mining property in
Ontario. In 1995 the Company ceased its investment activities and sold all of
its remaining marketable securities. All mining properties held directly by the
Company were allowed to lapse as no economically recoverable reserves had been
discovered. Effective December 31, 1995, the remaining mining property located
in northeastern Ontario was written down to $1.00 and subsequently disposed of
in September 1996 when Dura Products sold its interest in the subsidiary.
The focus of the Company during 1996 was to complete its research and
development for its proprietary composite material. The research and development
was substantially completed by year-end and in the first quarter of 1997 the
Company had commenced the manufacture of its first product, a pallet that is
sold under the tradename "Duraskid".
On the basis of the substantive change in the nature of the business conducted
by the Company, management believes that the Company's previous financial
statements are not relevant to its current business activities and as such,
there is no meaningful comparison of the results of operations of 1996 to 1995
and 1994. Accordingly, the following discussion covers only the fiscal year
ended December 31, 1995.
1996 OPERATING RESULTS
13
Since the Company was completing its process research and technology development
of its proprietary composite material throughout 1996, the Company had no
revenues.
All costs related to research and development were expensed as incurred. These
costs amounted to $668,995, consisting of salary and wages, costs associated
with die designs, and product specifications, raw material purchases, rent,
utilities, and consulting services.
General and administrative expenses totalled approximately $640,000 for the year
which consisted of the following: $340,000 related to investor relations, filing
fees, and other public company expenses; $56,000 for legal and accountant fees;
$69,000 for advertising and promotional expenses; and $45,000 for office
expenses.
Interest expense of $9,779 was attributable primarily to interest charges on
short-term loans payable.
Net loss for the year was $1,314,126 with a loss per share of $0.137.
The Company's results of operations are subject to a number of risks including
market acceptance of the Company's products, competition, rapid technological
change, retaining key employees and continued improvement on and protection of
the Company's proprietary composite material. No assurance can be given that
these factors will not adversely affect the Company's future operating results.
CAPITAL INVESTMENTS
Dura Products invested approximately $1.2 million in the purchase of production
equipment and other capital assets during the year ended December 31, 1996. Of
this amount, $1.1 million was for production equipment. Equipment for three
production lines was purchased which enabled the Company to commence limited
production of Duraskids(TM) in the first quarter of 1997.
In addition to capital assets, the company invested approximately $680,000 in
technology, know-how and expertise related to composite materials.
LIQUIDITY AND CAPITAL RESOURCES
During 1996, Dura Products issued common shares for gross proceeds of
approximately $2.5 million. Of this amount, approximately $2.1 million was cash
proceeds received on the exercise of stock options and share purchase warrants
and the balance of $400,000 was allocated to the acquisition of Dura Skid Inc.
Cash proceeds were used for research and development activities and the purchase
of capital assets.
As of December 31, 1996, the Company had a working capital deficiency of
approximately $1 million. Subsequent to December 31, 1996, Dura Products
finalized arrangements for three private placements for 2,182,612 Units for
total proceeds of approximately $1.8 million. The Units consisted of one common
share and one common share purchase warrant. The warrants have a one-year term
(expiring between January and June 1998) and have the following exercise prices:
1,582,612 at $0.90; and 600,000 at $1.10. If these warrants were to be
exercised, additional proceeds of approximately $2 million would be received.
During the six-month period ended June 30, 1997 the Company raised $2.7 million
from the sale of common shares by way of private placements and the exercise of
stock options. The proceeds from the sale of common shares were used to purchase
$898,000 of production equipment with the remainder utilized for working
capital. Cash on hand at the end of the period increased approximately $300,000
to $346,059 while the working capital deficiency was reduced by approximately
$800,000 from $1,015,816 to $221,643. In addition the Company entered into a
lease financing agreement with Bombardier Finance Inc. ("Bombardier"), to
provide up to $3.1 million for extrusion equipment and related components.
14
The Company anticipates that its cash on hand plus expected cash flows from
operations and the funding available from the equipment lease line with
Bombardier Finance will allow the Company to fund operations for the next 12
months. Thereafter, the Company will be required to raise additional funds
through debt on equity financings. Such funds, if available, may not be
available on terms favorable to the Company. The Company intends to spend
approximately $4.5 on capital expenditures during the next 12 months.
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
- ------------------------------------ ----------------------------------- -----------------------------------
Name Position Term
- ------------------------------------ ----------------------------------- -----------------------------------
<S> <C> <C>
Keith Carrigan Director, President and CEO Director since November 1995 and
President and CEO since February 1996
- ------------------------------------ ----------------------------------- -----------------------------------
Patrick Banfield Director Director since January 1997
- ------------------------------------ ----------------------------------- -----------------------------------
Stuart MacGregor Director Director since February 1996
- ------------------------------------ ----------------------------------- -----------------------------------
15
- ------------------------------------ ----------------------------------- -----------------------------------
John Winter Director, VP Manufacturing Director since May 1996 and VP
Manufacturing since December 1995
- ------------------------------------ ----------------------------------- -----------------------------------
Carl McMurray VP Finance and CFO VP Finance and CFO since May 1996
- ------------------------------------ ----------------------------------- -----------------------------------
Weining Song VP Engineering VP Engineering since December 1995
- ------------------------------------ ----------------------------------- -----------------------------------
</TABLE>
All directors hold office until the next annual meeting of the shareholders of
the Company and until their successors have been elected and qualified. Officers
of the Company serve at the discretion of the Board of Directors.
There are no arrangements or understandings between any of the directors or
officers of the Company and any other person pursuant to which they were
selected as a director or officer of the Company. There are no family
arrangements between any director or officer of the Company and any other
director or officer of the Company.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
Compensation Summary
The table below sets forth information concerning the compensation of the
Company's chief executive officer and for all officers as a group for the
Company's financial years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
- ------------ ----------------------------------------------- -----------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
- ------------ ----------------------------------------------- -----------------------------------------------
Name and Year Salary ($) Bonus ($) Other Awards Awards Payouts All other
principal annual securities restricted LTIP (2) compensation
position compensation under Shares or Payouts ($)
($) option/ restricted ($)
SARs (1) share
granted units ($)
(#)
- ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Keith
Carrigan
President
1996(3) 112,000 Nil Nil Nil Nil Nil Nil
- ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
J.Hunter,
President 1996(3) Nil Nil Nil Nil Nil Nil Nil
1995 Nil Nil 13,190 Nil Nil Nil Nil
1994 Nil Nil Nil Nil Nil Nil Nil
- ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Officers 1996 239,500 Nil Nil Nil Nil Nil Nil
as a group 1995 Nil Nil 13190 Nil Nil Nil Nil
1994 Nil Nil Nil Nil Nil Nil Nil
- ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
(1) Stock appreciation rights
(2) Long term incentive plans
(3) Mr. Hunter was succeeded as President of the Company by Mr. Carrigan on
February 19, 1996
For each of the financial years ended December 31, 1996, 1995 and 1994, there
were no standard arrangements by which directors of the Company were compensated
for their
16
services to the Company as directors. Directors participate in the Company's
stock option plan.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
On April 17, 1996, the board of directors of the Company approved the
establishment of a stock option plan (the "1996 Plan") relating to the common
shares ("Common Shares") of the Company. Disinterested shareholders of the
Company passed a resolution approving the establishment of the 1996 Plan on May
30, 1996. Eligibility for participation in the 1996 Plan is restricted to
directors, officers, employees and consultants of the Company and its affiliates
and other designated persons and their personal holding companies and registered
retirement savings plan "(RRSP's"). The number of Common Shares subject to
options granted under the 1996 Plan (and under all other management options and
employee stock purchase plans) is limited, in the aggregate, to 5,000,000. The
maximum number of Common Shares which may be reserved for issuance to any one
person, including insiders of the Company under the 1996 Plan, is not limited
except to the extent that at no time may such number exceed 5% of the number of
issued and outstanding Common Shares. The exercise price of any option granted
under the 1996 Plan may not be less than the fair market value (e.g., the
prevailing market price) of the Common Shares at the time the option is granted.
Options issued under the 1996 Plan may be exercised during a period determined
by the board of directors which cannot exceed five years and are subject to
earlier termination upon the termination of the optionee's employment, upon the
optionee ceasing to be a director and/or officer of the Company or any
subsidiary, or upon the retirement, permanent disability or death of an
optionee. The options issued under the 1996 Plan are non-transferable. The
Company does not provide any financial assistance to participants under the 1996
Plan to facilitate the purchase of Common Shares.
As of September 30, 1997, the following options were outstanding:
Number of options Expiry date Purchase price
----------------- ----------- --------------
713,000 June 28, 2001 $0.70
450,000 January 27, 2002 $1.10
1,475,000 July 9, 2002 $2.00
As of September 30, 1997, directors and officers as a group held options
to purchase up to 1,625,000 common shares of the Company.
17
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
(a) Material Transactions
Effective January 15, 1996, the Company completed its acquisition of all of the
issued and outstanding shares of Dura Skid Inc. for $400,000, which was settled
by the issuance of 1,000,000 common shares of the Company. In addition to the
$400,000 purchase price, the Company granted warrants to the shareholders of
Dura Skid Inc. which entitled the warrant holders to purchase in the aggregate,
500,000 common shares, at a per share price of $0.40. Dura Skid Inc. was owned
equally by two shareholders, one of whom was Mr. Keith Carrigan. Upon signing
the letter of intent, Mr. Carrigan was elected to the Board of Directors of the
Company, and effective February 19, 1996, became President and CEO of the
Company. Mr. Carrigan does not own greater than 10% of the issued and
outstanding common shares of the Company.
(b) Indebtedness of Directors and Officers
No director or officer of the Company, at any time during the fiscal year ended
December 31, 1996 was indebted to the Company.
Except with respect to Mr. James Hunter, a former director and officer of the
Company, who was indebted to the Company to the extent of $31,469 as at December
31, 1995, no director or officer of the Company was indebted to the Company
during the fiscal year ended December 31, 1995.
Except with respect to Mr. James Hunter, a former director and officer of the
Company, who was indebted to the Company to the extent of $29,759 as at December
31, 1994, no director or officer of the Company at any time during the fiscal
year ended December 31, 1994 was indebted to the Company.
Key Employee Agreements
On May 1, 1995 the Company entered into an employment agreement with Keith
Carrigan. Mr. Carrigan holds the offices of Director, President and Chief
Executive Officer and his annual compensation is $120,000. The contract is
ongoing unless otherwise terminated pursuant to the terms thereunder. Mr.
Carrigan is eligible to participate in all stock option plans, bonus plans and
other fringe benefit plans of the Company.
On January 1, 1997 the Company entered into an employment agreement with Carl
McMurray. Mr. McMurray holds the offices of Vice President Finance and Chief
Financial Officer and Secretary to the Board. His annual compensation is $78,000
for 1997 increasing to $102,000 in 1998. The contract is ongoing unless
otherwise terminated pursuant to the terms thereunder. Mr. McMurray is eligible
to participate in all stock option plans, bonus plans and other fringe benefit
plans of the Company.
On August 7, 1996 the Company entered into a two year employment agreement with
Weining Song. Mr. Song holds the office of Vice President Engineering and his
annual compensation is $75,000. Mr. Song was granted options to acquire 150,000
common shares and is eligible to participate in all stock option plans, bonus
plans and other fringe benefit plans of the Company.
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED.
(a) Capital Stock to be Registered
- ----------------------------------
The Company is authorized to issue an unlimited number of common shares without
nominal or par value, each holder of which is entitled to one vote in respect of
each share held at all meetings of the shareholders of the Company.
Each holder of the common shares is entitled to share proportionately in
dividends that may be paid and upon liquidation of the Company. Holders of the
common shares are not entitled to preemptive rights on the issuance of
additional common shares, and there are no conversion rights, redemption rights,
or sinking fund established. All shares issued are fully paid and
non-assessable, and no shareholder is liable for further calls or assessment.
The Company is authorized to issue an unlimited number of Class A Special Shares
without par value, issuable in series and an unlimited number of Class B Special
Shares without par value. There are no Class A or Class B Special Shares issued
and outstanding. The Board of Directors may fix from time to time before issue,
the number of shares to comprise each series of Class A Special Shares and the
designation, rights, privileges, restrictions and conditions of each series of
Class A Special Shares. The Class B Special Shares are redeemable, voting and
non-participating with respect to dividends. The Company has no current
intention to issue any Class A or Class B Special Shares.
(b) Debt Securities to be Registered
- ------------------------------------
Not applicable, inasmuch as there are no debt securities of the Registrant to be
registered.
(c) American Depository Receipts to be Registered
- -------------------------------------------------
Not applicable, inasmuch as there are no American Depository Receipts of the
Registrant to be registered.
(d) Other Securities to be Registered
- -------------------------------------
Not applicable, inasmuch as there are no other securities of the Registrant to
be registered.
(e) Shareholder Rights Plan
- ---------------------------
On April 23, 1997, the board of directors of the Company (the "Board") adopted
the Dura Products International Inc. shareholder rights plan (the "Rights
Plan"). The Rights Plan, which was subsequently approved by the shareholders of
the Company, is effective as of April 23, 1997, and will expire on December 31,
2002.
The objectives of the Rights Plan are to ensure, to the extent possible, that
all shareholders of the Company are treated equally and fairly in connection
with any take-over bid for the Company. Take-over bids may not always result in
shareholders receiving equal or fair treatment or full value for their
investment. In addition, current Canadian securities legislation only requires a
take-over bid to remain open for 21 days. The Board believes that this period
may be insufficient for the Board to evaluate a bid, pursue alternatives which
could maximize the shareholder value, and make informed recommendations to the
shareholders.
The Rights Plan discourages discriminatory or unfair take-over bids for the
Company and gives the Board time, if appropriate, to pursue alternatives to
maximize shareholder value in the event of unsolicited take-over bid for the
Company. The Rights Plan will encourage a potential offeror to proceed by way of
a permitted bid or to approach the Board with a view to negotiation, by creating
the potential for substantial dilution of any offeror's position. The permitted
bid provisions of the Rights Plan are designed to ensure that, in any take-over
bid, all shareholders are treated equally, receive the maximum value for their
investment and are given adequate time to properly assess the take-over bid on a
fully informed basis. However, it should be noted that the terms of The Rights
Plan could deter potential acquisitions of the Company in circumstances where
such bids would result in premiums for shareholders.
Pursuant to the Rights Plan, one Right has been issued by the Company pursuant
to the Rights Agreement in respect of each Common Share outstanding at the Close
of Business on April 23, 1997 (the "Record Time"). One Right will also be issued
for each additional Common Share issued after the Record Time and prior to the
earlier of the Separation Time (as defined below), the expiry date of the Rights
Plan or the day on which the right to exercise Rights expires.
The Separation Time is defined in the Rights Agreement as the Close of Business
on the 10th day (or such earlier or later day as may be determined by the Board)
after the earlier of: public disclosure that a person has become an Acquiring
Person (defined in the Rights Agreement as a person who has acquired, other than
pursuant to an exemption available under the Rights Plan or a permitted bid,
beneficial ownership of 10% percent or more of the Voting Shares of the
Company); and the date of the commencement of, or first public announcement of
an intention to commence, a take-over bid (other than a permitted bid) to
acquire beneficial ownership of 20% percent or more of the Common Shares.
Each Right will entitle the registered holder to purchase from the Company one
Common Share at a price per share equal to 50% of the then fair market value,
subject to certain anti-dilution adjustments. The Rights, however, will not be
exercisable until the Separation Time.
Until the Separation Time, the Rights will trade together with the Common
Shares, will be represented by the Common Share certificates and will not be
exercisable. After the Separation Time, the Rights will become exercisable, will
be evidenced by Rights certificates and will be transferable separately from the
Common Shares.
If an offeror successfully completes a permitted bid, the Board shall be deemed
to have elected to redeem the Rights at $0.001 per Right, appropriately adjusted
for anti-dilution, and no further Rights will be issued.
A permitted bid, even if not approved by the Board, may be taken directly to the
shareholders of the Company. Shareholder approval at a special meeting will not
be required for a permitted bid. Instead, shareholders of the Company will
initially have 60 days to deposit their shares. If more than 50 percent of the
outstanding Common Shares (other than Common Shares beneficially owned by the
offeror on the date of the take-over bid) have been deposited and not withdrawn
by the end of such 60-day period, the bid must be extended for a further period
of 10 days to allow initially disapproving shareholders to deposit their shares
if they so choose.
If a potential offeror does not wish to make a permitted bid, it can negotiate
with, and obtain the prior approval of, the Board to make a take-over bid on
terms which the Board considers fair to all shareholders. In such circumstances,
the Board may waive the application of the Rights Plan to that particular
transaction or redeem the Rights, thereby allowing such bid to proceed without
dilution to the offeror.
Under the Rights Agreement, the implementation of the Rights Plan is triggered,
subject to the Board's discretion, upon the occurrence of any transaction or
event in which any person becomes an Acquiring Person. Except as set out below,
from and after the Close of Business on the 10th day following such an event:
(a) any Rights beneficially owned by the acquiring person and affiliate,
associates and transferees of the acquiring person will become void; and (a)
each Right (other than Rights which are void) will entitle the holder thereof to
purchase Common Shares at 50% of the then fair market value. Therefore, an event
triggering the implementation of the Rights Plan, if not approved by the Board,
will result in significant dilution to an Acquiring Person. The Board, at its
option and at any time prior to the occurrence of such an event, may elect to
redeem all of the outstanding Rights at a redemption price of $0.001 per Right,
appropriately adjusted for anti-dilution as set out in the Rights Agreement.
The Company may, from time to time, amend, vary or delete any of the provisions
of the Rights Agreement to, among other things: (i) make any changes which the
Board, acting in good faith, deems necessary or desirable, (ii) cure any
ambiguity or correct any inconsistency; or (iii) increase or decrease the
exercise price of the Rights. Such amendments will not require the approval of
the holders of Rights or Common Shares. The Company may, from time to time, with
the approval of a majority of the holders of Rights, amend, vary or delete any
of the provisions of the Rights Agreement (whether or not such change shall
materially adversely affect the interests of the holders of the Rights).
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES
Not applicable.
PART IV
ITEM 17. FINANCIAL STATEMENTS.
18
Not applicable.
ITEM 18. FINANCIAL STATEMENTS.
The consolidated financial statements of the Company, the accompanying notes
thereto and the independent auditors' reports are included as part of this Form
20-F and immediately follow the signature page of this Form 20-F.
Item 19. Financial Statements and Exhibits
(A) FINANCIAL STATEMENTS
The following financial statements are filed herewith:
1. Consolidated Balance Sheets as at June 30, 1997, December 31, 1996 and
December 31, 1995
2. Consolidated Statements of Earnings and Deficit for the six month
periods ended June 30, 1997 and 1996 and for the years ended December
31, 1996, 1995 and 1994.
3. Consolidated Statements of Changes in Financial Position for the six
month periods ended June 30, 1997 and 1996 and for the years ended
December 31, 1996, 1995 and 1994.
4. Notes to Consolidated Financial Statements
(B) EXHIBITS
The following exhibits are filed herewith:
1.1 Articles of Incorporation as Amended ..................................
1.2 By-laws ...............................................................
3.1 Share Exchange Agreement dated as of January 15, 1996 by and between
the Company and its wholly-owned subsidiary Dura Skid, Inc. ...........
3.2 Lease Agreement dated as of November 1, 1995 between Carrier Drive
Development Ltd. and Cantech Investments Ltd. .........................
3.3 Shareholder Rights Agreement dated as of April 23, 1997 between the
Company and the R-M Trust Company .....................................
3.4 Employment Agreement by and between Keith Carrigan and the Company
dated May 1, 1995......................................................
3.5 Employment Agreement by and between Carl McMurray and the Company
dated January 1, 1997..................................................
3.6 Employment Agreement by and between Weining Song and the Company
dated August 7, 1996...................................................
3.7 1996 Stock Option Plan.................................................
3.8 Master Lease Agreement by and between Bombardier Finance, Inc. and the
Company dated August 12, 1997..........................................
3.9 Joint Venture Agreement by and between Dunraskid New England, L.L.C.,
Duraskid and Products, Inc., Environmental Composite Products L.L.C.
and the Company dated September 23, 1997 ..............................
3.10 Technology License Agreement by and between Duraskid New England L.L.C.
and the Company dated October 15, 1997 ................................
3.11 Stock Option Agreement by and between Environmental Composite Products
L.L.C. and the Company dated October 15, 1997 .........................
11.0 Computation of Earnings Per Share......................................
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
DURA PRODUCTS INTERNATIONAL INC. August 16, 1997
- ------------------------------------- ------------------------------
(Registrant) (Date)
19
/s/ Keith A. Carrigan /s/ Carl D. McMurray
- ------------------------------------- ------------------------------
(Signature) (Signature)
President and Chief Executive Officer Vice President Finance & Chief
Financial Officer
- ------------------------------------- ------------------------------
20
AUDITORS' REPORTS
We have audited the consolidated balance sheets of Dura Products International
Inc. (formerly Transway Capital Inc.) as at December 31, 1996 and 1995 and the
consolidated statements of earnings and deficit and changes in financial
position for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1996
and 1995 and the results of its operations and changes in its financial position
for the years then ended in accordance with accounting principles generally
accepted in Canada.
Selby & Silverstein
Chartered Accountants
Toronto, Ontario
February 21, 1997
I have audited the consolidated statements of earnings and deficit and changes
in financial position of Dura Products International Inc. (formerly Transway
Capital Inc.) for the year ended December 31, 1994. These financial statements
are the responsibility of the Company's management. My responsibility is to
express an opinion on these statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
In my opinion, these consolidated financial statements present fairly, in all
material respects, the results of the operations of the Company and the changes
in its financial position for the year ended December 31, 1994 in accordance
with accounting principles generally accepted in Canada.
Ian Campbell
Chartered Accountant
Toronto, Ontario
21
May 11, 1995
DURA PRODUCTS INTERNATIONAL INC.
(FORMERLY TRANSWAY CAPITAL INC.)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ------------------------------------------------------ ----------------- ----------------- -----------------
June 30, 1997 December 31, December 31,
(unaudited) 1996 1995
- ------------------------------------------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C>
ASSETS
- ------------------------------------------------------ ----------------- ----------------- -----------------
Current assets
- ------------------------------------------------------ ----------------- ----------------- -----------------
Cash $ 346,059 $ 12,192 $ 26
- ------------------------------------------------------ ----------------- ----------------- -----------------
Accounts receivable 72,820 32,505 31,469
- ------------------------------------------------------ ----------------- ----------------- -----------------
Inventory and Prepaid expenses 26,905 4,000 0
- ------------------------------------------------------ ----------------- ----------------- -----------------
445,784 48,697 31,495
- ------------------------------------------------------ ----------------- ----------------- -----------------
Capital assets, net (Note 3) 2,028,352 1,148,727 0
- ------------------------------------------------------ ----------------- ----------------- -----------------
Technology and other intangible assets (Note 2)
680,716 679,967 0
- ------------------------------------------------------ ----------------- ----------------- -----------------
Mining Property (Notes 2 and 4)
0 0 1
- - -
- ------------------------------------------------------ ----------------- ----------------- -----------------
$ 3,154,852 $ 1,877,391 $ 31,496
- ------------------------------------------------------ ----------------- ----------------- -----------------
LIABILITIES
- ------------------------------------------------------ ----------------- ----------------- -----------------
Current liabilities
- ------------------------------------------------------ ----------------- ----------------- -----------------
Account payable (Note 7) $ 598,324 $ 373,336 $ 83,969
- ------------------------------------------------------ ----------------- ----------------- -----------------
Accrued liabilities 69,103 350,000 0
- ------------------------------------------------------ ----------------- ----------------- -----------------
Short-term loans payable (Note 8) 0 341,177 349,519
- ------------------------------------------------------ ----------------- ----------------- -----------------
667,427 1,064,513 433,488
- ------------------------------------------------------ ----------------- ----------------- -----------------
SHAREHOLDERS' EQUITY
- ------------------------------------------------------ ----------------- ----------------- -----------------
Common shares, no par value, unlimited authorized;
17,087,447, 14,105,919 and 5,759,927 issued and
outstanding at June 30, 1997, December 31, 1996 and
1995 (Note 5) 7,579,709 4,901,150 2,372,154
- ------------------------------------------------------ ----------------- ----------------- -----------------
Deficit (5,092,284) (4,088,272) (2,774,146)
- ------------------------------------------------------ ----------------- ----------------- -----------------
$ 3,154,852 $ 1,877,391 $ 31,496
- ------------------------------------------------------ ----------------- ----------------- -----------------
</TABLE>
(see accompanying notes to consolidated financial statements)
22
DURA PRODUCTS INTERNATIONAL INC.
(FORMERLY TRANSWAY CAPITAL INC.)
CONSOLIDATED STATEMENTS OF EARNINGS AND DEFICIT
<TABLE>
<CAPTION>
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Six month Six month
period period ended
ended June June 30,
30, 1997 1996 Year ended Year ended Year ended
December December 31, December
(unaudited) 31, 1996 1995 31, 1994
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue $ $ $ $ $
------------- -------------- ------------- -------------- -------------
13,912 0 0 0 0
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Expenses
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Cost of sales 10,519 0 0 0 0
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Research and development 646,562 280,900 668,996 0 0
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
General & administration 248,278 133,720 635,351 66,628 87,470
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Sales and marketing 112,565 0 0 0 0
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Interest - short-term 0 0 9,779 27,044 24,843
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Loss on sale of investments 0 0 0 9,228 353,701
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Write-down of mining properties
(Note 4) 0 0 0 512,415 0
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Unrealized loss on investments 0 0 0 0 337,636
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Excess of book over cost on the
purchase of 155433 Canada Inc. 0 0 0 0 9,960
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Loss for the period 1,004,012 414,620 1,314,126 615,315 813,610
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Deficit, beginning of period 4,088,272 2,774,146 2,774,146 2,158,831 1,345,221
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Deficit, end of period $ 5,092,284 $ 3,188,766 $ 4,088,272 $ 2,774,146 $ 2,158,831
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Loss per share
$ (0.063) $ (0.053) $ (0.137) $ (0.107) $ (0.141)
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
Weighted average common shares
outstanding 15,956,578 7,823,019 9,564,501 5,759,927 5,759,927
- ------------------------------------ ------------- -------------- ------------- -------------- -------------
</TABLE>
(see accompanying notes to consolidated financial statements)
23
DURA PRODUCTS INTERNATIONAL INC.
(FORMERLY TRANSWAY CAPITAL INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Six month Six month
period period Year ended Year ended Year ended
ended June ended June December 31, December December
30, 1997 30, 1996 1996 31, 1995 31, 1994
(unaudited)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Operating activities
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
(Loss) for the period $(1,004,012) $ (414,620) $(1,314,126) $ (615,315) $ (813,610)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Add non-cash items:
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Amortization 18,007 0 11,166 0 0
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Loss on sale of investments 0 0 0 9,228 353,701
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Write-down of mining properties
0 0 0 512,415 0
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Unrealized loss on investments 0 0 0 0 337,636
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Excess of book over cost on
purchase of 155433 Cana 0 0 0 0 9,960
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
(986,005) (414,620) (1,302,960) (93,672) (112,313)
------------ ------------ --------------- ------------- -------------
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Financing activities
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Change in accounts payable and
accrued liabilities (55,909) 322,309 639,367 57,036 (128,534)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Change in short-term loans payable (341,177) (349,519) (8,342) (20,046) 369,565
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Change in accounts receivable
inventory and prepaid expenses (63,220) (271,466) (5,036) (1,710) (16,453)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Issuance of common shares 2,678,559 2,023,996 2,528,996 0 1,000,000
------------- ------------- --------------- ------------- -------------
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
2,218,253 1,725,320 3,154,985 35,280 1,224,578
------------ ------------- --------------- ------------- -------------
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
24
Investing activities
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Additions to capital assets (897,632) (660,730) (1,159,893) 0 0
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Technology and other intangible
assets (749) (662,222) (679,967) 0 0
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Deferred exploration expense 0 0 1 (45,280) (4,636)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Sale of tailings 0 0 0 0 20,000
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Purchase of 155433 Canada Inc. 0 0 0 0 (492,460)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Proceeds on sale of investments 0 0 0 105,000 328,323
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Purchase of investments
-----------------------------------------------------------------------
0 0 0 0 (965,000)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
(898,381) (1,322,952) (1,839,859) 59,720 (1,113,773)
------------ ------------ --------------- ------------- -------------
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Increase (decrease) in cash during
the period 333,867 (12,252) 12,166 1,328 (1,508)
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Cash (overdraft), beginning of
period 12,192 26 26 (1,302) 206
------ ----- -- ------- ---
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Cash (overdraft), end of period
$ 346,059 $ (12,226) $ 12,192 $ 26 $ (1,302)
------------ ------------- -------------- ------------- -------------
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Supplemental disclosures of cash
flow information:
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
Cash paid for interest $ 0 $ 0 $ 19,202 $ 17,621 $ 24,843
Cash paid for income taxes $ 0 $ 0 $ 0 $ 0 $ 0
- ------------------------------------ ------------- ------------- --------------- ------------- -------------
</TABLE>
(see accompanying notes to consolidated financial statements)
DURA PRODUCTS INTERNATIONAL INC.
(FORMERLY TRANSWAY CAPITAL INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997 AND
SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
These consolidated financial statements have been prepared in Canadian dollars
and in accordance with accounting principles generally accepted in Canada, which
conform, in all material respects, with accounting principles generally accepted
in the United States,
25
except as disclosed in Note 12.
In the opinion of management, the unaudited interim financial statements contain
all adjustments (consisting only of normal, recurring accruals), necessary to
present fairly, in all material respects, the financial position of the Company
as at June 30, 1997 and the results of its operations and changes in financial
position for the six month periods ended June 30, 1997 and 1996.
Effective February 6, 1997 the Company changed its name from Transway Capital
Inc. to Dura Products International Inc.
(B) PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its wholly
owned subsidiary Dura Skid Inc. ("Dura Skid"). Effective February 7, 1997
Cantech Composites Inc. changed its name to Dura Skid Inc.
(C) CAPITAL ASSETS
Capital assets are recorded at cost, with amortization being provided for on a
straight-line basis as follows:
Computer equipment and software 3 years
Furniture and equipment 5 years
Leasehold improvements term of the lease plus one renewal period
Production equipment 10 years
Amortization in the year of purchase is calculated at one-half of the annual
rate. Amortization of production equipment will commence with commercial
production.
(D) TECHNOLOGY AND OTHER INTANGIBLE ASSETS
Through its acquisition of Dura Skid Inc., the Company acquired technology,
know-how and expertise related to composite materials, which is recorded at
cost. This asset is assessed for future recoverability on an annual basis by
estimating future net undiscounted cash flows and residual values. When the net
carrying amount of an intangible asset exceeds the estimated net recoverable
amount, the asset is written down with a charge against income.
Amortization of technology and other intangible assets will be recorded on a
straight-line basis over five years, commencing with commercial production.
(E) RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. Any investment tax
credits related to these costs will be recorded as income when reasonable
assurance of recovery exists.
(F) MARKETABLE INVESTMENTS
26
Marketable investments are carried at the lower of cost and quoted market value.
The market value is the price of the most recent trade if the security traded on
the financial statement date or the "bid" price as reported by the Company's
brokers. Due to the variations in the number of securities represented and to
other factors, these prices may or may not be representative of the price which
might be obtained if the Company disposed of all of its securities on the
financial statement date.
(G) MINING PROPERTIES
Acquisition costs of mining claims together with direct exploration expenditures
thereon are deferred in the account to be amortized into income when production
is attained, or written off if disposition or abandonment occurs, or there is no
intention of further development.
(H) LOSS PER SHARE
The loss per share has been calculated using the weighted average number of
shares outstanding during the year.
(I) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments with a maturity of three
months or less when purchased to be cash equivalents and are grouped with "Cash"
on the balance sheet.
(J) USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual amounts could differ from those estimates.
(K) FINANCIAL INSTRUMENTS
Due to the short-term nature of the Company's financial instruments, the market
value approximates their carrying values.
1. BASIS OF OPERATIONS
During 1996 the Company substantially completed its research and development on
a new proprietary composite material. The Company's first product using this
material is a pallet trademarked "Duraskid". As at December 31, 1996 the company
had a working capital deficiency of $1,015,816 ($401,993 December 31, 1995). The
Company's future is dependent upon its ability to raise additional capital to
meet its obligations and to commence commercial operations (see Note 10).
2. BUSINESS ACQUISITIONS AND DIVESTITURES
Effective January 15, 1996, the Company acquired 100% of the issued and
outstanding shares of Dura Skid for $400,000. The purchase price was settled by
the issuance of
27
1,000,000 common shares of the Company. The major asset of Dura Skid was
technology, know-how and expertise. Accordingly, the $400,000 was allocated to
technology and other intangible assets along with the accumulated shareholder
deficiency of Dura Skid plus legal expenses. In addition to the $400,000
purchase price, the Company granted warrants to the shareholders of Dura Skid
which entitle the warrant holders to purchase in the aggregate, 500,000 common
shares, at a per share price of $0.40, all of which were exercised during the
year. The acquisition was accounted for using the purchase method. The breakdown
of the purchase is as follows:
Cash $ 3,801
Other current assets 13,159
Capital and other assets 13,310
Current liabilities (261,915)
----------
Net liabilities acquired (231,645)
Technology and other intangible assets acquired 631,645
----------
Purchase price $ 400,000
----------
Effective September 28, 1996, the Company sold its 100% interest in 155433
Canada Ltd. ("155433") for $2.00. 155433 owns the mining properties which had
been written down to $1.00 as of December 31, 1995 (see Note 4).
3. CAPITAL ASSETS
Capital assets consist of:
June 30, 1997 Accumulated Net Book Value
Cost Amortization
Computer equipment and software $ 83,837 $ 15,246 $ 68,591
Furniture and fixtures 48,709 7,977 40,732
Leasehold improvements 289,725 1,860 287,865
Production equipment 1,635,252 4,088 1,631,164
------------ ------------- ------------
$ 2,057,523 $ 29,171 $ 2,028,352
------------ ------------- ------------
December 31, 1996 Accumulated Net Book Value
Cost Amortization
Computer equipment and software $ 42,428 $ 7,072 $ 35,356
Furniture and fixtures 38,569 3,857 34,712
Leasehold improvements 4,745 237 4,508
Production equipment 1,074,151 0 1,074,151
------------ ------------- -------------
$ 1,159,893 $ 11,166 $ 1,148,727
------------ ------------- -------------
28
Amortization expense for the six-month period ended June 30, 1997 was $18,007
and for the year ended December 31, 1996 was $11,166. No amortization expense
was reported for any other periods.
4. MINING PROPERTIES
Prior to 1996, the Company held 13 contiguous and one isolated patented mining
claims covering approximately 189 hectares in South
Lorraine Township, Timiskaming Mining Division, Ontario which were acquired at
the following cost. These properties were acquired as part of the transaction to
purchase 155433 Canada Inc. in 1994 for $467,136, cash.
- ------------------------------------------------------ -------------------------
1995
- ------------------------------------------------------ -------------------------
Mining claims - at cost $ 482,500
- ------------------------------------------------------ -------------------------
Exploration
- ------------------------------------------------------ -------------------------
Geology 47,402
- ------------------------------------------------------ -------------------------
Taxes and fees 2,514
- ------------------------------------------------------ -------------------------
532,416
- ------------------------------------------------------ -------------------------
Less: Proceeds on sale of tailings (20,000)
- ------------------------------------------------------ -------------------------
Write-down of properties (512,415)
- ------------------------------------------------------ -------------------------
Balance (see Note 2) $ 1
---------------------
- ------------------------------------------------------ -------------------------
The Company wrote down the carrying value of the properties as it did not intend
to pursue their development. Effective September 1996, the Company disposed of
the properties (see Note 2)
5. SHARE CAPITAL
Class A Special Shares
The Class A Special Shares are voting and may be issued in one or more series.
The directors of the Company may establish, before an issue, the number of
shares to comprise each series and the designation, rights, privileges,
restrictions and conditions attached to each series and without limiting the
generality of the foregoing, the rate or amount of dividends or the method of
calculating dividends, the dates of payment, the redemption, purchase and/or
conversion prices and terms and conditions of redemption and any sinking fund or
other provisions. As at December 31, 1996 and June 30, 1997, no Class A Special
Shares had been issued.
Class B Special Shares
The Class B Special Shares are designated as redeemable, voting,
non-participating shares. No dividends shall be declared, set aside or paid on
the Class B Special Shares. As at December 31, 1996 and June 30, 1997, no Class
B Special Shares had been issued.
<TABLE>
<CAPTION>
<S> <C> <C>
Common Shares Issued
Shares Amount
--------- ---------
Balance as of December 31, 1993 759,927 $ 1,372,154
Issue of shares for cash 5,000,000 1,000,000
--------- ---------
29
Balance as of December 31, 1994 and 1995
5,759,927 2,372,154
Acquisition of Dura Skid Inc. 1,000,000 400,000
Exercise of stock options 1,725,992 892,996
Exercise of warrants 5,500,000 1,200,000
Severance payment 120,000 36,000
------- ------
Balance, December 31, 1996 14,105,919 4,901,150
Issue for cash 2,382,528 2,026,959
Exercise of stock options 599,000 651,600
------- -------
Balance, June 30, 1997 17,087,447 $ 7,579,709
---------- ------------
</TABLE>
Stock options
The Company has issued stock options pursuant to the following plans:
(i) the 1995 stock option plan was limited to 575,992 shares in the aggregate,
and restricted to directors, officers, employees and consultants of the Company.
The exercise price of any options granted may not be less than the fair market
value at the time the option is granted. Vesting provisions are at the
discretion of the board. The term of the options cannot exceed five years.
(ii) the 1996 stock option plan was limited to 1,000,000 shares in the
aggregate, and restricted to directors, officers, employees and consultants of
the Company. The exercise price of any options granted may not be less than the
fair market value at the time the option is granted. Vesting provisions are at
the discretion of the board. The term of the options cannot exceed five years.
(iii) the 1996 replacement stock option plan was limited to 2,500,000 shares in
the aggregate, and restricted to directors, officers, employees and consultants
of the Company and its subsidiaries and other designated persons as designated
from time to time by the board. The exercise price of any options granted may
not be less than the fair market value at the time the option is granted.
Vesting provisions are at the discretion of the board. The term of the options
cannot exceed five years. This plan was subsequently amended to increase the
limit of shares from 2,500,000 to 5,000,000 shares in the aggregate.
<TABLE>
<CAPTION>
The following is a continuity of stock options outstanding:
Price per share Number
--------------- ------
<S> <C> <C>
Granted in 1995 at: $0.50 575,992
Granted during 1996 at: $0.50 1,000,000
Granted during 1996 at: $0.70 1,300,000
Exercised during 1996 at: $0.50 (1,575,992)
Exercised during 1996 at: $0.70 (150,000)
----- ----------
Balance, at December 31, 1996 at: $0.70 1,150,000
Granted during 1997 at: $1.10 577,000
Granted during 1997 at: $4.00 55,000
Exercised during 1997 at: $0.70 (417,000)
Exercised during 1997 at: $1.10 (127,000)
Exercised during 1997 at: $4.00 (55,000)
----- ----------
Balance, at June 30 at: $0.70 and $1.10 1,183,000
--------------- ----------
</TABLE>
Of the total options outstanding, 733,000, issued with an excercise price of
$0.70 per share expire on June 27, 2001, and 450,000, issued with an exercise
price of $1.10 per share expire on January 27, 2002. All options are currently
excercisable.
<TABLE>
<CAPTION>
<S> <C> <C>
Warrants
The following is a continuity of warrants outstanding:
Price per share Number
--------------- ------
Issued in 1994 at: $0.20 5,000,000
Issued during 1996 at: $0.40 500,000
Exercised during 1996 at: $0.20 (5,000,000)
30
Exercised during 1996 at: $0.40 (500,000)
----- ---------
Balance at December 31, 1996 nil nil
Issued during 1997 at:
Issued during 1997 at: $0.90 1,782,612
$1.10 600,000
----- ---------
Balance at June 30, 1997 $0.90 and $1.10 2,382,612
=========
</TABLE>
6. INCOME TAXES
As at December 31, 1996, the Company had operating losses of approximately
$2,334,800 available to offset future taxable income. The potential tax savings
of these losses have not been recognized in these financial statements. These
losses expire according to the following schedule:
December 31, 1997 $ 44,087
December 31, 1998 35,342
December 31, 1999 35,314
December 31, 2000 30,756
December 31, 2001 112,113
December 31, 2002 325,672
December 31, 2003 1,751,484
In addition, the Company has available capital losses of approximately
$2,022,000, which may be applied against future capital gains. These losses do
not expire. The potential tax savings of these losses have not been recognized
in these financial statements.
7. COMMITMENTS
The Company leases its premises and some office equipment. The lease for
premises is an operating lease. Office equipment is under capital lease. The
minimum lease payments for each of the next five years is as follows:
Operating leases Capital leases
---------------- --------------
1997 $ 97,128 $ 4,953
1998 159,012 1,971
1999 168,874 542
2000 148,060 0
less imputed interest (0) (1,069)
------------ --------
$ 573,074 $ 6,397
------------ --------
Capital leases are included with accounts payable and accrued liabilities.
Operating lease expense for the six-month period ended June 30, 1997 was $41,070
and for the year ended December 31, 1996 was $82,140.
The Company is subject to the payment of royalties to unrelated third parties on
product sales utilizing specific technologies. The payment of these royalties is
contingent upon the determination of the usage of these specific technologies.
8. SHORT TERM LOANS PAYABLE
31
Short-term loans payable are promissory notes payable repayable on demand. The
notes are non-interest bearing. Subsequent to year-end these notes were
refinanced through the completion of private placements (see Note 10).
9. CONTINGENCIES
During the year, the Company was notified of a filing of a statement of claim
against the Company and its former President pertaining to an alleged agreement
to complete a private placement for shares of the Company. Management and the
company's legal counsel were of the opinion that such an agreement, if any, was
solely between the plaintiff and the former President. The former President
agreed to indemnify the Company from any judgment regarding this action. Since
discovery of the plaintiff, no steps have been taken to pursue the claim.
10. SUBSEQUENT EVENTS
The Company completed the following financial arrangements:
(a) Signed a master lease agreement for up to $3.1 million for extrusion
equipment and related components with Bombardier Finance Inc. In August
and September 1997 two drawdowns were made for approximately $1.5 million
in the aggregate.
(b) During August 1997, 2,094,212 warrants were exercised for 2,094,212 common
shares. The Company received net cash proceeds of approximately $1.7
million.
(c) During August 1997, 111,000 stock options were exercised for 111,000 common
shares. The Company received cash proceeds of $77,000.
(d) On September 23, 1997 the Company signed a joint venture agreement with
Wood Recyclers, Inc. to establish a manufacturing, sales and distribution
facility to service the New England states. The Company will own 51% of the
joint venture.
11. COMPARATIVE FIGURES
Certain prior years' comparative figures have been reclassified to conform to
the current year's presentation.
12. RECONCILIATION OF ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN CANADA AND
THE UNITED STATES The Company's accounting principles do not differ materially
from accounting principles generally accepted in the United States ("US GAAP")
except as follows:
32
(a) Income taxes
The Financial Accounting Standards Board has issued Statement 109 ("FAS 109"),
Accounting for Income Taxes. This standard uses the liability method to
calculate the income tax provision for reporting purposes. The Company adopted
FAS 109, for US GAAP purposes, effective January 1, 1993. Due to the significant
uncertainty relating to the Company's ability to utilize the loss carry-forwards
to offset taxable income, a valuation allowance equal to the net deferred tax
asset was provided for. Accordingly, no differences arise between FAS 109 and
Canadian generally accepted accounting principles.
(b) Deferred exploration expenses
US GAAP requires that exploration expenses be expensed in the year incurred. In
1994 and 1995 such expenses were incurred. Prior to 1994 all such expenses had
been written off and accordingly for the periods presented herein there is no
impact.
(c) Statement of changes in financial position
During the year ended December 31, 1996 several non-cash transactions occurred
which for US GAAP purposes should be excluded from the statement. These
transactions include:
(i) the acquisition of Dura Skid Inc. The purchase price was settled
with the issuance of share capital. Accordingly, the purchase has been
reflected in investing activities and the issuance of share capital as
a financing activity, in the amount of $400,000;
(ii) share capital was issued for $36,000 as part of a severance
payment both of which were reflected as financing activities;
(iii) capital assets of $9,973 were acquired under capital leases.
These were reflected as investing and financing activities.
Since these non-cash transactions are pervasive throughout the statement, a
separate statement of changes in financial position has been prepared using US
GAAP, which is set out below.
(d) Business acquisition
The acquisition of Dura Skid Inc. in January 1996 (refer to Note 2) was settled
by way of common shares and share purchase warrants. Under US GAAP the share
purchase warrants must be valued and included in the purchase price. The value
ascribed to the warrants, as determined under the Black-Scholes model, was
$85,000, which would be added to Technology and other intangible assets. For the
periods ended December 31, 1996 and June 30, 1997 there is no impact on the
statements of earnings and deficit.
(e) Stock options
The Company has elected to follow ABP Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25") in accounting for its stock option plans. Under
APB 25 no compensation expense has been recognized. Statement of Financial
Accounting Standards No. 123 ("FAS 123"), Accounting and Disclosure of
Stock-Based Compensation, has been issued. For a description of the option plans
reference should be made to Note 5. The assumptions used in the Black-Sholes
model are as follows: the risk free interest rate used was 4%; expected
dividends was 0%; expected life ranged from .08 to 2.5; and expected volatility
ranged from .936 to 2.545. The weighted-average grant date fair value of options
granted during 1997 was $0.61; during 1996 was $0.27; and during 1995 was $0.32.
The pro-forma effect of the options granted under the option plans is presented
below.
(f) Earnings per share
Statement of Financial Accounting Standards No. 128 ("FAS 128"), Earnings per
Share, has been issued. Due to the fact there are no common stock equivalents
for the periods presented, basic earnings (loss) per share under FAS 128 would
be equal to the primary earnings (loss) per shares numbers presented below.
Statement of Earnings and Deficit
33
<TABLE>
<CAPTION>
- ------------------------------------------- --------------- ---------------- --------------- ---------------
PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
JUNE 30/97 JUNE 30/96 DEC 31/96 DEC 31/95
- ------------------------------------------- --------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Loss for the period as reported under
Canadian GAAP $ 1,004,012 $ 414,620 $1,314,126 $ 615,315
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Add back write down of mining properties
0 0 0 (512,415)
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Deduct exploration expenses incurred
during the period 0 0 0 45,280
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Loss for the period as reported under US
GAAP 1,004,012 414,620 1,314,126 148,180
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Deficit, beginning of period 4,088,272 2,774,146 2,774,146 2,625,996
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Deficit, end of period $5,092,284 $3,188,711 $4,088,272 $2,774,146
- ------------------------------------------- --------------- ---------------- --------------- ---------------
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Loss per share $ (0.063) $ (0.053) $ (0.137) $ (0.026)
--------------- ---------------- --------------- ---------------
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Pro-forma disclosures under FAS 123
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Loss $1,389,802 $1,040,620 $ 1,940,126 $ 332,497
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Loss per share $ (0.087) $ (0.133) $ (0.203) $ (0.058)
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Statement of Changes in Financial Position
- ------------------------------------------- --------------- ---------------- --------------- ---------------
PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
JUNE 30/97 JUNE 30/96 DEC 31/96 DEC 31/95
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Operating activities:
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Loss for the period as reported under US
GAAP (1,004,012) (414,620) (1,314,126) (148,180)
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Add non-cash items:
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Amortization 18,007 0 11,166 0
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Loss on sale of investments 0 0 0 9,228
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Change in account payable and accrued
liabilities (55,909) 275,061 592,119 57,036
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Change in short-term loans payable
(341,177) (528,186) (187,009) (20,046)
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Change in accounts receivable inventory
and prepaid expenses (63,220) (258,307) 8,123 (1,710)
- ------------------------------------------- --------------- ---------------- --------------- ---------------
(1,446,311) (926,052) (889,727) (103,672)
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Financing activities:
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Bank indeptedness 0 12,226 0 (1,302)
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Issuance of common shares 2,678,559 1,587,996 2,092,996 0
- ------------------------------------------- --------------- ---------------- --------------- ---------------
2,678,579 1,600,222 2,092,996 (1,302)
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Investing activities:
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Additions to capital assets (897,632) (656,145) (1,155,308) 0
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Mining properties and investments
0 0 1 105,000
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Technology and other intangible assets
(749) (21,852) (39,597) 0
- ------------------------------------------- --------------- ---------------- --------------- ---------------
(898,381) (677,997) (1,194,904) 105,000
- ------------------------------------------- --------------- ---------------- --------------- ---------------
34
Net increase (decrease) in cash during
the period 333,867 (3,827) 8,365 26
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Cash, beginning of period 12,192 3,827 3,827 0
- ------------------------------------------- --------------- ---------------- --------------- ---------------
Cash, end of period 346,059 0 12,192 26
- ------------------------------------------- --------------- ---------------- --------------- ---------------
</TABLE>
35
INDEX TO EXHIBITS
*1.1 Articles of Incorporation as Amended
*1.2 By-laws
*3.1 Share Exchange Agreement dated as of January 15, 1996 by and between the
Company and its wholly-owned subsidiary Dura Skid, Inc.
*3.2 Lease Agreement dated as of November 1, 1995 between Carrier Drive
Development Ltd. and the Company
*3.3 Shareholder Rights Agreement dated as of April 23, 1997 between the
Company and the R-M Trust Company
*3.4 Employment Agreement by and between Keith Carrigan and the Company dated
May 1, 1995
*3.5 Employment Agreement by and between Carl McMurray and the Company dated
January 1, 1997
*3.6 Employment Agreement by and between Weining Song and the Company dated
August 7, 1996
*3.7 1996 Stock Option Plan
3.8 Master Lease Agreement by and between Bombardier Finance, Inc. and the
Company dated August 12, 1997.
3.9 Joint Venture Agreement by and between Dunraskid New England, L.L.C.,
Duraskid and Products, Inc., Environmental Composite Products L.L.C. and
the Company dated September 23, 1997
3.10 Technology License Agreement by and between Duraskid New England L.L.C.
and the Company dated October 15, 1997
3.11 Stock Option Agreement by and between Environmental Composite Products
L.L.C. and the Company dated October 15, 1997
11.0 Computation of Earnings Per Share
____________________
* Previously filed.
EXHIBIT 3.8
-----------
MASTER LEASE AGREEMENT
(CAPITAL LEASE)
THIS LEASE AGREEMENT executed in the City of Etobicoke on the 12th day
of August 1997.
BETWEEN:
DURA SKID INC., a company duly constituted under the
laws of the Province of Ontario and having its
principal place of business at 60 Carrier Drive,
Etobicoke, Ontario, Canada M9W 5R1
(the "LESSEE")
AND:
BOMBARDIER FINANCE INC, a company duly constituted
under the laws of the Province of Alberta and having
a place of business at 6815-A 40th Street South East,
Calgary, Alberta, Canada T2C 2W7
(the "LESSOR")
--------------------------------------------------
WHEREAS the Lessor, at the request and upon the instructions of the
Lessee and conditional upon the execution of this Agreement, has agreed to
purchase the Equipment (as hereinafter defined) for the sole purpose of leasing
the said Equipment to the Lessee for Lessee's use in its business or enterprise
in accordance with the terms and conditions of this Agreement;
WHEREAS the Lessee acknowledges that the Lessor is neither the
manufacturer, dealer or distributor of the Equipment nor an expert with respect
thereto, and that the Manufacturer and the Equipment have been selected by the
Lessee;
WHEREAS the Lessee desires to lease the Equipment from the Lessor and
the Lessor desires to lease the same to the Lessee, at the Rental (as
hereinafter defined), payable as set forth herein and subject to and upon the
terms and conditions hereinafter provided; and
WHEREAS the Lessor, as a condition of (i) its leasing to the Lessee the
Equipment and (ii) entering into this Agreement with the Lessee, has required
the Guarantor to provide to the Lessor the Guarantee (as hereinafter defined)
and the Guarantor desires to provide the foregoing;
NOW THEREFORE, in consideration of the premises and of the Rentals to
be paid and the mutual covenants hereinafter provided to be observed and
performed by the Lessee, the Lessor hereby agrees to lease to the Lessee and the
Lessee hereby agrees to lease from the Lessor, for the Term (as hereinafter
defined), the Equipment, subject to and upon the following terms and conditions
and, in consideration of the premises and the mutual covenants hereinafter
provided to be observed and performed, the Lessor and the Lessee hereby agree as
follows:
1. DEFINITIONS AND INTERPRETATION
1.1 The following terms and expressions, whenever used in this Lease Agreement
including the preamble hereof, or any Schedules, Supplement or Appendix hereto
or thereto, shall, unless the context otherwise requires, have the following
meanings, and such meanings shall be equally applicable to both the singular and
the plural forms of the terms defined:
"ACCEPTANCE CERTIFICATE" means an acceptance certificate issued as provided in
Clause 3 and substantially in the form set forth in Schedule 2 hereof;
2
"AGREEMENT" means this Lease Agreement together with the recitals and schedules,
supplements and appendices (which form an integral part hereof) as originally
executed or to be executed by the parties hereto, as the same may be amended,
modified or supplemented from time to time in accordance with the terms hereof
or as rights or obligations hereunder may be assigned or transferred from time
to time in accordance with the terms hereof;
"BREAKAGE COSTS" mean the amount equal to the financial cost, if any, incurred
or engaged or to be incurred or engaged by the Lessor, directly arising out of
the payment to the Lessor of the Casualty Value (as defined in Clause 7.4
hereof) for the Equipment or any Unit thereof or of the Stipulated Loss Value,
as the case may be, or any part thereof, including, but without limiting the
generality of the foregoing, the financial cost of unwinding any funding
relating to the Purchase Price or the Purchase Price per Unit, as the case may
be, or any part thereof, liquidating or redeploying deposits or swaps or
reinvesting such funds, including its own funds where such amount of money shall
be calculated as at the date of the actual payment by the Lessee of the
aforesaid Casualty Value or Stipulated Loss Value, as the case may be, or any
part thereof payable under this Agreement as a result of the same event which
has resulted in such costs being or to be incurred or engaged by the Lessor. The
Lessor shall use reasonable efforts to minimize such costs;
"BUSINESS DAY" means any day, excluding Saturday, Sunday and any other day which
shall be in the City of Toronto, Province of Ontario, a legal holiday or a day
on which the principal financial institutions therein are required by law or by
local proclamation to close;
"CONTAMINANT" means any contaminant, pollutant, dangerous substance, waste,
toxic substance, special waste or hazardous substance as defined, judicially
interpreted or identified as such in or pursuant to any applicable law;
"DEFAULT RATE" means the rate of interest specified in Clause 5.2 hereof;
"DELIVERY DATE" means a Business Day on which the Equipment or any Unit thereof
is delivered to and accepted by the Lessee under this Agreement;
"DELIVERY LOCATION" means the location specified in the Acceptance Certificate;
"DOLLARS" means the lawful money of Canada;
"EQUIPMENT" means and includes the equipment specified and described in a Lease
Supplement and the Parts thereof (each such unit being referred to as a Unit),
the total Purchase Price of which shall not exceed $3,100,000.00;
"EVENT OF DEFAULT" means any of the events or circumstances set out in Clause 15
hereof;
"EVENT OF LOSS" means, in relation to a Unit or, where applicable, the
Equipment, any of the following events:
(a) actual, constructive or agreed total loss of such Unit;
(b) the destruction or damage of the Unit rendering it unfit for its
use by the Lessee in its commercial operations if repair is, in the
reasonable opinion of the Lessor, uneconomic;
(c) the disappearance or theft of the Unit which results in a loss of
possession or use thereof by the Lessee for a period in excess of
thirty (30) consecutive days;
(d) the condemnation, confiscation, seizure or possession of a Unit for
a period of more than thirty (30) consecutive days or the requisition
for use or hire of the Unit (other than as referred to in (e)) for a
period of more than thirty (30) consecutive days by any government;
(e) requisition of title, forfeiture or any compulsory acquisition
whatsoever of the Unit (otherwise than by requisition for use or hire)
by any governmental or competent authority or by any person acting or
purporting to act by authority of the same and whether de jure or de
facto for a period in excess of thirty (30) days;
(f) the non-use of the Unit for a period of thirty (30) days as a
result of action by any governmental or competent authority.
"FINAL PAYMENT DATE" means, for any specific Unit, the date specified in the
Lease Supplement related to such Unit;
"FIRST PAYMENT DATE" means for any specific Unit, the date on which the first
Rental is payable, which date is specified in the Lease Supplement related to
such Unit;
"GUARANTEE" means the guarantee to be executed by the Guarantor, substantially
in the form set forth in Schedule 4 hereof;
"GUARANTOR" means the Dura Products International Inc.;
3
"INTEREST" means the interest specified in Clause 5.2 hereof;
"LAST RENTAL" means the amount of the Rental referred to in Clause 5.1 and
specified in the Lease Supplement;
"LEASE SUPPLEMENT" means a lease supplement in relation to this Agreement,
substantially in the form and substance set forth in Schedule 1 hereto, to be
entered into between the Lessor and the Lessee on or before the Lease
Commencement Date;
"LEASE COMMENCEMENT DATE" means, with respect to each specific Unit, the date
the Lessor acquires title to the Equipment or such other date agreed between the
parties, such date to be specified in a Lease Supplement;
"LEASE TERMINATION DATE" means, with respect to a Unit, the date specified in a
Lease Supplement, except as otherwise specified in the Lease Agreement;
"LEGAL OPINION" means a legal opinion to be issued to the Lessor and to its
legal counsel by the Lessee's legal counsel, the content of the said legal
opinion to be acceptable to the Lessor and to its legal counsel;
"LESSEE'S LETTER OF CREDIT" means one (or more than one) irrevocable letter of
credit to be issued by a Canadian banking institution acceptable to the Lessor,
at the request of the Lessee, for an amount equal to thirty-five percent of the
Purchase Price of the Equipment leased hereunder, the provisions of which to be
acceptable to the Lessor and to remain valid throughout the Term, and which,
providing absence of an Event Default, may be reduced as specified a each Lease
Supplement;
"LESSOR'S INTEREST" means Lessor's ownership, title to and property interest in
the Equipment and each Unit;
"LOST UNIT" means a Unit of the Equipment referred to in Clause 7 hereof;
"MANUFACTURER" means the Person specified in the relevany Lease Supplement;
"OPTION TO PURCHASE" means the Option to Purchase the Equipment as set out in
Clause 18 of this Agreement;
"PART" or "PARTS" means all appliances, components, accessories, instruments,
modules, parts, appurtenances, accessories, furnishings or other equipment of
any kind (other than a complete Unit) which may from time to time be
incorporated or installed in or attached to the Equipment or any Unit;
"PAYMENT DATE" means the date specified in a Lease Supplement;
"PERSON" means any natural person, partnership, unincorporated association,
corporation, trustee, joint venture, public utility and governmental body,
however constituted or designated;
"PRIME RATE" means the rate of interest established from time to time by the
Canadian Imperial Bank of Commerce as its reference rate then in effect for
determining interest rates for commercial loans made by said bank in Canadian
Dollars expressed as an annual rate;
"PURCHASE OPTION DATE" means, for a Unit, the date specified in Clause 18 of
this Agreement;
"PURCHASE OPTION PRICE" means for each Unit, the purchase price payable by the
Lessee upon the exercise of the Option to Purchase on the Purchase Option Date
as set out in Clause 18 of this Agreement;
"PURCHASE PRICE" means the sum paid by the Lessor to acquire the Equipment and
specified in the relevant Lease Supplement or such other amount which may be
mutually agreed by the parties;
"PURCHASE PRICE PER UNIT" means the sum specified in the relevant Lease
Supplement or such other amount which may be mutually agreed by the parties;
"RENTAL" means, with respect to a Unit, the amount of money referred to in
Clause 5 hereof and set forth in a
Lease Supplement;
"REPURCHASE AGREEMENT" means a repurchase agreement to be entered into between
the Lessor and the Lessee, upon terms and conditions acceptable to the Lessor,
substantially in the form and substance set forth in Schedule 6 hereto;
"SECURITY INTEREST" means any mortgage, privilege, encumbrance, charge, lien or
any security interest whatsoever, howsoever created or arising;
"STIPULATED LOSS VALUE" at any date means, with respect to the Equipment or to
any Unit thereof as the case may be, the amount determined in accordance with
Appendix "A" to a Lease Supplement, to be completed by the Lessor in accordance
with its normal rental/leasing practice;
"SUCCESSOR CORPORATION" has the meaning ascribed to it in Clause 10.2.7 hereof;
"TERM" means, with respect to each Unit, the period of time commencing on the
Lease Commencement Date referred to in Clause 3.1 and specified in a Lease
Supplement and expiring on and including the Lease Termination Date, the whole
as morefully set forth in a Lease Supplement;
4
"THIS AGREEMENT", "HERETO", "HEREIN", "HEREOF", "HEREBY", "HEREUNDER" and
similar expressions refer to this Lease Agreement and not to any particular
clause, sub-clause, paragraph or other portion hereof, and include any and every
instrument supplemental or ancillary hereto or in implementation hereof
(including without restriction, all schedules referred to herein or therein and
attached hereto or thereto);
"UNIT" means one unit forming part of the Equipment.
1.2 The Schedules and the Lease Supplement referred to herein and attached
hereto or to any Lease Supplement are an integral part of this Agreement.
1.3 The headings of Articles, Clauses, Subclauses or paragraphs herein and the
Table of Contents are inserted for convenience only and shall not affect the
construction or interpretation of this Agreement.
1.4 In this Agreement, unless otherwise specifically provided, the singular
includes the plural and vice versa, "month" means calendar month, and "in
writing" or "written" includes printing, typewriting or any electronic means of
communication, capable of being visibly reproduced at the point of reception,
including by telecopy.
1.5 Each accounting term used in this Agreement has the meaning assigned to it
under generally accepted accounting principles in Canada unless otherwise
defined herein and reference to any balance sheet item or income statement item
means such items as computed from the applicable statement prepared in
accordance with generally accepted accounting principles in Canada.
1.6 Unless otherwise indicated in this Agreement, any reference to a time shall
mean local time in the city of Toronto, Province of Ontario, Canada.
1.7 Any act or deed required to be observed, performed or done hereunder falling
on a day other than a Business Day shall be observed, performed or done on the
next succeeding Business Day.
1.8 Any reference in this Lease Agreement to any statute, rule, regulation or
provision thereof shall be deemed to be a reference to such statute, rule
regulation or provision as amended, re-enacted, substituted for or replaced from
time to time. Any reference in this Agreement to an agreement shall be deemed to
be, except as otherwise expressly provided, a reference to such agreement as
amended, modified or supplemented from time to time.
2. AGREEMENT TO LEASE
2.1 Subject to and conditional upon the observance and performance by the
Lessee, to the entire satisfaction of the Lessor, of the Lessee's obligations
under this Agreement or pursuant hereto, and to the execution by the Lessee of
the Lease Supplement(s) as contemplated herein, the Lessor hereby agrees to
lease the Equipment to the Lessee and the Lessee agrees to lease and to accept
the Equipment from the Lessor, for the Term, on the terms and subject to the
conditions set out in this Agreement.
3. DELIVERY AND ACCEPTANCE
3.1 Delivery and acceptance of the Equipment shall take place on the Delivery
Date at the Delivery Location, or such other location as the Lessor and the
Lessee may agree upon in writing. Immediately upon such delivery and acceptance,
the Lessee shall become liable to pay to the Lessor the Rental for the Units so
delivered in accordance herewith (the "LEASE COMMENCEMENT DATE") and as more
fully specified in the relevant Lease Supplement.
3.2 Concurrently with the delivery and acceptance of the Equipment or of any
Unit thereof pursuant to Clause 3.1, the Lessee shall execute the Lease
Supplement and the Acceptance Certificate relating thereto and deliver same to
the Lessor. Each Lease Supplement creates a lease by Lessee from Lessor of the
Equipment described therein for the Term and the Rentals and upon the terms and
conditions of this Master Lease Agreement.
3.3 Execution and delivery of a Lease Supplement and of an Acceptance
Certificate for any Unit by the Lessee shall evidence and constitute
irrevocable, final and conclusive acceptance of such Unit by the Lessee for all
purposes hereof and shall irrevocably confirm that such Unit is satisfactory in
all respects and complies with the requirements of this Agreement.
5
4. INSIGNIA, LOGO, REGISTRATION AND LICENSING
4.1 The Lessee shall neither paint, affix or otherwise apply nor allow any
Person to paint, affix or otherwise apply on the Equipment the name, initials or
any other insignia or logo of any Person, other than the Lessor, as a
designation of ownership. Notwithstanding the foregoing provisions of this
Clause 4.1, the Lessee may cause the Equipment to be lettered with the names or
initials or other insignia or logo customarily used by the Lessee on equipment
of the same or a similar type used by the Lessee for convenience of
identification of the rights of the Lessee to use the Equipment as permitted
under this Agreement and in conformity with all applicable laws and regulations.
4.2 The Lessee shall make the registrations, filings, deposits and recordings in
respect of this Agreement and the Equipment at the Lessee's sole cost and
expense. The Lessor shall be identified on each such registering, filing,
depositing and recording as the owner of the Equipment leased to the Lessee
pursuant to a long-term lease agreement. The Lessee shall forthwith furnish to
the Lessor, unless done by the Lessor on behalf and at the costs of the Lessee,
certified copies or other evidence, in form and substance satisfactory to the
Lessor, of all such registering, filing, depositing and recording on or before
the delivery of the Equipment and on every anniversary thereof and any renewal
thereof.
5. RENTALS, DEFAULT INTEREST AND LOSS OF EQUIPMENT
5.1 Subject to the other terms and conditions of this Lease Agreement, the
Lessee covenants and agrees to pay to the Lessor the Rentals specified in the
Lease Supplement related to the Unit or Equipment;
5.2 Upon a default in payment of any Rental, or of any other amounts payable by
the Lessee pursuant to this Lease Agreement, Interest thereon (i) shall be
payable on demand and (ii) shall accrue at the annual rate of 15% or five
percent (5%) above the Prime Rate whichever is the higher, together with
interest on all overdue interest and on all other sums due by the Lessee
hereunder at the same increased rate from the date of such default for so long
as such default shall continue, before and after demand and judgment (the
"Default Rate").
6. TITLE
6.1 It is hereby agreed that this Lease Agreement is a true lease agreement and
that notwithstanding delivery of the Equipment to the Lessee hereunder or any
other matter whatsoever, the Lessor shall retain the Lessor's Interest, and
ownership and title to the Equipment shall be reserved to the Lessor.
Notwithstanding the foregoing, all risk of loss of, or damage to the Equipment
shall pass to and shall be borne by the Lessee as of the Delivery Date of the
Unit(s). No right, title or interest in the Equipment shall pass to the Lessee
other than, conditional upon the Lessee's compliance with and fulfillment of the
terms and conditions of this Lease Agreement, the right to maintain possession
and use the Equipment for the Term. The Lessee, at its expense, will protect and
defend the Lessor's title to the Equipment from and against all claims, liens
and legal process of creditors of the Lessee and take such action as is
necessary to discharge any such claim, lien, or legal process.
7. PAYMENT
7.1 All payments to be made and other charges to be paid pursuant to this Lease
Agreement shall be made in Canadian Dollars, for value on the day such amount is
due and if such day is not a Business Day, on the Business Day next succeeding,
by payment or transfer of immediately available funds to the Lessor at the bank
or location advised by the Lessor to the Lessee.
AL payment to be made and other charges to be paid pursuant to this
Lease Agreement shall be remitted by the Lessee to the Lessor in cash or by bank
transfer as follows:
Bombardier Finance Inc.
1600 MountainView Drive
Colchester, Vermont
USA 05446
6
7.2 The Lessee shall pay the Rentals, and any other amounts owing hereunder on
the due date thereof. Notwithstanding anything herein contained or the
provisions of any statute or law, or the provisions of any other agreement
between the Lessor and the Lessee, the obligations of the Lessee to pay such
Rentals and other amounts shall be absolute and unconditional under all
circumstances, including, without limiting the generality of the foregoing,
damage to or the loss, theft or destruction of the Equipment, or any Unit, Parts
or accessories thereof, from any reason or cause whatsoever (subject to the
provisions of Clause 7.4 hereof). The Lessee shall have no right or claim
whatsoever, present or future, against the Rentals or other payment due
hereunder and agrees to pay the Rentals and other amounts to become due
hereunder regardless of any claim in the nature of an abatement, reduction,
set-off or compensation or otherwise which may be asserted by Lessee or on its
behalf.
7.3 Except as otherwise expressly provided herein, this Agreement shall not
terminate, nor the respective obligations of the Lessor or the Lessee be
otherwise affected as a result of: any defect in the title, condition, operation
or fitness for use of, or any damage to, or loss of possession or use of, or
destruction of, all or any of the Units or of the Equipment from whatsoever
cause; the prohibition of or other restriction against the use of all or any of
the Units by the Lessee or any other Person or the interference with such use by
any Person; the invalidity or unenforceability or lack of due authorization of
this Agreement or any other document or instrument referred to herein; any
breach, fundamental or otherwise, by the Lessor of any of the representations,
warranties or covenants of the Lessor contained herein; or any other cause
whether similar or dissimilar to the foregoing, any present or future law to the
contrary notwithstanding, it being the intention of the parties hereto that the
Rentals and other amounts payable by the Lessee hereunder shall continue to be
due and payable in all events in the manner and at the times herein provided
unless the obligation to pay the same shall be terminated pursuant to the
express provisions of this Agreement.
7.4 Upon the occurrence of an Event of Loss with respect to any Unit (a "LOST
UNIT") at any time hereunder, the Lessee shall, promptly after it shall have
determined that an Event of Loss has occurred, notify the Lessor thereof. The
obligation of the Lessee to pay the Rentals shall continue without abatement
regardless of the occurrence of such Event of Loss. The Lessee shall pay to the
Lessor, on the earlier of the next succeeding Payment Date (or in the event such
Payment Date will occur within 5 days after such notification, on the following
Payment Date) or upon the receipt of the insurance indemnity (such date being
hereinafter called a "CASUALTY PAYMENT DATE") a sum equal to the CASUALTY VALUE
(as hereinbelow defined in this Clause) of such Unit suffering an Event of Loss
as of the date on which such payment is made (regardless of the date on which
the determination that the Unit has suffered an Event of Loss is made) together
with all relevant taxes and Breakage Costs and the Lessor will promptly furnish
or cause to be furnished to the Lessee, as and if needed, revised Appendices "A"
and "B" which shall form part of the relevant Lease Supplement.
Upon payment by the Lessee to the Lessor of the Casualty Value of any
Unit of Equipment having suffered an Event of Loss, and in the absence of any
Event of Default existing and continuing hereunder, and of the other amounts, if
any, due hereunder, the Lessor's Interest in such Unit will terminate and the
Lessee or its insurers, as the case may be, shall have the absolute right to the
possession of, title to, and property in such Unit without further transfer or
action on the part of the Lessor, except that the Lessor, if requested by the
Lessee, will execute and deliver to the Lessee, at the expense of the Lessee, a
bill of sale in the form set forth in Schedule 3 hereto and such other documents
requested by the Lessee, acting reasonably, in order to perfect such transfer.
The CASUALTY VALUE of each Unit of the Equipment suffering an Event of
Loss shall be deemed to be the Stipulated Loss Value with respect to such Unit
on the Payment Date immediately following the Casualty Payment Date.
For better certainty and notwithstanding any of the foregoing, the
Lessee shall, on the Payment Date of the Last Rental, pay to the Lessor the
Casualty Value, determined as aforesaid, of each Unit which has suffered or be
the subject of an Event of Loss during the Term and in respect of which the
Lessee has not previously paid the said Casualty Value pursuant to this Clause
7.
7
8. CONDITIONS PRECEDENT
8.1 The obligations of the Lessor hereunder and under any Lease Supplement are
subject to the following conditions precedent being fulfilled to the
satisfaction of, or waived in writing by, the Lessor:
8.1.1 the receipt by the Lessor from the Lessee contemporaneously with
the signing hereof of the following:
(a) three duly executed originals of this Agreement;
(b) three duly executed originals of the Guarantee;
(c) three originals Legal Opinion;
(d) one certified copy of the certificate of incorporation
and by-laws of the Lessee;
(e) one certified copy of the certificate of incorporation
and by-laws of the Guarantor;
(f) certificate of the Lessee setting forth specimen
signatures of the individuals authorized to sign on
its behalf this Lease Agreement and the instruments,
agreements, certificates, papers and other documents
provided for or contemplated herein;
(g) a certificate of the Guarantor setting forth specimen
signatures of the individuals authorized to sign on
the Guarantee and the instruments, agreements,
certificates, papers and other documents provided for
or contemplated therein;
(h) a Certificate of Status with respect to the Lessee;
(i) a Certificate of Status with respect to the Guarantor;
(j) a certified copy of a resolution of the Lessee
authorizing the transactions contemplated by the Lease
Agreement and authorizing the Lessee's Letter of
Credit and authorizing the signatories to execute the
documentation on its behalf;
(k) a certified copy of a resolution of the Guarantor
authorizing the Guarantee and authorizing the
signatories to execute the documentation contemplated
thereby;
(l) Release, waiver and discharge of any third party who
may be claiming a security interest in or on the
Equipment or encumbrances affecting the Equipment (if
applicable) and evidence of registration thereof;
(m such other documents the Lessor may reasonably
request;
(n) payment of the legal fees and expenses of the Lessor.
8.1.2 the receipt by the Lessor from the Lessee, on or before each
Delivery Date, of the following:
(a) a timely notice of the forthcoming delivery of the
Equipment specifying the particulars of the Units, the
Purchase Price per Unit, their respective serial
numbers and such other information the Lessor may
request from the Lessee;
(b) the Lease Supplement and the Acceptance Certificate(s)
as required by Clause 3.2 hereof, duly executed by the
Lessee;
(c) the original of the Lessee's Letter of Credit;
(d) evidence of the insurance specified in Clause 13 of
this Agreement;
(e) evidence of the registrations, filings, deposits and
recordings as required by Clause 4.2 of this
Agreement;
(f) Release, waiver and discharge of any liens or
encumbrances;
8.1.3 the Lessor having acquired title to the Equipment from the
Manufacturer or from other Person, as the case may be, free and clear
of any Security Interest.
8.2 The terms and conditions of Clause 8.1 are inserted for the sole benefit of
the Lessor and may be waived by the Lessor only, in writing, in whole or in
part, with or without terms or conditions, without prejudicing the rights of the
Lessor to assert such terms and conditions in whole or in part. If any of the
said conditions are outstanding on the Delivery Date, the Lessor shall not be
under any obligation under this Agreement and shall not incur any liability
hereunder or at law, and the Lessee agrees and undertakes
8
to indemnify the Lessor and hold the Lessor harmless in respect of any losses,
damages, charges or liabilities, including, without limiting the generality of
the foregoing, to pay to the Manufacturer of the Equipment the equivalent of the
Purchase Price or such other amounts specified in the Manufacturer's invoice
(s), which the Lessor may incur as a result of the Lessee's failure to comply
with the terms and conditions of this Agreement.
9. LESSOR'S REPRESENTATIONS, WARRANTIES AND DISCLAIMER
9.1 The Lessor hereby represents and warrants as follows:
(a) The Lessor is a corporation duly incorporated and organized
and validly subsisting under applicable law of the Province of
Alberta with all requisite corporate power and authority to
enter into and perform its obligations under this Agreement;
(b) The Lessor has taken all necessary legal action to authorize
the persons who execute and deliver this Agreement on behalf
of the Lessor, to execute and deliver the same and thereby
bind the Lessor to all of the terms and conditions of the same
and to act for and on behalf of the Lessor as contemplated
hereby;
(c) This Agreement constitutes the legal, valid and binding
obligation of the Lessor enforceable against the Lessor in
accordance with its terms, subject only to such qualifications
with respect thereto relating to creditors' rights generally
and the enforcement of equitable remedies; and
(d) so long as an Event of Default shall not have occurred and
then be continuing under this Agreement and any Lease
Supplement, the Lessor will not interfere with the quiet
enjoyment of the Equipment by the Lessee after the Equipment
has been delivered to the Lessee.
9.2 THE REPRESENTATIONS AND WARRANTIES OF THE LESSOR HEREIN SET FORTH IN THIS
CLAUSE ARE MADE TO THE EXCLUSION AND IN LIEU OF ALL OTHER REPRESENTATIONS OR
WARRANTIES OF THE LESSOR, WHETHER LEGAL, EQUITABLE, STATUTORY, CONTRACTUAL OR
CUSTOMARY, WRITTEN OR ORAL, EXPRESS OR IMPLIED, AND THE LESSOR HAS NOT MADE AND
DOES NOT HEREBY MAKE, NOR SHALL IT BE DEEMED BY VIRTUE OF HAVING LEASED THE
EQUIPMENT TO THE LESSEE PURSUANT TO THIS AGREEMENT TO HAVE MADE ANY
REPRESENTATION OR WARRANTY AS TO THE MERCHANTABILITY, DURABILITY, OPERATING
FITNESS, FITNESS FOR A PARTICULAR PURPOSE, DESIGN OR CONDITION OF THE EQUIPMENT
OR AS TO ITS QUALITY.
9.3 THE LESSEE ACKNOWLEDGES AND AGREES THAT:
* THE EQUIPMENT AND THE MANUFACTURER THEREOF HAVE BEEN SELECTED BY THE
LESSEE ALONE;
* NEITHER THE LESSOR NOR ITS EMPLOYEES OR AGENTS OR REPRESENTATIVES IS
A MANUFACTURER, DEALER OR DISTRIBUTOR OF THE EQUIPMENT OR EXPERT
WITH RESPECT THERETO;
* THAT THE MANUFACTURER OF THE EQUIPMENT IS NOT, AND HAS NEVER BEEN,
AN EMPLOYEE, AGENT OR REPRESENTATIVE OF THE LESSOR WITH RESPECT TO
THE EQUIPMENT;
ACCORDINGLY, THE LESSEE WITHOUT PREJUDICE TO ANY RIGHTS WHICH
THE LESSEE MAY HAVE AGAINST THE MANUFACTURER OF THE EQUIPMENT OR OTHER PERSONS,
HEREBY:
* RELEASES AND FOREVER DISCHARGES THE LESSOR FROM ANY AND ALL ACTIONS,
CAUSES OF ACTIONS, DEBTS, DAMAGES (WHETHER CONTRACTUAL OR TORTUOUS
AND WHETHER DIRECT OR INDIRECT,
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CONSEQUENTIAL OR INCIDENTAL), COSTS, EXPENSES, CLAIMS, DEMANDS,
RIGHTS OR DEFENSES WHICH, AT ANY TIME NOW OR HEREAFTER MAY ARISE
FROM OR RELATE TO THE EQUIPMENT.
THE LESSEE ACKNOWLEDGES AND AGREES THAT THE LESSEE HAS MADE OR SHALL
MAKE ALL APPROPRIATE AND PRUDENT STUDIES IN CONNECTION WITH THE SELECTION OF THE
EQUIPMENT AND ALL THE TESTS AND INSPECTIONS THEREOF, AS WOULD A CAREFUL AND
PRUDENT PURCHASER OR LESSEE CARRYING ON THE BUSINESS CONDUCTED BY THE LESSEE OR
A SIMILAR BUSINESS.
AS TO ALL MATTERS OF SELECTION, DESIGN, PATENTS, TRADE MARKS,
MATERIALS, MANUFACTURING, CONDITION, SAFETY, FITNESS, CAPACITY, PERFORMANCE AND
DURABILITY OF THE EQUIPMENT AND ALL MATTERS WHATSOEVER WITH RESPECT TO THE
ACCEPTABILITY, POSSESSION, USE AND OPERATION OF THE EQUIPMENT, THE LESSEE SHALL
LOOK ONLY TO, AND SHALL RELY UPON THE MANUFACTURER OF THE EQUIPMENT, AND NOT TO
OR UPON THE LESSOR OR THE LESSOR'S DIRECTORS, OFFICERS, EMPLOYEES,
REPRESENTATIVES OR AGENTS.
9.4 THE LESSOR SHALL HAVE NO RESPONSIBILITY OR LIABILITY UNDER THIS AGREEMENT TO
THE LESSEE OR ANY OTHER PERSONS WITH RESPECT TO:
(I) ANY LIABILITY, LOSS OR DAMAGE (WHETHER CONTRACTUAL OR TORTUOUS
AND WHETHER DIRECT OR INDIRECT, CONSEQUENTIAL OR INCIDENTAL) CAUSED
OR ALLEGED TO BE CAUSED DIRECTLY OR INDIRECTLY BY ANY INADEQUACY OF
ANY OF THE EQUIPMENT OR DEFICIENCY OR DEFECT THEREIN;
(II) THE DELIVERY, SERVICING, MAINTENANCE, REPAIR, IMPROVEMENT OR
REPLACEMENT OF ANY OF THE UNITS; OR
(III) THE POSSESSION, USE OR OPERATION OF THE EQUIPMENT OR OF ANY
UNIT THEREOF.
THE LESSEE'S ACCEPTANCE OF THE DELIVERY OF THE UNITS SHALL BE
CONCLUSIVE EVIDENCE AS BETWEEN THE LESSEE AND THE LESSOR THAT THE UNITS SO
DELIVERED ARE IN ALL RESPECTS SATISFACTORY TO THE LESSEE, AND THE LESSEE SHALL
NOT ASSERT ANY CLAIM OF ANY NATURE WHATSOEVER AGAINST THE LESSOR BASED ON ANY OF
THE FOREGOING MATTERS REFERRED TO IN CLAUSE 9.
9.5 THE LESSEE ACKNOWLEDGES AND AGREES THAT THE EQUIPMENT WAS ACQUIRED BY THE
LESSOR IN STRICT COMPLIANCE WITH THE LESSEE'S REQUEST AND INSTRUCTIONS AND ONLY
FOR THE PURPOSE OF LEASING SAME TO THE LESSEE AND THAT, EXCEPT TO THE LIMITED
EXTENT OTHERWISE PROVIDED HEREIN, THERE ARE AND SHALL BE NO AGREEMENTS OR
CONDITIONS, EXPRESS OR IMPLIED, WRITTEN OR ORAL, STATUTORY, CUSTOMARY,
COLLATERAL OR OTHERWISE, ON THE PART OF THE LESSOR RESPECTING OR IN CONNECTION
WITH THE EQUIPMENT, AND THAT THE LESSOR HAS UNDERTAKEN THIS TRANSACTION STRICTLY
IN RELIANCE AND CONDITIONAL UPON THE PROVISIONS OF THIS CLAUSE 9. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING PROVISIONS OF THIS CLAUSE 9, THE LESSEE
AGREES THAT ANY LATENT DEFECT IN OR ANY FAILURE OF ANY OF THE UNITS SHALL BE
CONCLUSIVELY DEEMED NOT TO BE OR CONSTITUTE A FUNDAMENTAL OR OTHER BREACH HEREOF
BY THE LESSOR, OR A FAILURE OF PERFORMANCE OR OF CONSIDERATION HEREUNDER ON THE
PART OF THE LESSOR.
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9.6 TO THE EXTENT PERMITTED BY APPLICABLE LAW, LESSEE HEREBY WAIVES ANY RIGHTS
HEREAFTER CONFERRED TO STATUTE OR OTHERWISE WHICH MAY REQUIRE THE LESSOR TO
MITIGATE THE LESSOR'S DAMAGES UNDER THIS LEASE AGREEMENT OR WHICH MAY OTHERWISE
LIMIT OR MODIFY ANY OF LESSOR'S RIGHTS OR REMEDIES HEREUNDER.
10. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS
10.1 The Lessee and represents and warrants as follows:
10.1.1 the Lessee is a corporation duly incorporated and validly
subsisting under the laws of the Province of its incorporation
specified in a Lease Supplement, with full corporate power and
authority to own its properties and to carry on its business as
presently conducted in each and every jurisdiction and to enter into
and perform its obligations under this Agreement.
10.1.2 this Agreement has been duly authorized, executed and delivered
by the Lessee, and constitute a legal, valid and binding obligation of
the Lessee, enforceable in accordance with its terms, subject only to
such qualifications with respect thereto relating to creditors' rights
generally and the enforcement of equitable remedies.
10.1.3 no approval is required from any public regulatory body or
Person with respect to the entering into or performance of this
Agreement by the Lessee or if any such approval is required, it has
been properly obtained and evidence thereof satisfactory to the Lessor
is being delivered to the Lessor concurrently with the execution of
this Agreement.
10.1.4 the entering into, delivery and performance of this Agreement by
the Lessee will not result in any breach of, or constitute a default
under any indenture, mortgage, trust, loan, creditor security agreement
or any other instrument, deed or agreement to which the Lessee is a
party or by which the Lessee may be bound, or contravene any provision
of any law, statute, rule or regulation to which the Lessee is subject,
or any judgment, decree, order, permit or franchise applicable to the
Lessee.
10.1.5 there are no actions, suits or proceedings pending or, to the
knowledge of the Lessee threatened against the Lessee, its properties
or affecting this Agreement or the transactions contemplated hereby
which could, if adversely determined, affect the carrying out of such
transactions.
10.1.6 it holds all licenses, certificates and permits from applicable
agency or governmental authority for the conduct of its business as it
is presently conducted.
10.1.7 it has delivered all necessary returns to all relevant taxation
authorities and it is not in default in the payment of any taxes due
and payable.
10.1.8 it is not in default under any agreement to which it is a party
or by which it may be bound which would have a material adverse effect
on its business, assets or condition.
10.2 The Lessee hereby covenants, as to itself and to each other, with the
Lessor that:
10.2.1 the Lessee will duly and punctually pay the Rentals (including
any Interest on amounts in default at the Default Rate) as well as all
other amounts due hereunder, on the dates, at the places and in the
manner mentioned herein.
10.2.2 if and when requested by the Lessor, it shall furnish to the
Lessor or shall cause to be delivered to the Lessor, (i) no later than
one hundred and twenty (120) days from the end of each fiscal year of
the Lessee, as long as Rentals and all other amounts due hereunder are
still outstanding, a copy of the Lessee's audited financial statements
for such year in the same form provided to shareholders of the Lessee,
and (ii) within sixty (60) days from the end of each quarter, the
Lessee's unaudited statement of profit and loss for each such quarter,
and a balance sheet as at the end of such quarter, all in reasonable
detail and signed by its Vice President, Finance.
10.2.3 on or before the date of the Lease Supplement in each calendar
year hereunder, the Lessee furnish to the Lessor, in such number of
counterparts or copies as may reasonably be requested by the Lessor, an
accurate statement signed by the Vice President, Finance of the Lessee,
containing the description and manufacturer's serial numbers of the
Equipment then leased hereunder and
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such other information regarding the use, maintenance, condition and
state of repair of the Equipment as the Lessor may reasonably request.
10.2.4 the Lessee shall prepare and deliver to the Lessor within a
reasonable time prior to the required date of filing (or, to the extent
permissible, file on behalf of the Lessor) any and all reports to be
filed by the Lessor with any federal, state, provincial, local or other
regulatory authority by reason of the interest of the Lessor in the
Equipment or the lease thereof to the Lessee.
10.2.5 The Lessee shall promptly notify the Lessor of any requirements
by any governmental authority (of which it has knowledge or should have
knowledge as an operator) which shall require any action to be taken by
the Lessor in consequence of its ownership of any Unit and the Lessee
shall promptly furnish to the Lessor from time to time such information
as may be required to be filed by the Lessor with any governmental
authority because of the Lessor's Interest in any Unit.
10.2.6 it shall preserve and maintain its corporate existence in every
jurisdiction in which the character of the property owned or the nature
of the business transacted by it makes licensing or qualification
necessary.
10.2.7 it will not enter into any transaction or series of transactions
(including by way of reorganization, consolidation, amalgamation,
merger, liquidation, transfer, sale or otherwise) whereby all or
substantially all of its undertakings, property and assets would become
the property of any other person, or, in the case of any such
amalgamation, of the continuing corporation or resulting corporation
therefrom, unless:
* i) no Event of Default has occurred and is subsisting or would
result therefrom; and
* ii) such transaction or series of transactions is effected between
any or all of the Lessee's parent or sister companies and such
transaction preserves the rights and powers of the Lessor under this
Agreement and does not increase the financial risks to the Lessor
under this Agreement; and
* iii) such transaction or series of transactions does not affect the
validity and the enforceability of any of the rights of the Lessor
hereunder; and
* iv) such transaction or series of transactions is effected with a
party other than pursuant to Clause 10.2.7 (ii) and:
(A) such other Person or continuing corporation
(herein called "SUCCESSOR CORPORATION") is a
corporation constituted under the laws of Canada or
of a Province thereof; and
(B) the Successor Corporation shall execute, prior to
or contemporaneously with the consummation of such
transaction, such instruments, if any, as are in the
opinion of the Lessor necessary or advisable to
evidence the assumption by the Successor Corporation
of liability for all of the obligations of the Lessee
under this Agreement; and
(C) such transaction or series of transactions, in
the opinion of the Lessor shall be upon such terms as
to preserve and not impair in any respect any of the
rights and powers of the Lessor under this Agreement
nor increase the risks to the Lessor under this
Agreement; and
(D) such transaction or series of transactions do not
affect the validity and the enforceability of this
Agreement.
Whenever the conditions hereinabove specified have been duly
observed and performed, the Successor Corporation shall possess and
from time to time may exercise each and every right and power of the
Lessee under this Agreement, in the name of the Lessee or otherwise and
any act or proceeding under any provision of this Agreement required to
be done or performed by any directors or officers of the Lessee may be
done and performed with like force and effect by the directors or
officers of such Successor Corporation.
10.2.8 it shall not at any time, directly or indirectly, create, incur,
assume or suffer or permit to exist any mortgage, pledge, lien,
privilege, charges, encumbrance or other security interest or any claim
on or with respect to any Unit leased hereunder and the subject of a
Lease Supplement, except (i) the respective rights of the Lessor and
the Lessee as herein provided, (ii) liens or privileges or other
encumbrances which result from claims against the Lessor for which the
Lessee
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is not responsible pursuant to the terms hereof, (iii) any
security interest created by the Lessor in any Unit and any liens or
privileges arising out of liabilities of the Lessor.
10.2.9 it agrees to pay the Lessor's legal fees and other expenses
incurred by the Lessor in the preparation and execution of the
transactions and the documents contemplated by this Agreement.
10.2.10 it shall not change its domicile without a thirty days prior
written notice of its intent thereof to the Lessor.
10.2.11 it shall register the Equipment leased hereunder in each
jurisdiction in which the Equipment will be used and registration is
required.
10.2.12 throughout the Term hereof, the Lessee shall, and the Guarantor
shall cause the Lessee to, locate the Equipment or of any Unit thereof
in the location(s) as specified in the Lease Supplement and in such
other locations as the Lessee may advise from time to time and the
Equipment or any Unit thereof shall not remain located in any other
location for any period of time in excess of fifteen (15) days without
a thirty days prior written notice by the Lessee of its intent to do so
to the Lessor, unless the Lessee has filed the appropriate
documentation to protect the interest of the Lessor in the Equipment,
and a copy thereof has been previously received by the Lessor.
10.2.13 it shall, throughout the Term (or any renewal thereof) maintain
at all time (unless otherwise indicated), the following financial
ratios:
(a) Liquidity (Quick) Ratio to be at or above 2,5:1 for
fiscal year 1997. For fiscal year 1998 and following,
Liquidity (Quick) Ratio to be at or above 2,0:1. This
ratio shall be calculated by dividing the sum of
Cash, Shorts Term Investments and Accounts
Receivable, by Current Liabilities.
(b) Leverage Ratio (Total Debt/Tangible Net Worth) shall
remain at or below 1,25:1 This ratio shall be
calculated by dividing the Total Liabilities by
Tangible Net Worth.
10.3 The representations, warranties and covenants contained in this
Clause 10, other than those in 10.2.9, shall be deemed to be repeated
by the Lessee on and as of each Delivery Date and on and as of each
Payment Date as if made with reference to the facts and circumstances
existing on each such date.
11. MAINTENANCE, ALTERATIONS, INSPECTIONS AND USE
11.1 The Lessee shall, at its sole cost and expense, cause the Equipment to be
maintained and repaired, with no equipment discrimination toward the Equipment,
by competent and duly qualified personnel only, in a careful and proper manner
in accordance with the repair standards applicable to the Equipment and in
compliance with all relevant and applicable laws, statutes, rules and
regulations applicable or in any way related to the repair and maintenance of
the Equipment in every jurisdiction in which the Equipment may be maintained or
repaired, and otherwise keep the Equipment which is subject to this Agreement in
good order and repair, ordinary wear and tear excepted in accordance with all
Manufacturer's manuals, instructions, recommendations and warranties All parts,
mechanisms and devices, other than the profile extrusion dyes, installed or
affixed to the Equipment shall immediately, without further act, become part of
the Equipment for all purposes of this Agreement without cost to the Lessor. The
Lessee shall not alter or add to the Equipment without the Lessor's prior
written consent. All permitted alterations, additions and improvements of
whatsoever kind or nature made to the Equipment shall become the property of the
Lessor upon expiration or earlier termination of this Lease Agreement, except
that any of the foregoing which are not required pursuant to this Clause 11 and
are removed without damage to the Equipment, without adversely affecting the
Equipment's commercial value, useful life or originally intended use shall
remain the property of the Lessee.
11.2 The Lessor shall have the right (but no obligation), upon reasonable notice
to the Lessee and at the Lessor's sole cost and expense, by its authorized
representatives, to inspect the Equipment at all reasonable times during the
Lessee's business hours at such location or locations designated by the Lessee,
to review the state and condition of the Equipment and to confirm to the Lessor
the existence and proper maintenance thereof; provided, however, that the Lessee
shall not be liable, except in the case of gross negligence of the Lessee, or of
its employees or agents, for any damage, injury to, or the death of any Persons
exercising on behalf of the Lessor, the rights of inspection granted hereunder.
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15
11.3 The Lessee shall cause the Equipment to be stored, used and operated by
competent and duly qualified personnel only, in a careful and proper manner and
for lawful purposes only, in compliance with all relevant laws, statutes, rules
and regulations applicable or in any way related to the storage, use and
operation of the Equipment in every jurisdiction in which the Equipment may be
stored, used or operated including, without limitation, all such laws, statutes,
rules and regulations relating to the property of the environment or the
transportation of polluting or hazardous substances.
11.4 The Lessee shall cause the Equipment to be stored, used, operated,
maintained and repaired only within the territories of the Province of Ontario,
Canada. Further, the Lessor shall, prior to the removing ofany Unit from the
location specified in a Lease Supplement and relocating any such Unit in the
Province of Ontario, advise the Lessor in writing and the provisions Clause 4
shall apply mutadis mutandis.
12. INDEMNIFICATION
12.1 The Lessee shall indemnify and hold harmless the Lessor against and from
any and all charges and claims made against the Lessor, and against any and all
expenses, damages (whether contractual or tortuous and whether direct or
consequential), losses and liabilities (including, without limitation,
reasonable lawyers' fees and expenses, patent liabilities, product liabilities,
penalties and interest, liabilities arising from the presence or release or
possession of any Contaminant in any way related to the Equipment), or damage to
or impairment of the natural environment in any way related to the Equipment,
which the Lessor may incur in any manner by reason of entering into or of the
performance of this Agreement or by reason of the ownership of any Unit, or
which may arise in any manner out of or as the result of the ordering, purchase,
sale, lease, use, operation, maintenance, condition, delivery, transshipment,
rejection, storage or return of any Unit under this Agreement or in connection
therewith or the occurrence of any Event of Default hereunder or any event which
with the giving of notice, or lapse of time, or both, would become an Event of
Default. The Lessee shall further indemnify and hold harmless the Lessor against
and from any and all charges, claims, expenses, losses and liabilities on
account of any accident in connection with the possession, storage, use,
operation or condition of any Unit resulting in damage to property or the
environment or injury or death to any Person. The indemnities arising under this
Clause 12 shall survive the performance and completion of all other obligations
under this Agreement, the sale, assignment, transfer or other disposition of
this Agreement or any of the Equipment by the Lessor, and the termination of
this Agreement. In case any action, suit or proceeding is brought against the
Lessor in connection with any claim indemnified against hereunder by the Lessee,
the Lessee may, and upon the request of the Lessor shall, at the Lessee's
expense, defend such action, suit or proceeding, or cause the same to be
defended by counsel selected by the Lessee and acceptable to the Lessor and, in
the event of any failure by the Lessee to do so, the Lessee shall pay all costs
and expenses (including, without limitation, reasonable lawyers' fees and
expenses) as incurred by the Lessor in connection with such action, suit or
proceeding. Notwithstanding anything contained in this Agreement, the Lessee
shall not be obliged to so indemnify the Lessor in the event of the Lessor's
gross negligence or willful misconduct.
12.2 Upon the payment in full of any indemnity pursuant to this Clause 12 by the
Lessee, and provided that no Event of Default (or other event which with lapse
of time or notice, or both, would constitute an Event of Default) shall have
occurred and be continuing, either hereunder or under any other agreement
entered into between the Lessee and the Lessor, or between companies related
thereto or in the same group of companies, the Lessee may, upon written request
to the Lessor, be subrogated to any right of the Lessor in respect of the
matters against which such indemnity has been paid. (In the event of such
subrogation by effect of law, notwithstanding the foregoing, the rights of the
Lessee or of the Guarantor, as the case may be, shall be subordinated to the
rights of the Lessor, until full payment of all amounts due to the Lessor or a
related company are paid in full by the Lessee or a related company).
12.3 (a) The Lessee shall pay and indemnify and hold the Lessor harmless against
and from all taxes, withholdings, duties, levies, registration fees and other
imposts or charges (together with all interest, penalties or fines thereon or
other additions thereto), whether foreign or domestic, (other than corporation
income taxes and other than taxes paid by the Lessee to the Lessor and which
Lessor had to remit to any relevant authority) incurred by or imposed, levied or
assessed against the Lessor in connection with the financing, purchase, lease,
ownership, delivery, use, import or export, return or sale of the Equipment
(collectively, the "TAXES").
16
17
(b) In the event any reports with respect to the Taxes are required to
be made, the Lessee shall either make such reports in such manner as to show the
interests of the Lessor in the Equipment, or notify the Lessor of such
requirement, and shall make such reports in such manner as shall be satisfactory
to the Lessor.
(c) In the event that, as long as any part of the Rentals or any other
amount payable under this Agreement are still outstanding, the Lessee becomes
liable for the payment or reimbursement of any Taxes pursuant to this Clause 12,
such liability shall continue, notwithstanding the expiration of this Agreement,
until all such Taxes are paid or reimbursed by the Lessee.
(d) The Rentals and all other sums payable by the Lessee to the Lessor
under this Agreement, including, without limitation the Casualty Value, the
Stipulated Loss Value, the Breakage Costs and the Purchase Option Price are
exclusive of any goods and services tax, sales tax, value added tax or similar
tax payable in respect thereof, wheresoever imposed. The Lessee shall in
addition to any other sums payable by the Lessee hereunder, pay to the Lessor
the amount of any such goods and services tax, sales tax, value added tax or
similar tax as may be required from time to time by law.
(e) If and to the extent that any sums payable to the Lessor by the
Lessee under this Agreement by way of indemnity or otherwise prove to be
insufficient, by reason of any taxation suffered thereon, for the Lessor to
discharge the corresponding liability to the relevant third party, or to
reimburse the Lessor for the cost incurred by it in discharging the
corresponding liability to a third party, the Lessee shall pay to the Lessor
such additional sums as (after taking into account any taxation suffered by the
Lessor thereon) shall be required to make up the relevant deficit together with
interest on the amount of such deficit at the Default Rate until payment by the
Lessee (after as well as before judgment).
If any sums (the "INDEMNITY SUM") constituting (directly or indirectly)
an indemnity to the Lessor under this Agreement or under the Guarantee, but paid
by the Lessee (or by the Guarantor, as the case may be) to any person other than
the Lessor, shall be treated as taxable in the hands of the Lessor and which
would not otherwise have been payable by the Lessor, the Lessee shall reimburse
the Lessor for any such Taxes suffered by it in respect of the indemnity sum
(after taking into account any taxation suffered by the Lessor on the
compensating sum) together with Interest thereon at the Default Rate (together
the "COMPENSATING SUM") calculated from the time of payment of any such Taxes by
the Lessor to the time of receipt of the Compensating Sum by the Lessor from the
Lessee.
13. INSURANCE
13.1 The Lessee shall, at its own expense, subscribe and maintain in effect in
every jurisdiction in which any of the Equipment or any Unit thereof is parked,
stored, possessed, used, operated, maintained or repaired, every minimum public
liability insurance (including insurance related to damage to the environment),
which is mandatory under the federal, state, provincial or local laws, statutes,
rules or regulations of the Province of Ontario or of any province of Canada
having jurisdiction on or over the Equipment, if any, in respect of the
Equipment, and, if necessary, such additional public liability insurance in
respect of the Equipment so that the resulting coverages for bodily injury
(including death) and property damage shall be for an amount of not less than
the amount specified in a Lease Supplement.
The Equipment, subject to an insurance deductible to be specified in a
Lease Supplement related to the Unit so leased hereunder, shall be kept insured
by the Lessee at the full actual cash value, (such actual cash value to be not
less than the Stipulated Loss Value), against all risks (including earthquake
and flood) of loss or damage.
All insurance referred to in this Clause 13 shall be in the joint name
of the Lessor and the Lessee with loss payable to the Lessor as its interest in
the Equipment may be, irrespective of any breach of warranty or other act or
omission of Lessee. The Lessee shall furnish the Lessor concurrently herewith
(or as otherwise specified in Clause 8.1.2 hereof, as the case may be) a
certificate of insurance and a copy of such insurance policy(ies) and a letter
from its insurance brokers, all evidencing, in terms and of substance
satisfactory to the Lessor, the coverage required herein, and said certificate
of insurance shall provide for thirty (30) days' notice of expiration,
cancellation, renewal or amendment by the insurer to the Lessor.
The Lessee shall ensure that all insurance policies required pursuant
to this Clause 13 are occurrence-based. Any insurance policy required pursuant
to this Clause 13 under which coverage is
18
contingent upon the receipt or report of a claim (claim made basis) or of a
circumstance which might give rise to a claim during the policy period and any
renewal or replacement of such policy whether before or after the Lease
Termination Date, in relation to the Equipment, the location thereof and the
operations of the Lessee or any of them, and any discovery period or extension
of coverage under any such policy, shall name the Lessor as insured.
Furthermore, any such policy shall provide for a discovery period extending
coverage granted by the insurer for a period of not less than three years after
the effective date of cancellation or expiry of such policy. The Lessee
undertakes to purchase such discovery coverage under all such policies on the
earlier of i) the date on which any such policy shall be canceled or shall
expire without immediate renewal or replacement; or ii) the Lease Termination
Date.
14. SECURITY INTEREST
14.1 Notwithstanding that this Agreement is a true lease, in the event that it
is determined to be a transaction intended as financing lease transaction, the
Lessee hereby grants to the Lessor a security interest in favor of the Lessor in
the Equipment, the proceeds of any sale thereof, any sublease thereof, any
insurance proceeds with respect thereto and any other rights of the Lessee,
tangible or intangible, in and to the Equipment and in this Lease Agreement as
security for the payment of the Rentals and all other amounts of money due and
payable by the Lessee to the Lessor hereunder and the payment and performance of
all other present and future obligations, direct or indirect, consequential or
incidental, absolute or contingent, of the Lessee to the Lessor evidenced by or
arising pursuant to or in respect of this Lease Agreement or the transactions
contemplated hereunder. Furthermore, the Lessee hereby assigns and transfers to
the Lessor and grant to the Lessor a security interest in all of the Lessee's
equity in the Equipment and all its rights and interest therein or herein,
hereunder or at law as security for the performance of all of the Lessee's
obligations under this Agreement. The Lessee shall (or, if requested by the
Lessee, but at the Lessee's cost and expense, the Lessor will) prepare for the
Lessor's review all of the documentation necessary to protect and perfect the
security interest of the Lessor in the above and will file, record or register
such documentation at the Lessee's sole expense in all applicable jurisdictions
as requested by the Lessor and shall provide the Lessor with evidence thereof.
15. DEFAULT AND REMEDIES
15.1 The occurrence of any one or more of the following events (herein referred
to as the "Events of Default") shall constitute an Event of Default under this
Agreement:
(a) the Lessee fails to make any payment due hereunder in the manner
and by the date provided herein;
(b) the Lessee fails, at any time, to procure and maintain any of the
insurance coverage prescribed herein;
(c) the Lessee shall make or permit any unauthorized assignment or
transfer of this Agreement;
(d) the Lessee shall default in the observance or performance of any
other of the covenants, conditions and agreements on the part of the
Lessee contained herein and such default shall continue and remain
uncured for a period of thirty (30) days from the date the Lessor
notifies the Lessee of such default;
(e) the Lessee or the Guarantor shall become insolvent, commit any act
of bankruptcy, or if bankruptcy proceedings are begun by or against the
Lessee or the Guarantor, or if a receiver is appointed for the Lessee
or the Guarantor, or the Lessor shall reasonably determine the Lessee
or the Guarantor faces a significant risk of imminent insolvency;
(f) the Lessee or the Guarantor or any other company related thereto or
of the same group of companies shall default, as such term is defined
therein, under any other agreement (of any kind whatsoever, including
any other Installment sale agreement (conditional sale agreement) or
lease agreement) it may have with any Person (excluding for the purpose
hereof the Lessor and any company related thereto or of the same group
of companies), whether such agreement now exists or shall hereafter be
created and such default shall involve any risk of sale, forfeiture or
loss of any of the Equipment or endanger any of the rights or interests
of the Lessor herein, the whole subject
19
to the provisions of Clause 7.4 hereof;
(g) the Lessee or the Guarantor ceases or threatens to cease to carry
on its business or to operate its enterprise;
(h) an encumbrancer takes possession of any substantial part of the
assets of the Lessee or of the Guarantor, as the case may be, thereby
impairing the operations of the Lessee or the Guarantor, or if a
seizure, distress or execution or any similar process is levied or
enforced thereagainst and remains unsatisfied for such period as would
permit such substantial part thereof, to be sold thereunder;
(i) if a writ, execution, attachment or similar process is issued or
levied against all, or a substantial portion of, the property of the
Lessee or of any Guarantor in connection with any judgment against the
Lessee or the Guarantor which affects the business and property of the
Lessee or the Guarantor, and such writ, execution seizure, attachment
or similar process is not released, bonded, satisfied, discharged,
vacated or stayed within 30 days after its issuance or levy unless
diligently contested by the Lessee or the Guarantor in good faith and
by appropriate proceedings;
(j) if the Lessee or the Guarantor or any company related thereto or of
the same group of companies fails to pay at maturity, or, in the event
a period of grace is provided, within any such applicable period of
grace, any obligation for monies borrowed or guaranteed or fails to
observe or perform any term, covenant or agreement contained in any
agreement by which it is bound evidencing or securing monies borrowed
or guaranteed, for such period of time as would cause or permit
(assuming the giving of appropriate notice if required) the holder or
holders, or beneficiary or beneficiaries, thereof or of any such
obligations issued thereunder to cause acceleration of the maturity
thereof or of any such obligation, if such failure on the part of the
Lessee or of the Guarantor could adversely affect the performance by
the Lessee of its obligations hereunder;
(k) if the Lessee or the Guarantor or any other company related thereto
or of the same group of companies shall default, as such term is
defined therein, and such default is continuing, under any other
agreement of any kind whatsoever it may have with the Lessor or any
other company related thereto or of the same group of companies,
whether such agreement now exists or shall hereafter be created.
15.2 Upon the occurrence of an Event of Default and at any time thereafter, the
Lessor may, at its option, declare this Lease Agreement to be in default and
may, in its sole discretion, exercise any one or more of the following remedies:
(a) the Lessor may, by notice in writing to the Lessee, declare this
Agreement terminated, whereupon all rights of the Lessee to the use of
the Equipment and of all the Units thereof shall absolutely cease and
terminate, but the Lessee shall remain liable as hereinafter provided;
and thereupon the Lessor may by its agents enter upon the premises of
the Lessee or other premises where any of the Units may be and take
possession of all or any of such Units without incurring any liability
for or by reason of such taking possession;
(b) the Lessor may proceed, by appropriate court action or actions
either at law or in equity, to enforce performance by the Lessee of the
applicable covenants of this Agreement or to recover damages for the
breach thereof;
(c) the Lessor may lease, sell or otherwise dispose of the Equipment or
of any Unit thereof free and clear of any right or interest of the
Lessee to any Person on such terms as seem advisable to the Lessor,
without any notice to the Lessee and the Lessee waives (to the extent
permitted by law) all rights of redemption, stay and appraisal which
the Lessee now has or may have at any time in the future under any law
now existing or hereafter enacted;
(d) the Lessor may give written notice to the Lessee requiring the
Lessee to pay to the Lessor on the date stipulated therein (which shall
not be earlier than the date which is three Business Days from the date
of such notice), an amount equal to the Stipulated Loss Value of the
Equipment or of the Units then leased to the Lessee hereunder (subject
to the provisions of Clause 7.4 hereof) computed as of the Payment Date
immediately preceding such notice together with any unpaid Rental due
on any Payment Date prior to such notice, any Casualty Value remaining
unpaid, all other amounts due and owing hereunder and Breakage Costs
together with Interest thereon from such Payment Date to the date of
actual payment of all such amounts at the Default Rate; upon
20
payment in full by the Lessee and receipt by the Lessor of all amounts
herein stipulated, the Lessor's Interest in the Equipment or in any of
the aforementioned Units shall transfer to the Lessee on an "as is,
where is" condition without any representation or warranty of any
nature whatsoever except the warranty that the Equipment is free and
clear of any Security Interest created by or through the Lessor; all
reasonable costs, expenses and fees (including legal fees and
disbursements) incurred by the Lessor related to or arising in
connection with the conveyance of the Equipment and all sales, excise,
value-added and consumption taxes, transfer, license or registration
fees or other governmental fees or assessments payable in connection
with such conveyance of the Equipment shall be borne by the Lessee and
paid when due or on demand, as applicable; the Lessee hereby
acknowledges and it shall be conclusively deemed that the amount
payable under this Clause 15.2(d) is a genuine and reasonable
pre-estimate by the parties of liquidated damages that will be suffered
by the Lessor upon the occurrence of an Event of Default and not as a
penalty;
(e) the Lessor may enforce any of its remedies under the security
interest created in its favor pursuant to Clause 14 hereof;
(f) the Lessor may enforce its rights and remedies under the
Guarantee(s);
(g) the Lessor may, upon the occurrence (and at any time thereafter) of
an event of a default, draw, in part or in whole, on the Lessee's
Letter of Credit.
THE LESSEE WAIVES ANY AND ALL RIGHTS TO NOTICE AND JUDICIAL HEARING
WITH RESPECT TO THE REPOSSESSION OR ATTACHMENT OF THE EQUIPMENT BY THE LESSOR IN
THE EVENT OF DEFAULT HEREUNDER BY THE LESSEE. The Lessee further expressly
waives any action, cause of action, claim or demand which it may have by reason
of any act which the Lessor, its assignee or their agents may do or leave undone
in connection with the repossession of the Equipment, and the Lessee releases
and discharges the Lessor of and from actions, causes of action, claims and
demands of every kind and nature which may arise as a result of any action of
the Lessor, its assignee or their agents in connection with this Agreement or
the Equipment, its repossession or resale or the condition or use thereof.
15.3 Pending the sale of the Equipment, the Lessor shall be entitled to fully
administer, manage, insure, maintain and repair the same and to employ, lease,
charter, operate or otherwise use the Equipment in such manner and for such
period as it thinks fit and to do all acts incidental thereto and to recover any
losses incurred as a consequence of taking any such action as aforesaid, and all
payments due to the Lessee by virtue of the leasing, hiring or other disposal of
the Equipment or otherwise howsoever arising prior to the enforcement hereof by
the Lessor shall immediately on receipt thereof be and become due to the Lessor
and be applied to the Stipulated Loss Value and to any other amount due under
this Agreement.
15.4 Upon any sale of the Equipment by the Lessor, the Lessee shall not be bound
or entitled to see or inquire whether the power of sale has arisen or remains
exercisable in the manner herein provided or whether the Lessor has given the
Lessee notice of its intention to sell, and the sale shall be deemed to be
within the power of the Lessor.
15.5 Any sale by the Lessor of the Equipment pursuant to the rights, powers and
remedies conferred upon it by this Agreement or by law may be for cash,
debentures or other debt instruments and the consideration may be payable or
deliverable forthwith or over a period of time. If any consideration for any
such sale is not in cash, that consideration shall immediately on receipt
thereof be and become charged in favor of the Lessor with the payment of all
sums at that time secured by this Agreement.
15.6 The powers conferred upon the Lessor under this Clause 15 are and shall be
cumulative and shall be in addition to every other power and remedy hereby
specifically conferred or now or hereafter existing at law or by statute. Each
and every power and remedy may be exercised from time to time and as often and
in such order as may be deemed expedient by the Lessor and the exercise or the
beginning of the exercise of any power or remedy shall not be construed or
implied to be a waiver of the right to exercise any other power or remedy at the
same time or thereafter. No delay or omission by the Lessor in the exercise of
any right or power or pursuant to any remedy shall impair any such right, power
or remedy or be construed or implied to be a waiver of any default on the part
of the Lessee or to be an acquiescence therein.
15.7 Except as otherwise specifically stipulated herein, the Lessor need not
before exercising any of the
21
rights, powers or remedies conferred upon it by this Agreement or by law:
(i) take action or obtain judgment against the Lessee or any other
person in any court; or
(ii) make or file any claim or proof in a winding-up or liquidation of
the Lessee.
15.8 The Lessor may, without prejudice to its rights with respect to any other
event which may constitute an Event of Default, waive in writing any Event of
Default or extend the time period for remedying any Event of Default.
15.9 The Lessor may, at its option, without prejudice and in addition to any of
the foregoing provisions of this clause, if the Lessee shall fail to duly and
promptly perform any of its obligations under this Lease Agreement with respect
to the equipment, perform any act or make any payment which the Lessor deems
necessary for the maintenance and preservation of the Equipment and the Lessor's
title thereto, including payments for satisfaction of liens, repairs, taxes,
levies and insurance, and all sums so paid or incurred by the Lessor, together
with any overdue or delinquent payment charges pursuant to Clause 4 hereof, and
any reasonable legal fees incurred by the Lessor in connection therewith, shall
be paid by the Lessee to the Lessor upon demand, together with Interest thereon
at the Default Rate.
16. ASSIGNMENT, POSSESSION AND USE
16.1 This Agreement shall be binding upon and enure to the benefit of the
Lessee, the Lessor and their respective successors and assign(s).
16.2 The Lessor shall have the absolute right to sell, transfer or assign to any
Person, the Lessee hereby agreeing to and accepting any such sale, transfer or
assignment, any or all of its rights, obligations, benefits and interests under,
in and to this Lease Agreement or the Equipment or any of them, provided that no
such sale, transfer or assignment shall render the Lessee liable for any
increased or additional costs, expenses or amounts of money, including, without
limitation, Taxes, for which the Lessee would not have been otherwise liable for
hereunder had such sale, transfer or assignment not been made. All the rights of
the Lessor hereunder shall enure to the benefit of the Lessor's purchasers,
transferees or assignees, provided that the Lessee shall not be required to pay
to or perform in favor of any such purchaser, transferee or assignee any of the
Lessee's obligations hereunder unless and until the Lessee shall have received
from the Lessor a written notice of such sale, transfer or assignment. Subject
to the foregoing, whenever the Lessor is referred to in this Agreement, it shall
apply and refer to each such purchaser, transferee or assignee of the Lessor. It
is hereby agreed that as long as the Lessee is not in default under this
Agreement, it will proceed to any such sale, cession or assignment to a direct
competitor of the Lessee without the Lessee's prior written approval.
16.3 The Lessee shall not assign, sublease or transfer its interest under this
Agreement and in the Equipment or any of them or delegate any of its obligations
or duties hereunder. In addition, the Lessee, at its own expense, will promptly
cause to be duly discharged any lien, security interest, charge or other
encumbrance (other than an encumbrance resulting from claims against the Lessor
not related to the ownership of the Equipment) which may at any time be imposed
on or with respect to any Equipment including any accession thereto or the
interests of the Lessor or the Lessee therein. The Lessee shall not part with
the possession or control of, or suffer or allow to pass out of its possession
or control, any of the Equipment, provided, however, that so long as no Event of
Default shall have occurred and be continuing at the time of such transfer of
possession, delivery or control, the Lessee may deliver possession of the
Equipment to the Manufacturer thereof or to any organization for testing,
repair, maintenance or overhaul work on the Equipment. The Lessee is not
entitled to sub-lease the Equipment or any Unit thereof.
17. MANUFACTURER'S WARRANTIES
17.1 The Lessor hereby assigns to the Lessee the benefit of any warranties and
service policies given by the Manufacturer of or for the Equipment or by the
vendors of items fitted thereto to the extent only that such warranties exist or
remain in force and to the extent only that the Lessor is able to make the
benefit of same available to the Lessee and provided further that the Lessee
shall be responsible for all costs incurred by the Lessee in connection with the
transfer of such benefits or the enforcement of entitlement hereunder; provided,
however, that upon the occurrence of an Event of Default or upon the return of
the Equipment as herein provided, all such benefit shall immediately revert to
the Lessor including all claims thereunder
22
whether or not perfected. The Lessor makes no representation that there are any
such warranties, Manufacturer's or otherwise.
Upon termination of this Agreement, the Lessee hereby assigns,
reassigns or otherwise makes available to the Lessor or to any Person designated
by the Lessor, and the Lessee is hereby deemed to have so assigned, reassigned
or otherwise made available to the Lessor or such Person, such rights as the
Lessee may have under all warranties, including without limitation, the right to
receive payment of all indemnities, insurance or otherwise, related to the
Equipment, to the extent that those rights are capable of being assigned,
reassigned or otherwise made available. To the extent that those rights are not
capable of being so assigned, reassigned or otherwise made available to the
Lessor or any Person designated by the Lessor, the Lessee agrees, at the request
of the Lessor, but at the expense of the Lessee, to use its reasonable efforts
to enforce such rights as the Lessee may have with respect thereto for and on
behalf of the Lessor or any Person designated by the Lessor.
Upon the occurrence of an Event of Default which is continuing, the
Lessee agrees, at the request of the Lessor, to assign, reassign or otherwise
make available to the Lessor or to any Person designated by the Lessor the
rights described in the preceding paragraph and to comply with the provisions of
such paragraph.
18. PURCHASE AND OPTION TO PURCHASE
18.1 Provided that the Lessee has paid to the Lessor all Rentals and
all other amounts due by the Lessee under this Lease Agreement, and
provided no Event of Default shall have occurred and be continuing,
the Lessee shall have the following purchase options ("OPTION TO
PURCHASE") on the dates ("PURCHASE OPTION DATE") and at the price(s)
specified below("PURCHASE OPTION PRICE"). The Lessee shall exercise
such option by giving written notice to the Lessor no later than
thirty days prior to the date of the intended purchase:
(i) at the end of the Term, unless the Lease shall have been
earlier terminated, to purchase all the Equipment or Unit
thereof but not less than all of them the subject to a Lease
Supplement on an "as is where is basis" for a Purchase Option
Price equal to ten percent (10%) of the Purchase Price for
such Equipment or Unit thereof, plus applicable taxes.
(ii) on any Payment Date, to purchase all the Equipment or Unit
thereof but not less than all of them the subject to a Lease
Supplement on an "as is where is" basis, for a Purchase Option
Price equal to the aggregate of (x) the then Stipulated Loss
Value increased by two percent (2%) of the value thereof, and
(y) the Breakage Costs (the "PURCHASE OPTION PRICE"), plus
applicable taxes. The Lessee shall exercise this Option.
18.2 Upon the exercise of the Option to Purchase by giving of the required
notice, there shall be a binding agreement for the sale, on the Purchase Option
date, of the Equipment so covered by a Lease Supplement, as specified in the
Lessee's notice, on the terms and conditions provided in Clauses 18 hereof.
18.3 On the effective date of purchase, the Lessee shall pay to the Lessor the
price determined under Clause 18.1)(i) or 18.(ii), as the case may be, hereof
for the Equipment together with all other amounts due or owing to the Lessor
under the Lease Supplement related to the Equipment so purchased. Upon receipt
in full of the foregoing amounts, the Lessor shall deliver to the Lessee a Bill
of Sale in the form set forth in Schedule 3 hereof and such other documents that
may be requested by the Lessee, acting reasonably, to evidence such transfer of
title. The Lessor shall not give any warranties or representations of any nature
whatsoever in connection with such sale ( excepted for the absence of liens or
encumbrances created by or through the Lessor) and thereupon this Agreement
shall terminate with respect to the lease of the said Aircraft so sold to the
Lessee.
Notwithstanding the conveyance of the Equipment to the Lessee pursuant
to this Clause 18, the Lessee shall not be relieved of its obligations and
covenants to the Lessor to pay any amounts due or owing hereunder, including
without limitation, its obligation to pay the overdue Rental Instalment, the
Casualty Value or the Stipulated Loss Value, as the case may be, which are still
unpaid under this Agreement.
18.4 If the Lessee has not exercised the Option to Purchase set forth in Clause
18.1 hereof, the Lessee and the Lessor shall negotiate (such negotiation to be
conducted before the expiry of the Term hereof) in good faith the extension of
the Term hereof, upon conditions, rentals and a term acceptable to both parties.
23
At the end of the Term as extended, the Lessee shall purchase all but not less
that all the Equipment subject to a Lease Supplement for one dollar ($1.00). In
the event the Lessee and the Lessor fail reach, before the expiry of the Term
hereof, an agreement with respect to an extension of the Term of this Lease
Agreement, then, the Lessee shall, on the expiry of the Term hereof, purchase
all the Equipment or Unit thereof but not less than all of them the subject to a
Lease Supplement, on an "as is where is basis" for a Purchase Option Price equal
to ten percent (10%) of the Purchase Price for such Equipment or Unit thereof
plus applicable taxes, and the provisions of 18.3 shall apply mutadis mutandis.
The Lessee shall also pay to the Lessor any amounts due or owing hereunder,
including without limitation, payment of any overdue Rental Instalment, the
Casualty Value or the Stipulated Loss Value, as the case may be, which are still
unpaid under this Agreement.
18.5 If the Lessee ever has to return the Equipment to the Lessor under this
Lease Agreement, the Lessee shall, at the request of the Lessor, or on the date
of termination of this Agreement, or on any other date thereafter requested by
the Lessor, remove, pack, ship and surrender the Equipment or the relevant Unit
thereof to the Lessor at the location to be advised by the Lessor, in an as good
condition as when delivered to the Lessee hereunder, ordinary wear and tear
excepted, with all the relevant certificates issued by any authorities as to the
condition, usability and registration of such Equipment. The Lessee shall be
responsible for all liabilities, obligations, losses, damages, penalties,
claims, actions, suits, costs and expenses incurred or which are asserted
against it or the Lessor in connection with (a) the return of the Equipment and
(b) the removal of the Equipment from the site where it is located. When
returned to the Lessor, the Equipment shall be free and clear of all Security
Interest and encumbrances of any nature whatsoever and the Lessee shall reassign
to the Lessor any warranties in accordance with the provisions of this
Agreement.
18.6 In the event the Lessee remains in possession of the Equipment or of any
Unit thereof after the expiration or termination of the relevant Term, other
than under the provisions of Clauses 18.1 and 18.4 hereof, all provisions of the
Agreement shall continue to apply thereto, and Rentals shall continue to be
payable with respect to such Equipment or Unit until surrender as herein
provided. Nothing herein shall be construed or interpreted nor have the effect
of extending or renewing the Term of this Agreement or of any Lease Supplement
respecting the Equipment.
19. GUARANTEE
19.1 As a condition to the entering into and execution of this Lease Agreement
by the Lessor, the Lessee shall cause the Guarantor to, to execute and deliver
to the Lessor, concurrently with the execution of this Lease Agreement, a
Guarantee substantially in the form and of substance set forth in Schedule 4.
20. NOTICES
20.1 Any notice or other communication to a party hereof shall be in writing and
may be delivered personally or sent by prepaid mail, telex or telecopier to the
following mailing, telex or telecopier address, as applicable:
TO THE LESSEE: Dura Skid Inc.
60 Carrier Drive
Etobicoke, Ontario
Canada M9W 5R1
tel: (416) 679-0556
fax: (416) 679 0614
Attention: The Vice President Finance
with copy to: Dura Products International Inc.
60 Carrier Drive
Etobicoke, Ontario
24
Canada M9W 5R1
tel: (416) 679-0556
fax: (416) 679 0614
Attention: The Vice President Finance
TO THE LESSOR: Bombardier Finance Inc.
1600 Mountainview Drive
Colchester, Vermont 05446
tel: (802) 654-8339
fax: (802) 654-8431
Attention: The Manager, Industrial Division Financing
Any such notice or other communication, if personally delivered or
mailed or telecopied, shall be deemed to have been given when received and, if
telexed and the appropriate answer back received, shall be deemed received at
the time that the answer back is received. Any party may from time to time
notify the other in writing of a change of mailing, telex or telecopier address
in the manner set forth herein which thereafter, until changed by like notice,
shall be the address of that party for all purposes of this Lease Agreement.
21. RIGHT OF FIRST REFUSAL
The Lessee hereby grants to the Lessor a right of first refusal on any
future equipment financing on the part of the Lessee, its subsidiaries or
affiliated companies. The Lessee further undertakes to provide the Lessor with a
similar undertaking on the part of the Guarantor, such undertaking to be
delivered upon the execution of this Agreement.
22. ENTIRE AGREEMENT
22.1 This Lease Agreement together with its recitals and its Schedules
exclusively and completely states the rights of the Lessor and the Lessee with
respect to the lease of the Equipment and supersedes all other agreements, oral
or written, with respect to the sale of the Equipment. No variation or
modification of this Agreement and no waiver of any of its provisions or
conditions shall be valid unless in writing and signed by duly authorized
officers of the parties hereto.
23. SEVERABILITY; EFFECT AND MODIFICATION OF LEASE AGREEMENT
23.1 Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall be, as to such jurisdiction, ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
24. EXECUTION AND COUNTERPARTS
24.1 This Agreement may be executed by the parties in several counterparts, each
of which when so executed and delivered shall be deemed to be an original, and
in such case all such counterparts shall together constitute but one and the
same instrument.
25. GOVERNING LAW
25
25.1 This Agreement and any Schedules hereto, including any Lease Supplement,
shall be governed by, interpreted and construed in accordance with, the laws of
the Province of Ontario and the laws of Canada applicable therein.
25. EFFECTIVE DATE
25.1 This Lease Agreement and the obligations of the parties hereto shall be
effective as and from the date first written above.
IN WITNESS WHEREOF, the parties hereto have each caused these presents
to be duly executed by their authorized officers as of the date first
hereinbefore written.
LESSEE: DURA SKID INC.
_________________________________________
Name:
Title: President
_________________________________________
Name:
Title: Vice President Finance
LESSOR: BOMBARDIER FINANCE INC.
_________________________________________
Name:
Title: Vice President
_________________________________________
Name:
Title: Vice President
26
27
SCHEDULE 1
FORM OF LEASE SUPPLEMENT
LEASE SUPPLEMENT NO. * DATED ___, ___, 1997
(CLAUSE 3 OF THE LEASE AGREEMENT)
THIS LEASE SUPPLEMENT NUMBER * dated this _____ day of _________, 1997
(the "SUPPLEMENT") between Bombardier Finance Inc. (the "LESSOR") and Dura Skid
Inc. (the "LESSEE").
WITNESSES THAT:
WHEREAS the Lessor and the Lessee have entered into a Lease Agreement
dated as of __,, 1997 (the "LEASE AGREEMENT") which provides for the execution
and delivery of Supplement(s) in the form hereof for the purpose of the
long-term lease of the Equipment in accordance with the terms of the Lease
Agreement;
NOW THEREFORE, in consideration of the premises, and pursuant to Clause
3 of the Lease Agreement, the Lessee and the Lessor agree as follows:
1. DEFINITIONS AND INCORPORATION OF TERMS
All capitalized terms used herein which are defined in the Lease
Agreement shall have, for the purpose hereof, the respective meanings ascribed
thereto in the Lease Agreement. All provisions of the Lease Agreement are
incorporated herein to the same extent as if such provisions were fully set
forth herein.
2. DELIVERY AND ACCEPTANCE
The Lessor hereby delivers and leases to the Lessee, and the Lessee
hereby accepts delivery of, at the Delivery Location specified in the Acceptance
Certificate, and leases from the Lessor under the Lease Agreement, as hereby
supplemented, the Equipment described in APPENDIX "C" hereto or the Units
thereof, the specification and the serial numbers of which are set out in the
duly executed Acceptance Certificate, with effect from the date hereof (the
"DELIVERY DATE").
3. PAYMENT OF THE RENTALS AND PURCHASE BY LESSEE
The Rentals shall be payable in accordance with the provisions of
Appendix "B" hereof, which Appendix shall be replaced upon payment of the
Casualty Value with respect to a Lost Unit, and for all purposes of the Lease
Agreement, the following, apply to the Equipment or the Units thereof specified
in the Acceptance Certificate herein above referred to:
3.1 PURCHASE PRICE: $ *
3.2 PURCHASE PRICE PER UNIT: AS SPECIFIED IN APPENDIX "C"
3.3 RENTAL: AS PER APPENDIX "B" PLUS ANY APPLICABLE TAX
3.4 PAYMENT DATE: THE ___ DAY OF EACH MONTH DURING THE TERM
3.5 FIRST PAYMENT DATE:
28
3.6 FINAL PAYMENT DATE:
3.7 PURCHASE OPTION DATE AND PRICE:
DATE:
PRICE: _____________,PLUS ANY RELEVANT TAXES
3.8 LEASE COMMENCEMENT DATE:
3.9 LEASE TERMINATION DATE:
4. STIPULATED LOSS VALUE
For the all purposes of the Lease Agreement, the Stipulated Loss Value
of the Equipment or of a Unit, as the case may be, shall be the amount
determined in accordance with Appendix "A" hereto, which Appendix "A", as and if
needed, may be replaced from to time to time in accordance with the provisions
of Clause 7.4 of the Lease Agreement.
6. LOCATION OF EQUIPMENT
The Equipment specified in the Acceptance Certificate attached hereto
will be located at :
60 Carrier Drive
Etobicoke, Ontario
Canada M9W 5R1
7. GUARANTOR
Name: Dura Products International Inc.
8. PROVINCE OF INCORPORATION
(i) Lessee: Ontario
(ii) Guarantor: Ontario
9. INSURANCE
(a) Liability: (i) Amount of Coverage: $
(ii) Deductible:
(b) Equipment: (i) Amount of Coverage: ___________
(ii) Deductible: ___________________
10. ACKNOWLEDGMENTS
The Lessee hereby represents, warrants and agrees that as of the date
of this Supplement: (i) possession of the Equipment specified in the Acceptance
Certificate referred to above has been transferred to the Lessee; (ii) the said
Equipment has been duly accepted by the Lessee under the Lease Agreement; (iii)
the said Equipment has become subject to and governed by the provisions of the
Lease Agreement; and (iv) the Lessee has become obligated to pay the Rentals,
together with all other amounts payable by
29
virtue of the Lease Agreement, as more fully provided for in the said Agreement.
11. REGISTRATIONS AND FILINGS
The Lessee has made all the registrations and filings, deposits and
recordings referred to in Clause 4.2 of the Lease Agreement and evidence thereof
has been delivered to the Lessor.
12. REPRESENTATIONS AND WARRANTIES
The Lessee represents and warrants that all the representations and
warranties contained in the Lease Agreement are true and correct on the date
hereof as if made on and as of the date hereof.
13. GOVERNING LAW
This Agreement and any Schedules hereto, including any Lease
Supplement, shall be governed by, interpreted and construed in accordance with,
the laws of the Province of Ontario and the laws of Canada applicable therein.
SIGNATURES ON THE FOLLOWING PAGE
30
IN WITNESS WHEREOF, the parties hereto have each caused these presents
to be duly executed by their authorized officers as of the date first
hereinbefore written.
LESSEE: DURA SKID INC.
_________________________________________
Name:
Title: President
_________________________________________
Name:
Title: Vice President Finance
LESSOR: BOMBARDIER FINANCE INC.
_________________________________________
Name:
Title: Vice President
_________________________________________
Name:
Title: Vice President
31
APPENDIX "A"
TO THE LEASE SUPPLEMENT NO. *
STIPULATED LOSS VALUE
The Stipulated Loss Value as of a Payment Date (after payment of the
Rental) is the percentage of the Purchase Price (or Purchase Price per Unit, as
the case may be) set forth in the table below under Column 2 opposite the
relevant Payment Date.
Purchase Price: $
Purchase Price per Unit: $
Term: 60 months
Payment Date:
PAYMENT DATE AND NUMBER COLUMN 2:
- ----------------------- ---------
No. 1 %
No. 2 %
32
APPENDIX "B"
TO LEASE SUPPLEMENT NUMBER ____
RENTALS
33
APPENDIX "C"
TO LEASE SUPPLEMENT NO.
DESCRIPTION OF THE EQUIPMENT
34
SCHEDULE 2
FORM OF ACCEPTANCE CERTIFICATE
(CLAUSE 3 OF THE LEASE AGREEMENT)
ACCEPTANCE CERTIFICATE NUMBER *
ATTACHED TO LEASE SUPPLEMENT NUMBER *
TO: BOMBARDIER FINANCE INC.
6815-A 40TH STREET S.E.
CALGARY, ALBERTA
CANADA T2C 2W7
Attention of the Vice President
The undersigned, a duly authorized officer for Dura Skid Inc. Inc.
being the lessee (the "Lessee") under the Lease Agreement made as of ____ __,
1997 (the "Lease") with Bombardier Finance Inc., (the "Lessor"), does hereby
certify that:
1. On behalf of the Lessee, I have accepted the Equipment listed in
ATTACHMENT A hereto, as conforming in all respects to the terms and
provisions of the said Lease Agreement.
2. On behalf of the Lessee, I further certify that by virtue of my said
acceptance of said Equipment the same has, on the date stated
herein, come under the Lease to the Lessee pursuant to the terms and
provisions of the said Lease Agreement.
3. The DELIVERY LOCATION is: 60 CARRIER DRIVE
ETOBICOKE, ONTARIO
CANADA M9W 5R1
DATED as of *, 1997. Dura Skid Inc.
_____________________________________
Name:
Title:
35
ATTACHMENT "A "
TO ACCEPTANCE CERTIFICATE NUMBER O
36
SCHEDULE 3
FORM OF BILL OF SALE
(Clause * of Lease Agreement)
_________________________ (the "Seller") in consideration of the sum of
_______ Dollar(s) ($___) paid by o (the "Buyer") at or before the execution and
delivery of these presents, the receipt of which is hereby acknowledged, does
hereby grant, sell, transfer and set over unto the Buyer, its successor and
assigns, all of its rights, ownership, title and interest in the following
property:
DESCRIPTION: *
MANUFACTURER: *
SERIAL NUMBER: *
The Seller hereby warrants unto the Buyer that the Seller has good and
legal title, as, but only to such extent, acquired from the Manufacturer or from
other Person(s) of the property hereinabove specified to the aforesaid property
free and clear of all encumbrances which result from claims against the Seller.
THE AFORESAID PROPERTY IS BEING SOLD HEREUNDER ON AN "AS IS" "WHERE IS"
BASIS AND "WITH ALL FAULTS AND DEFECTS". THE SELLER MAKES NO WARRANTY, EITHER
EXPRESS OR IMPLIED, LEGAL OR CONTRACTUAL, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND EXPRESSLY DISCLAIMS
LIABILITY FOR LOSS OF PROFIT OR INCIDENTAL, CONSEQUENTIAL, OR COMMERCIAL LOSSES
AND ALL OTHER OBLIGATIONS OR LIABILITIES.
IN WITNESS WHEREOF the Seller has caused this instrument to be executed
in its name by its officers thereunto duly authorized on the * day of *
SELLER:
_______________________________________
By:
37
SCHEDULE 4
FORM OF GUARANTEE (CORPORATE)
(CLAUSE 19 OF THE LEASE AGREEMENT)
DATE: JULY __, 1997
TO: BOMBARDIER FINANCE INC.
6815-A 40th. Street S.E.
Calgary, Alberta
Canada T2C 2W7
FOR VALUABLE CONSIDERATION, receipt whereof is hereby acknowledged, and
the agreement of BOMBARDIER FINANCE INC. (the "LESSOR"), to lease the Equipment
(as defined in the Lease Agreement hereinbelow referred to) to Dura Skid Inc.
(the "LESSEE"), a wholly owned subsidiary of DURA PRODUCTS INTERNATIONAL INC.
(the "GUARANTOR"), the Guarantor hereby unconditionally and absolutely
undertakes to be liable to the Lessor, as a primary and principal obligor and
not merely as surety, jointly and severally with the Lessee, for, and guarantee,
the full and punctual payment, due performance, completion and accuracy of all
the debts, indemnities, obligations, liabilities, indebtedness, covenants,
agreements, conditions and representations and warranties, respectively to be
paid, performed, observed, completed or kept by the Lessee under the Lease
Agreement entered into between the Lessor and the Lessee as of August __, 1997,
as supplemented by lease supplements executed from time to time (the "LEASE
AGREEMENT"), including, without limitation, the payment of Rentals, Stipulated
Loss Values, Casualty Values, Breakage Costs and all other amounts of money due
and payable or to become due and payable and at any time owing or remaining
unpaid by the Lessee to the Lessor under the Lease Agreement or under any other
instrument or agreement executed by or in favor of the Lessor ( collectively,
the "LIABILITIES"). The liability of the Guarantor hereunder is unlimited and
shall bear interest from the date of demand for payment until payment in full at
the rate per annum equal to the Default Rate ( as defined in the Lease
Agreement).
A. The Guarantor hereby agrees with the Lessor as follows:
1. The Lessor may grant time, renewals, extensions, indulgences,
releases and discharges to, take securities (which word as
used herein includes other guarantees), abstain from taking
securities or from perfecting securities of, cease or refrain
from giving credit or making loans or advances to, accept
compositions from and otherwise deal with, the Lessee or
others and with all securities as the Lessor may see fit, and
may apply all moneys at any time received from the Lessee or
others or from securities upon such part of the Liabilities as
the Lessor deems best and change any such application in whole
or in part from time to time as the Lessor may see fit, all
without in any way limiting or lessening the liability of the
Guarantor under this Guarantee, and no loss of or in respect
of any securities received by the Lessor from the Lessee or
others, whether occasioned by the fault of the Lessor or
otherwise, shall in any way limit or lessen the liability of
the Guarantor under this Guarantee.
2. This Guarantee shall be a continuing guarantee and shall cover
all the Liabilities, and it shall apply to and secure any
ultimate balance due or remaining unpaid to the Lessor under
the Lease Agreement.
3. The Lessor shall not be bound to exhaust its recourse against
the Lessee or others (including without limitation, other
guarantors) or any securities it may at any time hold before
being entitled to payment from the Guarantor of the
Liabilities; the Guarantor hereby renounces to all benefits of
discussion and division.
4. All indebtedness and liability, present and future, of the
Lessee to the Guarantor are postponed and subordinated to the
Liabilities, and all moneys received by the Guarantor
38
after demand from the Lessor to the Guarantor with respect to
the Liabilities or any of them, are hereby assigned to the
Lessor and shall be received in trust for the Lessor and
forthwith upon receipt shall be paid over to the Lessor, the
whole without in any way limiting or lessening the liability
of the Guarantor hereunder; and this assignment, postponement
and subordination is independent of this Guarantee and shall
remain in full effect notwithstanding that the liability of
the Guarantor under this Guarantee may be extinct, provided
however that any such moneys irrevocably and indefeasibly
received by the Lessor shall be applied in reduction of the
liability of the Guarantor hereunder.
5. This Guarantee shall not be affected by any change in the name
of the Lessee or any change in the persons responsible for the
conduct of the business of the Lessee, or by the acquisition
of the Lessee's business by any other Person (as this term is
defined in the Lease Agreement), natural or corporate, or by
any change whatsoever in the objects, capital structure or
constitution of the Lessee or by the Lessee's business being
amalgamated with a corporation, but shall, notwithstanding the
happening of any such event, continue to apply to all the
Liabilities whether theretofore or thereafter incurred or
arising.
6. This Guarantee shall not be considered as wholly or partially
satisfied by the payment or liquidation at any time or times
of any sum or sums of money for the time being due or
remaining unpaid to the Lessor and all payments received by
the Lessor from the Lessee or from others or from estates
shall be regarded for all purposes as payments in gross
without any right on the part of the Guarantor to claim in
reduction of the liability under this Guarantee the benefit of
any such payment or any guarantee held by the Lessor or
proceeds thereof, and the Guarantor shall renounce any right
to be subrogated in any rights of the Lessor until the Lessor
shall have received payment in full of the Liabilities, and to
the extent so subrogated, the foregoing notwithstanding, the
Guarantor's rights shall be subordinated and postponed to the
Lessor's rights until Lessor has so received payment in full
of the Liabilities.
7. All moneys, advances, renewals and credits in fact borrowed or
obtained from the Lessor shall be deemed to form part of the
Liabilities, notwithstanding any lack or limitation of status
or of power, incapacity or disability of the Lessee or of the
directors, partners or agents thereof, or that the Lessee may
not be a legal or suable entity, or any irregularity, defect
or informality in the borrowing or obtaining of such moneys,
advances, renewals or credits, the whole whether known to the
Lessee or not; and any sum which may not be recoverable from
the Guarantor on the basis of a guarantee shall be recoverable
from the Guarantor as sole or principal debtor in respect
thereof and shall be paid to the Lessor on demand with
interest at the Default Rate.
8. This Guarantee is in addition to and not in substitution for
any other guarantee, by whomsoever given, at any time held by
the Lessor, and any present or future obligation to the
Lessor, incurred or arising otherwise than under a guarantee,
of the Guarantor or of any other obligant, whether bound with
or apart from the Lessee; excepting any guarantee surrendered
for cancellation on delivery of this instrument.
9. Subject to manifest error on the part of the Lessor, the
Guarantor shall be bound by any account rightfully settled
between the Lessor and the Lessee, and if no such account has
been settled immediately before demand for payment under this
Guarantee any account stated by the Lessor shall be accepted
by the Guarantor as conclusive evidence of the amount which at
the date of the account so stated is due by the Lessee to the
Lessor or remains unpaid by the Lessee to the Lessor.
10. This Guarantee shall be operative and binding upon the
Guarantor notwithstanding the non-execution thereof by any
other proposed signatory or signatories, and possession of
this instrument by the Lessor shall be conclusive evidence
against the Guarantor that this instrument was not delivered
in escrow or pursuant to any agreement that it should not be
effective until any conditions present or subsequent have been
complied with.
11. No suit based on this guarantee shall be instituted until
demand for payment has been made, and demand for payment shall
be deemed to have been effectually made upon the
39
Guarantor if and when a notice requesting payment of the
liabilities from the Guarantor is given to the Guarantor in
the manner set forth in Clause 20 of the Lease Agreement.
Moreover, when demand for payment has been made, the Guarantor
shall also be liable to the Lessor for all legal costs,
lawyers fees and all expenses incurred by or on behalf of the
Lessor resulting from any action taken or legal proceedings
instituted on the basis of this Guarantee. All payments
hereunder shall be made to the Lessor at the address appearing
hereinabove.
12. This instrument covers all agreements between the parties
hereto relative to this Guarantee and none of the parties
shall be bound by any representation or promise made by any
person relative thereto which is not embodied herein.
13. This Guarantee shall extend to and enure to the benefit of the
Lessor and its successors and assigns, and every reference
herein to the Guarantor is a reference to and shall be
construed as including the Guarantor and its successors and
assigns, to and upon all of whom this Guarantee and agreement
shall extend and be binding.
14. All capitalized terms used in this Guarantee and not otherwise
defined herein are used with the same meanings as ascribed to
them in the Lease Agreement
B. THE GUARANTOR REPRESENTS, WARRANTS AND COVENANTS AS FOLLOWS:
1. The Guarantor is a corporation duly incorporated and validly
subsisting under the laws of the state of its incorporation
specified in a Lease Supplement, with full corporate power and
authority to own its properties and to carry on its business
as presently conducted in each and every jurisdiction and to
enter into and perform its obligations hereunder.
2. This Guarantee has been duly authorized, executed and
delivered by the Guarantor and constitute a legal, valid and
binding obligation of the Guarantor, enforceable in accordance
with its terms, subject only to such qualifications with
respect thereto relating to creditors' rights generally and
the enforcement of equitable remedies.
3. No approval is required from any public regulatory body or
Person with respect to the entering into or performance of
this Guarantee by the Guarantor or if any such approval is
required, it has been properly obtained and evidence thereof
satisfactory to the Lessor is being delivered to the Lessor
concurrently with the execution of this Guarantee.
4. The entering into, delivery and performance of this Guarantee
by the Guarantor will not result in any breach of, or
constitute a default under any indenture, mortgage, trust,
loan, creditor security agreement or any other instrument,
deed or agreement to which the the Guarantor is a party or by
which the Guarantor may be bound, or contravene any provision
of any law, statute, rule or regulation to which the Guarantor
is subject, or any judgment, decree, order, permit or
franchise applicable to the Guarantor.
5. There are no actions, suits or proceedings pending or, to the
knowledge of the Guarantor, threatened against the Guarantor,
its respective properties or affecting this Guarantee or the
transactions contemplated hereby which could, if adversely
determined, affect the carrying out of such transactions.
6. It holds all licenses, certificates and permits from
applicable agency or governmental authority for the conduct of
its business as it is presently conducted.
7. It has delivered all necessary returns to all relevant
taxation authorities and it is not in default in the payment
of any taxes due and payable.
8. It is not in default under any agreement to which it is a
party or by which it may be bound which would have a material
adverse effect on its business, assets or condition.
9. If and when requested by the Lessor, it shall furnish to the
Lessor or shall cause to be delivered to the Lessor, (i) no
later than one hundred and twenty (120) days from the end of
each fiscal year of the Guarantor, as long as Rentals and all
other amounts due under the Lease Agreement are still
outstanding, a copy of the Guarantor's audited financial
statements for such year in the same form provided to
shareholders of the Guarantor, and (ii) within forty-five (45)
days from the end of each quarter, the Guarantor's unaudited
statement of profit and loss for each such quarter, and a
balance sheet as at the end of such
40
quarter, all in reasonable detail and signed by its Vice
President, Finance.
10. It shall preserve and maintain its corporate existence in
every jurisdiction in which the character of the property
owned or the nature of the business transacted by it makes
licensing or qualification necessary.
11. It will not enter into any transaction or series of
transactions (including by way of reorganization,
consolidation, amalgamation, merger, liquidation, transfer,
sale or otherwise) whereby all or substantially all of its
undertakings, property and assets would become the property of
any other person, or, in the case of any such amalgamation, of
the continuing corporation or resulting corporation therefrom,
unless:
* (i)no Event of Default has occurred and is subsisting or
would result therefrom; and
* (ii) such transaction or series of transactions is
effected between any or all of the Guarantor's parent or
sister companies and such transaction preserves the
rights and powers of the Lessor under this Agreement and
does not increase the risks to the Lessor under this
Agreement; and
* (iii) such transaction or series of transactions does
not affect the validity and the enforceability of any of
the rights of the Lessor hereunder; and
* (iv) such transaction or series of transactions is
effected with a party other than pursuant to Clause
10.2.7 (ii) and:
(A) such other Person or continuing corporation
(herein called "SUCCESSOR CORPORATION") is a
corporation constituted under a jurisdiction
satisfactory to the Lessor, at its sole discretion;
and
(B) the Successor Corporation shall execute, prior to
or contemporaneously with the consummation of such
transaction, such instruments, if any, as are in the
opinion of the Lessor necessary or advisable to
evidence the assumption by the Successor Corporation
of liability for all of the obligations of the
Guarantor under this Agreement; and
(C) such transaction or series of transactions, in
the opinion of the Lessor shall be upon such terms as
to preserve and not impair in any respect any of the
rights and powers of the Lessor under this Agreement
nor increase the risks to the Lessor under this
Agreement; and
(D) such transaction or series of transactions do not
affect the validity and the enforceability of this
Agreement.
Whenever the conditions hereinabove specified have been duly
observed and performed, the Successor Corporation shall possess and
from time to time may exercise each and every right and power of the
Guarantor under this Agreement, in the name of the Guarantor or
otherwise and any act or proceeding under any provision of this
Agreement required to be done or performed by any directors or officers
of the Guarantor may be done and performed with like force and effect
by the directors or officers of such Successor Corporation.
THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE PROVINCE OF ONTARIO AND THE LAWS OF CANADA APPLICABLE THEREIN..
EXECUTED on this __th day of August 1997.
DURA PRODUCTS INTERNATIONAL INC.
Name: ______________________________ Name: ___________________________
41
Title: Title:
EXHIBIT 3.9
JOINT VENTURE AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 23rd day of September, 1997
A M O N G:
DURASKID (NEW ENGLAND), L.L.C., a limited liability
company formed under the laws of the Commonwealth of
Massachusetts,
(hereinafter called the "Company")
OF THE FIRST PART;
- and -
DURA PRODUCTS INTERNATIONAL INC.,
a corporation incorporated
under the laws of the Province of Ontario,
(hereinafter called "Dura Products")
OF THE SECOND PART;
- and -
DURASKID AND PRODUCTS, INC.,
a corporation incorporated
under the laws of the State of Delaware,
(hereinafter called "Duraskid US")
OF THE THIRD PART;
- and -
ENVIRONMENTAL COMPOSITE PRODUCTS L.L.C., a limited
liability company formed under the laws of the
Commonwealth of Massachusetts,
(hereinafter called "Woodco")
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OF THE FOURTH PART;
WHEREAS Duraskid US is a wholly-owned subsidiary of Dura Products and
Dura Products is the owner of certain proprietary technology (the "Technology")
relating to Duraskids;
AND WHEREAS Philip L. Caron, James M. Herlihy, Conrad Paulino, Mark
Paulino, Ronald Phillips, William Banfield, Patrick Banfield and Robert Banfield
are the sole members of Woodco;
AND WHEREAS Woodco will use its skills to enable the Company to source
from third parties the requisite raw materials to manufacture Duraskids;
AND WHEREAS Duraskid US and Woodco have therefore agreed to establish a
joint venture by incorporating the Company as a limited liability company which
will hold a licence for the manufacture, sale and distribution of Duraskids
using the Technology throughout the Territory;
AND WHEREAS the parties hereto understand that the following is the
Company's contemplated investment requirement in order to establish a facility
having 14 extrusion lines, it being understood, however, that the facility size
may be expanded if so determined by the management committee of the Company:
Equity $750,000
Subordinated Debt $750,000
Equipment Lease Financing $1,875,000
Bank Loans (working capital) $375,000
--------
$3,375,000
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
covenants, agreements, warranties and payments herein set forth and provided
for, the parties hereto respectively covenant and agree as follows:
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1. DEFINED TERMS
1. DEFINITIONS. Where used herein, the following terms shall have the following
meanings respectively:
"Affiliate" means, with respect to any designated person, each person that,
directly or indirectly, controls or is controlled by or is under common
control with such designated person. For the purpose of this definition,
"control" (including, with correlative meanings, the terms "controlled by"
and "under common control with") as used with respect to any person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such person, whether through
the ownership of voting securities or by contract;
"Closing Date" means October 15, 1997 or such earlier or later date as may be
mutually agreed upon by the parties hereto;
"Duraskid US Subscribed Capital" has the meaning attributed thereto in
section 3.2;
"Duraskids" means pallets and skids manufactured from Dura Products'
proprietary composite material;
"Dura Products Option Agreement" means the agreement between Woodco and Dura
Products relating to the grant of option to purchase Dura Product common
shares, in the form of the agreement attached hereto as Schedule A;
"Initial Subscription Capital" means the aggregate subscribed capital to be
paid by Duraskid US and Woodco at the Time of Closing pursuant to sections
3.1(i) and 3.2(ii);
"Letter of Intent" means the restated letter of intent entered into by Wood
Recycling and Dura Products dated June 4, 1997;
"Maturity Date" means the date which is 10 years after the Closing Date;
"Operating Agreement" means the operating agreement among the Company, Woodco
and Duraskid US in the form attached hereto as Schedule B;
"Subordinated Loan" has the meaning attributed thereto in section 4.1;
"Subscribed Capital" means collectively the Woodco Subscribed Capital and the
Duraskid US Subscribed Capital;
"Technology" has the meaning set forth in the first recital to this
Agreement;
"Technology Licence Agreement" means the agreement between the Company, as
licensee, and Dura Products, as licensor, relating to the licencing of the
Technology to manufacture, sell and distribute Duraskids in the Territory, in
the form of the agreement attached hereto as Schedule C;
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"Territory" means the States of Connecticut, Maine, Massachusetts, New
Hampshire, Rhode Island, Vermont and that part of upper New York State
described in Schedule D hereto;
"Time of Closing" means 10:00 o'clock (Toronto time) in the morning on the
Closing Date;
"Woodco Subscribed Capital" has the meaning attributed thereto in section
3.1.
1.2 UNITED STATES DOLLARS. Unless otherwise expressed herein, all dollar amounts
referred to in this agreement are in United States dollars.
1.3 SINGULAR, PLURAL, ETC. Wherever in this agreement the context so requires,
the singular number shall include the plural number and vice versa and any
gender herein used shall be deemed to include the feminine, masculine or neuter
gender and "person" shall mean an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture, or other entity or a government or any agency,
department or instrumentality thereof and vice versa.
2. SCHEDULES
2.1 SCHEDULES. The following are the schedules attached to and incorporated in
this agreement by reference and deemed to be a part hereof:
Schedule A - Form of Dura Products Option Agreement
Schedule B - Operating Agreement
Schedule C - Technology Licensing Agreement
Schedule D - Area of Upper New York State Forming Part of the
Territory
Schedule E - Form of Promissory Note
Schedule F - Certificate of Organization of the Company
3. SUBSCRIPTIONS
3.1 WOODCO SUBSCRIPTION. Woodco hereby subscribes for, on its own behalf and for
its own account, a 49% ownership interest in the Company and agrees to
contribute, as equity capital to the Company, the aggregate amount of $367,500
(the "Woodco Subscribed Capital") as follows:
(i) at the Time of Closing, an aggregate initial subscription amount of
$36,750, payable by certified cheque or banker's draft to the order of
the Company; and
(ii) from time to time thereafter upon not less than 20 business days
written notice from the Company to Woodco specifying (a) the aggregate
additional capital to be paid by Woodco by certified cheque, bank draft
or wire transfer of immediately available funds to the order of the
Company, (b) the final date by which the additional capital to be paid
by Woodco must be received by the Company which date cannot be earlier
than 20 business days following the giving of the notice and (c) that
the giving of such notice has been approved by the management committee
of the Company.
3.2 DURASKID US SUBSCRIPTION. Duraskid US hereby subscribes for, on its own
behalf and for its own account, a 51% ownership interest in the Company and
agrees to contribute, as equity
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capital to the Company, the aggregate amount of $382,500 (the "Duraskid US
Subscribed Capital") as follows:
(i) at the Time of Closing, an aggregate initial subscription amount of
$38,250, payable by certified cheque or banker's draft to the order of
the Company; and
(ii) from time to time thereafter upon not less than 20 business days
written notice from the Company to Duraskid US specifying (a) the
aggregate additional capital to be paid by Duraskid US by certified
cheque, bank draft or wire transfer of immediately available funds to
the order of the Company, (b) the final date by which the additional
capital to be paid by Duraskid US must be received by the Company which
date cannot be earlier than 20 business days following the giving of
the notice and (c) that the giving of such notice has been approved by
the management committee of the Company.
3.3 PRO RATA NOTICES. The Company agrees that any notices contemplated in
sections 3.1(ii) and 3.2 (ii) shall be given contemporaneously and the parties
hereto agree that such notices shall in all respects be identical save and
except that the aggregate additional capital to be paid shall be pro rata
between Woodco and Duraskid US on a 49:51 basis. Woodco and Duraskid US covenant
and agree with the Company and each other that each of them will comply with the
terms of the notices from time to time issued by the Company pursuant to
sections 3.1(ii) and 3.2(ii).
3.4 UNDISTRIBUTED EARNINGS INCLUDED IN ADDITIONAL CAPITAL. Woodco and Duraskid
US hereby agree for greater certainty that in the event that the management
committee of the Company determines that additional capital is required in
accordance with sections 3.1 and 3.2, any amount of undistributed or retained
profits or net income then held by the Company and deemed part of the Capital
Account of either Woodco or Duraskid US shall be included in all or part of that
party's proportionate share of any additional capital so required.
4. SUBORDINATED LOAN TO THE COMPANY
4.1 COMMITMENT TO LEND. Subject to the provisions of section 4.10 hereof, Woodco
hereby agrees to lend to the Company the aggregate principal amount of $750,000
(the "Subordinated Loan") as hereinafter provided. The Subordinated Loan may be
availed of by way of various advances and the resulting indebtedness shall be
evidenced by promissory notes, substantially in the form annexed hereto as
Schedule E, in the aggregate principal amount of the Subordinated Loan so
advanced by Woodco.
4.2 ADVANCES OF SUBORDINATED LOAN. Unless otherwise agreed by the parties
hereto, $187,500 of the Subordinated Loan shall be advanced contemporaneously at
the time when 50% of the aggregate equity capital commitment in sections 3.1 and
3.2 hereof has been requested by Company. Thereafter, advances of the
Subordinated Loan shall be made by Woodco upon not less than thirty days prior
written notice from the Company of the amount so required. The Company has
advised Woodco that it anticipates the balance of the Subordinated Loan will be
required on the basis of $75,000 per month thereafter; however, nothing herein
shall preclude requested advances on a faster basis. Woodco shall have no
obligation to advance any of the Subordinated Loan after the Maturity Date.
4.3 INTEREST. The principal portion of all indebtedness created by advances
under the Subordinated Loan, both before and after maturity, default or judgment
and overdue interest both before and after default of judgment shall bear
interest from the date of the advance or from the date interest is due, as the
case may be at 9% per annum, calculated quarterly. Interest shall accrue from
the earlier of the date of the final advance of the Subordinated Loan and the
date that
-6-
occurs three months following the date of the first advance of the Subordinated
Loan. Interest shall thereafter only be payable commencing on the first day of
the next succeeding calendar quarter. In all events interest shall not become
payable until the earlier of the advance of the entire Subordinated Loan and the
date determined by the management committee of the Company that no further
advances of the Subordinated Loan are required. The Company shall not be in
default of payment of any amount of interest hereunder if the Company is
prohibited from making such payment by reason of the terms of any loan
documentation provided by the Company to any third party lender; however,
interest shall nevertheless accrue and shall be added to the principal amount
outstanding if such interest has not been paid within six months of the date
such interest should otherwise have been paid.
4.4 REPAYMENT. The principal amount of the Subordinated Loan shall be repaid on
the following basis:
(a) payment of $25,000 on the first day of March, June, September
and December in each and every year commencing on December 1,
2000; and
(b) on the Maturity Date, the balance outstanding under the
Subordinated Loan;
provided, however, the Company shall not be in default of payment of any amount
of principal hereunder if the Company is prohibited from making such payment by
reason of the terms of any loan documentation provided by the Company to any
third party lender.
4.5 PREPAYMENT. The Subordinated Loan may be prepaid in whole or in part at any
time and from time to time without penalty or bonus.
4.7 NO SECURITY AND SUBORDINATION. The Subordinated Loan shall be unsecured.
Woodco covenants and agrees to execute any and all subordination documentation
reasonably requested by any lender or lenders or contemplated lender or lenders
to the Company in order to evidence the subordination and postponement of the
Subordinated Loan to the indebtedness owing, or to be owing, by the Company to
such lender or lenders. It is expressly acknowledged and agreed that such
documentation may restrict the payment of interest and the repayment of
principal on terms acceptable to both the lenders and the management committee
of the Company.
4.8 EVENTS OF DEFAULT. Woodco may demand immediate payment of the Subordinated
Loan and the same shall thereby become immediately due and payable and failing
payment of the same forthwith, Woodco may then proceed to enforce payment
thereof by exercising any right, power or remedy permitted by law, upon the
happening of any one or more of the following events:
(a) if the Company shall fail to pay any instalment of principal
or interest which shall have become due and payable after
thirty (30) days written notice to the Company from Woodco;
and
(b) if the Company is adjudged a bankrupt or if a custodian or
receiver or receiver and manager or any other officer with
similar powers if appointed for the Company or for a
substantial part of its assets.
Woodco may waive any breach by the Company of any of the provisions contained
herein or any default by the Company in the observance or performance of any
covenant in this section 4 to be
-7-
observed or performed by the Company; provided always that no act or omission of
Woodco shall extend to or be taken in any manner whatsoever to affect any
subsequent breach or default or the rights resulting therefrom.
4.9 ASSIGNMENT OF THE SUBORDINATED LOANS. Woodco may assign the Subordinated
Loan provided it obtains the prior written consent of the Company and Duraskid
US, which consent shall not be unreasonably withheld or delayed, and provided
that the assignee agrees in writing, in a form satisfactory to the Company and
Duraskid US, to be bound by the terms of this agreement insofar as this
agreement relates to the Subordinate Loan.
4.10 ISSUANCE OF LETTERS OF CREDIT. Woodco acknowledges that as part of
negotiating the equipment lease financing or bank working capital loans, one or
more of such lenders may wish to advance to the Company additional amounts which
would equal all or any part of the Subordinated Loan. In such event the parties
agree that the Company may give notice to Woodco that the amount of the
Subordinated Loan shall be reduced or eliminated by the amount set forth in the
notice and, in lieu thereof, if requested by the Company and such lenders,
Woodco covenants and agrees to provide a letter of credit from a bank,
acceptable to such lenders, in favour of such lenders and on terms acceptable to
such lenders in the amount of the Subordinated Loan which Woodco no longer has
the obligation to advance. The Company shall pay an annual fee to Woodco in the
amount of 0.50% of the amount of the letter of credit so provided by Woodco.
5. EXECUTION AND DELIVERY OF ADDITIONAL AGREEMENTS
5.1 EXECUTION OF TECHNOLOGY LICENCE AGREEMENT. At the Time of Closing, Dura
Products and the Company will enter into the Technology Licence Agreement.
5.2 EXECUTION OF OPERATING AGREEMENT. At the Time of Closing, Duraskid US,
Woodco and the Company will enter into the Operating Agreement.
5.3 EXECUTION OF DURA PRODUCTS OPTION AGREEMENT. At the Time of Closing, Dura
Products and Woodco will enter into the Dura Products Option Agreement.
6. REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS OF THE COMPANY. The Company represents and warrants to
Woodco and Duraskid US as follows and acknowledges that Woodco and Duraskid US
are relying upon such representations and warranties in connection with the
purchase, and/or the commitment to purchase, by Woodco and Duraskid US of the
Subscribed Capital:
6.1.1 The Company has been duly formed and organized and is validly subsisting
under the laws of the Commonwealth of Massachusetts. Attached hereto as Schedule
F is a true copy of the Certificate of Organization (and any amendments thereto)
of the Company.
6.1.2 Prior to the receipt of the Subscribed Capital, no person holds any
ownership interest in the Company.
6.1.3 At the Time of Closing upon payment of that portion of the Initial
Subscription Capital, Woodco will hold a 49% ownership interest in the Company
and Duraskid US will hold a 51% ownership interest in the Company.
-8-
6.1.4 Except for Woodco and Duraskid US, no person, firm, corporation or any
party whatsoever has any agreement or option or any right or privilege (whether
by law, pre-emptive or contractual) capable of becoming an agreement, including
convertible securities, warrants or verbal obligations of any nature, for the
purchase, subscription, allotment or issuance of any ownership interest in the
Company.
6.1.5 The Company has no subsidiaries or agreements of any nature to acquire any
subsidiaries or to acquire or lease any other business operations.
6.1.6 At the Time of Closing, the Company will not have any material assets or
liabilities of any nature and kind.
6.2 REPRESENTATIONS OF WOODCO. Woodco represents and warrants to Dura Products,
Duraskid US and the Company as follows and acknowledges that Dura Products,
Duraskid US and the Company are relying upon such representations and warranties
in connection with the transactions contemplated hereby:
6.2.1 Woodco has been duly formed and organized and is validly subsisting under
the laws of the Commonwealth of Massachusetts. Woodco has the power and
authority to enter into this Agreement and each of the agreements contemplated
herein and to perform its obligations hereunder and thereunder.
6.2.2 The entering into of this Agreement and the agreements contemplated herein
and the performance of their obligations hereunder and thereunder will not
result in the violation of any of the terms and provisions of the constating
documents of Woodco or of any indenture or other agreement, written or oral, to
which it may be a party of by which it is bound. The execution and delivery of
this Agreement and the agreements contemplated herein by Woodco and the
consummation of the transactions contemplated hereby and thereby will not result
in the violation of any statute, order, decree, judgment, notice, ordinance,
regulation, law, or other restrictions applicable to Woodco or require the
consent or approval of any governmental entity or other party.
6.2.3 The execution, delivery and performance of this Agreement and the
agreements contemplated herein have been duly authorized by all necessary
corporate action on the part of Woodco and this Agreement constitutes and, upon
execution, the agreements contemplated herein will constitute, valid and binding
obligations of Woodco enforceable in accordance with their terms, subject to the
following qualifications:
(a) specific performance and injunctive relief and other equitable
remedies are discretionary and, in particular, may not be
available where damages are considered by a court of competent
jurisdiction to be an adequate remedy; and
(b) enforcement may be limited by bankruptcy, insolvency,
liquidation, reorganization, reconstruction and other laws
generally affecting enforceability of creditors' rights.
6.2.4 Philip L. Caron, James M. Herhily, Conrad Paulino, Mark Paulino, Ronald
Phillips, William Banfield, Patrick Banfield and Robert Banfield are the sole
members of Woodco.
6.3 REPRESENTATIONS AND WARRANTIES OF DURASKID US. Duraskid US represents and
warrants to Woodco and the Company as follows and acknowledges that Woodco and
the Company are
-9-
relying upon such representations and warranties in connection with the
transactions contemplated hereby:
6.3.1 Duraskid US is a corporation duly incorporated and validly subsisting
under the laws of the State of Delaware. Duraskid US has the corporate power and
authority to enter into this Agreement and the agreements contemplated herein
and to perform its obligations hereunder and thereunder.
6.3.2 The entering into of this Agreement and the agreements contemplated herein
and the performance of their obligations hereunder and thereunder will not
result in the violation of any of the terms and provisions of the constating
documents or by-laws of Duraskid US or of any indenture or other agreement,
written or oral, to which it may be a party of by which it is bound. The
execution and delivery of this Agreement and the agreements contemplated herein
by Duraskid US and the consummation of the transactions contemplated hereby and
thereby will not result in the violation of any statute, order, decree,
judgment, notice, ordinance, regulation, law, or other restrictions applicable
to it or require the consent or approval of any governmental entity or other
party.
6.3.3 The execution, delivery and performance of this Agreement and the
agreements contemplated herein have been duly authorized by all necessary
corporate action on the part of Duraskid US and this Agreement constitutes and,
upon execution, the agreements contemplated herein, will constitute, valid and
binding obligations of Duraskid US, enforceable in accordance with their terms,
subject to the following qualifications:
(a) specific performance and injunctive relief and other equitable
remedies are discretionary and, in particular, may not be
available where damages are considered by a court of competent
jurisdiction to be an adequate remedy; and
(b) enforcement may be limited by bankruptcy, insolvency,
liquidation, reorganization, reconstruction and other laws
generally affecting enforceability of creditors' rights.
6.3.4 Dura Products is the legal and beneficial owner of all of the issued and
outstanding shares in the capital of Duraskid US.
7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
7.1 The representations and warranties of the Company, Woodco and Duraskid US
contained in this Agreement and contained in any document or certificate given
pursuant hereto shall survive the closing of the transactions contemplated
herein for a period of two years from the Closing Date.
8. COVENANTS OF THE COMPANY, WOODCO AND DURASKID US
8.1 OWNERSHIP INTEREST AND ELECTION OF MANAGEMENT COMMITTEE AND OFFICERS. The
Company, Woodco and Duraskid US covenant and agree with each other that they
will take all steps at the Time of Closing so that:
(a) a certificate representing a 51% ownership interest in the
Company will be issued to Duraskid US and a certificate
representing a 49% ownership interest in the Company will be
issued to Woodco;
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(b) Mark Paulino, Philip Caron, Keith Carrigan and Patrick
Banfield will be elected to the management committee of the
Company; and
(c) Keith Carrigan shall be the initial chairman of the management
committee of the Company.
8.2 SUPPLY OF RECYCLED CELLULOSE AND HDPE. So long as the Company is licensed to
manufacture and sell Duraskids and so long as the Company so requests, Woodco
covenants and agrees with the Company that Woodco will arrange for third party
suppliers acceptable to the Company, acting reasonably, to directly supply the
Company with recycled cellulose and high density polyethylene (or other similar
material acceptable to the Company ) at such supplier's best available pricing,
it being understood that that all such arrangements must be acceptable to the
Company and shall be directly between the Company and such supplier and not
indirectly through Woodco.
8.3 EXCESS COMPOUNDING CAPACITY. If the Company has compounding capacity and
material supply in excess of that required to manufacture Duraskids as
contemplated by this Agreement, Dura Products shall have the right, from and
after the Closing Date, to direct the Company to supply, and the Company agrees
that, from and after the Closing Date, it will supply compounded material in
respect of manufacturing products other than Duraskids to any joint venture
entity being formed or acquired by Dura Products or its Affiliates at prices
acceptable to the management committee of the Company.
-11-
9. INDEMNIFICATION
9.1 INDEMNIFICATION BY THE COMPANY. The Company covenants and agrees to
indemnify and save harmless Woodco and Duraskid US of and from any loss
whatsoever arising out of, under or pursuant to: (a) any loss suffered by either
of them as a result of any breach of representation, warranty or covenant by the
Company contained in this Agreement; and (b) all claims, demands, costs and
expenses in respect of the foregoing; provided that the indemnification provided
by this section shall be limited to a maximum amount of $500,000 in the
aggregate.
9.2 INDEMNIFICATION BY THE WOODCO. Woodco covenants and agrees to indemnify and
save harmless the Company and Duraskid US of and from any loss whatsoever
arising out of, under or pursuant to: (a) any loss suffered by any of them as a
result of any breach of representation, warranty or covenant by Woodco contained
in this Agreement; and (b) all claims, demands, costs and expenses in respect of
the foregoing; provided that the indemnification provided by this section shall
be limited to a maximum amount of $500,000 in the aggregate.
9.3 INDEMNIFICATION BY DURASKID US. Duraskid US covenants and agrees to
indemnify and save harmless Woodco of and from any loss whatsoever arising out
of, under or pursuant to: (a) any loss suffered by it as a result of any breach
of representation, warranty or covenant by Duraskid US contained in this
Agreement; and (b) all claims, demands, costs and expenses in respect of the
foregoing; provided that the indemnification provided by this section shall be
limited to a maximum amount of $500,000 in the aggregate.
10. CLOSING ARRANGEMENTS
10.1 LOCATION. The closing shall take place at the Time of Closing on the
Closing Date at the offices of Dura Products or such other location as the
parties may agree.
10.2 DELIVERIES. At the Time of Closing on the Closing Date, the Company shall
deliver to Woodco and Duraskid US certificates respecting the ownership
interests in the Company contemplated in sections 3.1(i) and 3.2(i) and will
cause such ownership interests to be duly and regularly recorded in the records
of the Company in the name of Woodco and Duraskid US whereupon, upon receipt of
such certificates and subject to all of the terms and conditions hereof being
complied with, payment of the Initial Subscription Capital shall be made and
satisfied in the manner provided in section 3.
11. CONDITIONS OF CLOSING FOR THE BENEFIT OF WOODCO
The payment of the Initial Subscription Capital is subject to the
following terms and conditions for the exclusive benefit of Woodco to be
fulfilled and/or performed at or prior to the Time of Closing:
11.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The covenants, representations
and warranties of the Company and Duraskid US contained in sections 6.1 and 6.3
hereof shall be true and correct as of the date hereof in all material respects
with the same force and effect as though such representations and warranties had
been made on and as of such date and Woodco shall have received at the Time of
Closing on the Closing Date certificates from Duraskid US dated the Closing Date
to the effect that such representations and warranties referred to above are
true and correct on and as of the Closing Date, in all material respects, with
the same force and effect as though made on and as of such date.
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11.2 COMPLIANCE WITH COVENANTS. The Company, Dura Products and Duraskid US shall
have complied with all covenants and agreements herein agreed to be performed or
caused to be performed by them at or prior to the Time of Closing.
11.3 NO ACTIONS. No action or proceeding by law or in equity shall be pending or
threatened by any person, company, firm, governmental authority, regulatory body
or agency to enjoin or prohibit the issuance of the ownership interest
contemplated in section 3 hereof or the payment of the Subscribed Capital
contemplated hereby.
If any of the foregoing conditions shall not be fulfilled or performed at or
before the Time of Closing, Woodco may terminate this Agreement by notice to the
other parties and in such event Woodco shall be released from all obligations
hereunder without prejudice to any rights or remedies they may have against the
other parties; provided that any of the said conditions may be waived in whole
or in part by Woodco without prejudice to their rights of termination in the
event of the non-fulfilment of any other condition or conditions, any such
waiver to be binding on Woodco only if the same is in writing.
12. CONDITIONS OF CLOSING FOR THE BENEFIT OF DURASKID US
The payment of the Initial Subscription Capital is subject to the
following terms and conditions for the exclusive benefit of Duraskid US to be
fulfilled and/or performed at or prior to the Time of Closing:
12.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The covenants, representations
and warranties of the Company and Woodco contained in sections 6.1 and 6.2
hereof shall be true and correct as of the date hereof in all material respects
with the same force and effect as though such representations and warranties had
been made on and as of such date and Duraskid US shall have received at the Time
of Closing on the Closing Date certificates from Woodco dated the Closing Date
to the effect that such representations and warranties referred to above are
true and correct on and as of the Closing Date, in all material respects, with
the same force and effect as though made on and as of such date.
12.2 COMPLIANCE WITH COVENANTS. The Company and Woodco shall have complied with
all covenants and agreements herein agreed to be performed or caused to be
performed by them at or prior to the Time of Closing.
12.3 NO ACTION. No action or proceeding by law or in equity shall be pending or
threatened by any person, company, firm, governmental authority, regulatory body
or agency to enjoin or prohibit the issuance of the ownership interest
contemplated in section 3 hereof or the payment of the Subscribed Capital
contemplated hereby.
12.4 BOARD APPROVAL. The transactions contemplated by this Agreement shall have
been approved by the board of directors of Dura Products no later than the
Closing Date.
If any of the foregoing conditions shall not be fulfilled or performed at or
before the Time of Closing, Duraskid US may terminate this Agreement by notice
to the other parties and in such event Dura Products and Duraskid US shall be
released from all obligations hereunder without prejudice to any rights or
remedies they may have against the other parties; provided that any of the said
conditions may be waived in whole or in part by Duraskid US without prejudice to
their rights of termination in the event of the non-fulfilment of any other
condition or conditions, any such waiver to be binding on Duraskid US only if
the same is in writing.
-13-
13. MANUFACTURE AND SALE OF OTHER PRODUCTS IN THE TERRITORY
13.1 DELIVERY OF SALE NOTICE. Subject to the provisions of section 13.4, in the
event that Dura Products develops new non-pallet products and makes a
determination that it wishes to create a joint venture for the manufacture, sale
and distribution of such products in the Territory, so long as the Company and
Woodco are not in default under this Agreement or any agreement contemplated
hereby, Dura Products will deliver a notice in writing (the "JV Notice") to
Woodco whereby Dura Products will offer Woodco the right to participate in the
proposed joint venture on the terms and conditions set forth in the JV Notice
(such terms and conditions being hereinafter collectively referred to as the "JV
Terms"). Woodco shall have the right, exercisable by giving notice (the
"Acceptance Notice") to Dura Products within 30 days after its receipt of the JV
Notice (the "Acceptance Period") to agree to participate in the joint venture as
required by the JV Notice and to comply with the JV Terms. In the event that no
Acceptance Notice is received from Woodco within the Acceptance Period, the
offer to Woodco shall be deemed to have been refused. For greater certainty,
nothing herein shall restrict Dura Products or any Affiliate from itself
manufacturing, selling or distributing such products in the Territory.
13.2 SALE NOTICE IRREVOCABLE. The delivery by Dura Products of a JV Notice shall
be irrevocable and, upon delivery by Woodco of an Acceptance Notice, Dura
Products and Woodco shall be bound by the JV Terms.
13.3 SALE TO THIRD PARTIES. If, following completion of the procedure stipulated
in section 13.1, the offer contained in the JV Notice remains unaccepted by
Woodco without amendment, Dura Products may enter into the joint venture
contemplate in section 13.1 with any person (the "Third Party") on terms not
more favourable to the Third Party than the JV Terms. If no joint venture is
established by Dura Products within 180 days following the expiration of the 30
day period referred to in section 13.1, Dura Products shall be required, before
proposing to establish another such joint venture in the Territory, again to
offer the said joint venture opportunity, as aforesaid, to Woodco in the manner
provided in section 13.1 and such process shall be repeated so often as Dura
Products desires to establish such joint venture in the Territory.
13.4 LIMITATION ON RIGHTS GRANTED IN THIS SECTION 13. If pursuant to section 6.4
of the Operating Agreement, Duraskid US or its nominees on the management
committee recommend additional funding for the Company in circumstances which
require unanimous approval of the Company's management committee and Woodco or
its nominees on the management committee reject such request, any rights of
Woodco under this section 13 shall thereupon cease and Dura Products shall have
no further obligations under this section 13.
14. RIGHT OF FIRST REFUSAL FOR ADDITIONAL TERRITORIES
14.1 DELIVERY OF SALE NOTICE. Subject to the provisions of section 14.4, in the
event that Dura Products wishes to create a joint venture for the manufacture,
sale and distribution of Duraskids in the State of New Jersey and that part of
the State of New York not forming part of the Territory, prior to the date which
is 18 months after the Closing Date (the "Expiry Date"), so long as the Company
and Woodco are not in default under this Agreement or any agreement contemplated
hereby, Dura Products will deliver a notice in writing (the "Duraskid Notice")
to Woodco whereby Dura Products will offer Woodco the right to participate in
the proposed joint venture on the terms and conditions set forth in the Duraskid
Notice (such terms and conditions being hereinafter collectively referred to as
the "Duraskid Terms"). Woodco shall have the right, exercisable by giving notice
(the "Acceptance Notice") to Dura Products within 60 days after its receipt of
the Duraskid Notice (the "Acceptance Period") to agree to participate in the
joint
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venture as required by the Duraskid Notice and to comply with the Duraskid
Terms. In the event that no Acceptance Notice is received from Woodco within the
Acceptance Period, the offer to Woodco shall be deemed to have been refused. For
greater certainty, nothing herein shall restrict Dura Products or any Affiliate
from itself manufacturing, selling or distributing Duraskids in New Jersey and
that part of the State of New York not forming part of the Territory. Dura
Products shall have no obligation to deliver a Duraskid Notice after the Expiry
Date.
14.2 SALE NOTICE IRREVOCABLE. The delivery by Dura Products of a Duraskid Notice
shall be irrevocable and, upon delivery by Woodco of an Acceptance Notice, Dura
Products and Woodco shall be bound by the Duraskid Terms.
14.3 SALE TO THIRD PARTIES. If, following completion of the procedure stipulated
in section 14.1, the offer contained in the Duraskid Notice remains unaccepted
by Woodco without amendment, Dura Products may enter into the joint venture
contemplate in section 14.1 with any person (the "Third Party") on terms not
more favourable to the Third Party than the Duraskid Terms. If no joint venture
is established by Dura Products within 180 days following the expiration of the
60 day period referred to in section 14.1, Dura Products shall be required,
before proposing to establish another such joint venture, again to offer the
said joint venture opportunity, as aforesaid, to Woodco in the manner provided
in section 14.1 and such process shall be repeated so often as Dura Products
desires to establish such joint venture.
14.4 LIMITATION ON RIGHTS GRANTED IN THIS SECTION 14. If pursuant to section 6.4
of the Operating Agreement, Duraskid US or its nominees on the management
committee recommend additional funding for the Company in circumstances which
require unanimous approval of the Company's management committee and Woodco or
its nominees on the management committee reject such request, any rights of
Woodco under this section 14 shall thereupon cease and Dura Products shall have
no further obligations under this section 14.
15. NOTICES
15.1 NOTICES. All notices, consents or other communications to any party under
this Agreement shall be in writing and shall be deemed to be sufficiently given
if delivered by overnight courier, in which case the notice shall be deemed to
have been received two (2) business days after the sending thereof, or if
delivered by hand to a representative of such party, in which case the notice
shall be deemed to have been received on the date of delivery thereof, or if
sent by telecopier to such party, in which case the notice shall be deemed to
have been received on the business day (in the locality of the addressee)
following the sending thereof (provided it is received or reproduced at the
address of the addressee on paper), addressed as follows:
(a) if to the Company, to it at:
c/o Wood Recycling Inc.
3 Wheeling Avenue
Woburn, Massachusetts
01801
Attention: Chairman
Telephone: 508-535-4144
Telecopier: 508-535-4252
(b) if to Dura Products or Duraskid US, to them at:
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60 Carrier Drive
Etobicoke, Ontario
M9W 5R1
Attention: Chief Financial Officer
Telephone: 416-679-0556
Telecopier: 416-679-0614
(c) if to Woodco, to it at:
c/o Wood Recycling Inc.
3 Wheeling Avenue
Woburn, Massachusetts
01801
Attention: Management Committee
Telephone: 508-535-4144
Telecopier: 508-535-4252
Any party may change the address to which all notices, consents or other
communications are to be sent by giving written notice of such change of address
to the other parties in conformity with this section.
16. TIME OF THE ESSENCE
16.1 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement.
17. ENTIRE AGREEMENT
17.1 ENTIRE AGREEMENT. This Agreement, including the Schedules hereto,
constitutes the entire agreement between the parties hereto with respect to the
subject matter contained herein and supercedes the Letter Agreement. There are
not and shall not be any verbal statements, representations, warranties,
undertakings or agreements between the parties and this Agreement may not be
amended or modified in any respect except by written instrument signed by the
parties hereto.
18. PROPER LAW OF CONTRACT
18.1 GOVERNING LAW. This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the
Commonwealth of Massachusetts. Each of the parties hereto hereby irrevocably
attorns to the jurisdiction of the courts of the Commonwealth of Massachusetts.
19. BENEFIT AND BINDING NATURE OF THE AGREEMENT
19.1 BINDING AGREEMENT. This Agreement shall enure to the benefit of and be
binding upon the parties hereto and their respective heirs, legal personal
representatives, successors and assigns but shall not be assignable by any of
the parties hereto without the written consent of the other parties hereto.
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20. COUNTERPARTS
20.1 COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which shall
constitute one and the same agreement.
21. EXPENSES
21.1 EXPENSES. It is understood and agreed that Woodco, on the one hand, and
Dura Products and Duraskid US, on the other hand, (and not the Company) shall be
responsible for all legal and accounting expenses incurred by each of them in
connection with the transactions herein provided for, unless all of the parties
hereto otherwise agree in writing.
22. NO ANNOUNCEMENT
22.1 ANNOUNCEMENTS. Any announcement with respect to this Agreement by Dura
Products shall be submitted in advance for the comments of Woodco where
practicable; provided always that nothing herein contained shall prevent or
restrict Dura Products from making any announcement with respect to this
Agreement which it is required by law to make. No announcement with respect to
this Agreement shall be made by Woodco without the prior written approval of
Dura Products.
23. CONFIDENTIALITY
23.1 CONFIDENTIALITY. Woodco acknowledges that it, Philip L. Caron, James M.
Herlihy, Conrad Paulino, Mark Paulino, Ronald Phillips, Robert Banfield, Patrick
Banfield and William Banfield have executed and delivered to Dura Products and
Duraskid US a confidentiality and non-use agreement contemporaneously with the
execution of this Agreement.
24. DISPUTE RESOLUTION
24.1 PROCEDURE FOR DISPUTE RESOLUTION. The purpose of this Section 24 is to set
forth a framework and procedure under which the parties shall, in good faith,
use their reasonable efforts to resolve any disputes that may arise under this
Agreement without resort to litigation. Except with respect to section 9 hereof,
the parties agree to first utilize the following process to accomplish this
goal, engaging first in informal discussion, and thereafter, to arbitration.
24.2 NOTICES AND APPOINTMENT OF NOMINEES. Except with respect to section 9
hereof, in the event of a dispute under this Agreement, including without
limitation, any failure of the parties to agree on a matter requiring settlement
or agreement (a "Dispute"), the party alleging the Dispute shall provide notice
giving particulars of the Dispute to the other parties (the "Notice of
Dispute"). The parties each agree to appoint a representative and to cause their
respective representatives to meet as soon as possible in an effort to resolve
the Dispute. Should the Dispute not be resolved within ten (10) Business Days of
the Notice of Dispute, representatives of the parties at a senior management
level shall attempt, in good faith, to resolve the Dispute in no more than
thirty (30) Business Days from the date of the Notice of Dispute. All such
representatives of the parties shall be referred to hereafter as "Settlement
Nominees", and the thirty (30) Business Day period shall be referred to as the
"Period of Discussion".
24.3 ARBITRATION. Except with respect to section 9 hereof, in the event that the
Settlement Nominees are unable to resolve the Dispute during the Period of
Discussion, any party may
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submit, within five (5) days following the expiration of the Period of
Discussion, the Dispute to binding arbitration before a single and sole (1)
arbitrator in Boston, Massachusetts pursuant to the UNCITRAL rules, except as
modified below:
(a) such arbitration shall be the exclusive dispute settlement
procedure between the parties, and the decision of the arbitrator
shall be binding on each of Dura Products and the Corporation,
subject only to section 24.3(f) hereof and the right of each party
to appeal a decision that is contrary to law;
(b) the parties shall have ten (10) Business Days from receipt of the
Arbitration Notice to select an arbitrator
(c) if the parties fail to appoint an arbitrator, the party initiating
the arbitration (the "Initiating Party") will be free, upon
written notice to the other party, to request that a court of
competent jurisdiction in the Commonwealth of Massachusetts
promptly appoint an arbitrator, as applicable, and to notify each
party of such appointment;
(d) the parties shall agree in advance as to the manner in which the
arbitrator shall promptly hear witnesses and arguments, review
documents and otherwise conduct the arbitration procedures and
failing agreement within five (5) Business Days from the date of
selection of their arbitrator, the arbitrator shall formulate its
own procedural rules and promptly commence and expeditiously
conduct the arbitration proceedings;
(e) the arbitrator shall issue its decision in writing within
forty-five (45) days from the date of appointment of the
arbitrator;
(f) nothing in this section 24 shall prevent either party from
applying to a court of competent jurisdiction in the Commonwealth
of Massachusetts for injunctive relief pending final disposition
of the arbitration proceeding;
(g) in no event shall the arbitrator have the jurisdiction to amend or
vary the terms of this Agreement;
(h) the arbitration award shall be given in writing and shall be final
and binding on the parties, not subject to any appeal, and shall
deal with the question of costs of arbitration and all matters
related thereto;
(i) judgement upon the award rendered may be entered in any court
having jurisdiction, or, application may be made to such court for
a judicial recognition of the award or an order of enforcement
thereof, as the case may be; and
(j) subject to paragraph (f) of this provision, it shall be a
condition precedent to the bringing of any legal proceedings with
respect to the Dispute that the arbitration procedure set out in
this section 24.3 shall have taken place.
The parties hereto agree that the foregoing shall apply so long as it does not
conflict with the arbitration rules of the American Arbitration Association, in
which event such rules of the American Arbitration Association shall apply.
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IN WITNESS WHEREOF this Agreement has been executed by the parties
hereto as of the date first above written.
DURASKID (NEW ENGLAND), L.L.C.
Per:__________________________________
Authorized Signing Officer
Per:__________________________________
Authorized Signing Officer
DURA PRODUCTS INTERNATIONAL INC.
Per:__________________________________
Authorized Signing Officer
Per:__________________________________
Authorized Signing Officer
DURASKID AND PRODUCTS, INC.
Per:__________________________________
Authorized Signing Officer
Per:__________________________________
Authorized Signing Officer
ENVIRONMENT COMPOSITE PRODUCTS L.L.C.
Per:__________________________________
Authorized Signing Officer
Per:__________________________________
Authorized Signing Officer
TECHNOLOGY LICENSE AGREEMENT
THIS AGREEMENT made as of, and effective from, the 15th day
of October, 1997.
B E T W E E N:
DURA PRODUCTS INTERNATIONAL INC., a corporation incorporated under the
laws of the Province of Ontario, (hereinafter referred to as "Dura
Products")
OF THE FIRST PART
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DURASKID (NEW ENGLAND), L.L.C., a limited liability company formed
under the laws of the Commonwealth of Massachusetts, (hereinafter
referred to as the "Company")
OF THE SECOND PART
WHEREAS Dura Products owns all right, title and interest to Duraskid
Technology;
AND WHEREAS Dura Products wishes to provide the Company with the right
to use Duraskid Technology for the purpose of manufacturing, marketing, selling
and distributing Duraskid Products in the Territory in accordance with, and
subject to, the terms and conditions of this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the
premises and covenants herein contained, the value and sufficiency of which is
hereby agreed and acknowledged, the parties hereto agree as follows:
ARTICLE ONE
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, the following terms shall have the following
meanings:
(1) "Business Day" shall mean each week day, except Saturday and
Sunday, and any week day which is a statutory holiday observed
in the Province of Ontario or in the Commonwealth of
Massachusetts;
(2) "Confidential Information" shall have the meaning ascribed to
it in Section 4.3 hereof;
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(3) "Dies" means those dies configured using the Duraskid
Technology and used to manufacture Duraskid Products, as such
Dies are more particularly defined in Schedule 1 attached
hereto;
(4) "Duraskid Modifications" means all functional changes,
upgrades, innovations, customizations, changes, improvements,
modifications and enhancements of the Duraskid Technology that
are created by Dura Products, or created by the Company as
contemplated by Section 4.2 hereof;
(5) "Duraskid Products" means pallets and skids manufactured using
the Duraskid Technology and shall include all upgrades,
functional changes, releases, enhancements, customizations and
improvements thereto;
(6) "Duraskid Technology" shall mean the technology, intellectual
property (including without limitation, industrial designs,
patents and copyrightable works), information (whether
confidential information, trade secrets, or otherwise),
concepts, ideas, data, written materials, formulae, computer
programs, charts, drawings, development notes, operational and
functional specifications, technical requirements, and related
documentation, whether in electronic, graphic, artistic or
human readable text form, concerning pallets or skids
manufactured from composite materials which is owned by Dura
Products, is more particularly defined and set out in Schedule
1 attached hereto, and which shall include all Duraskid
Modifications;
(7) "Duraskid Technology Specifications" shall mean the
operational, functional, and technical specifications
concerning the Duraskid Technology that are set out in
Schedule 1 attached hereto;
(8) "Duraskid US" means Duraskid and Products, Inc.;
(9) "Gross Sales" means the aggregate gross amounts, fees, monies
and consideration that are payable by any person to the
Company, both during and after any termination of this
Agreement, in any connection whatsoever with the manufacture,
sale or distribution, use, exploitation, or commercialization
of all, or any part of, the Duraskid Technology or Duraskid
Products including any such gross payable amounts, fees,
monies, and consideration associated with any Duraskid Product
maintenance, customization, enhancement, installation,
training, networking, and upgrading services, and including
any such gross payable amounts, fees, monies, and
consideration in connection with any equipment, technology,
intellectual property distribution sale, lease, rental,
license, trust or bailment; provided however, (i) the gross
amounts payable to the Company shall exclude transportation
costs included in such amounts to ship Products from the
Company's factory to the location designated by the purchaser
and (ii) if Products are sold to a company primarily carrying
on the business of pallet leasing and which is controlled by
Dura Products or an affiliate thereof at a price which is less
than 95% of the best available pricing for Products to the
Company's customers, the purchase price for such Products
shall not be included in Gross Sales;
(10) "Joint Venture Agreement" means the agreement dated as of
September 23, 1997 among Dura Products, the Company and
various other parties;
(11) "Operating Agreement" means that certain operating agreement
relating to the Company dated the date hereof among the
Company, Duraskid US and Woodco;
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(12) "Parties" and "parties" shall mean each of Dura Products and
the Company collectively, and/or severally, as the context of
the provision reasonably requires;
(13) "Purpose" shall have the meaning ascribed to it in Subsection
2.1(1) hereof;
(14) "Royalties" has the meaning ascribed to it in Section 3.1
hereof;
(15) "Start-up Test" has the meaning ascribed to it in Section 2.8
hereof;
(16) "Term" has the meaning ascribed to it in Section 5.1 hereof;
(17) "Territory" shall mean the States of Connecticut, Maine,
Massachusetts, New Hampshire, Rhode Island, Vermont and that
part of upper New York State described in Schedule 2, except
as otherwise provided in Section 2.3 of this Agreement;
(18) "Woodco" means Environmental Composite Products L.L.C.
1.2 HEADINGS
The division of this Agreement into Articles and sections and the
insertion of headings are for convenient reference only, and shall not affect
either the construction or the interpretation of this Agreement. The terms,
"hereof", "hereunder" and similar expressions refer to this Agreement and not to
any particular part, Article, section or other portion hereof and include any
agreement supplemental hereto. Unless something in the subject matter or context
is inconsistent therewith, references herein to parts, Articles and sections are
to parts, Articles and sections of this Agreement.
1.3 ENTIRE AGREEMENT
This Agreement, including all Schedules attached hereto, together with
the Joint Venture Agreement and all agreements contemplated therein hereby
constitute the entire agreement between the parties with respect to the subject
matter hereof, and supersedes and replaces all prior or contemporaneous
proposals, draft or proposed written contracts, letters of intent,
understandings or agreements, whether written or oral and whether express or
implied, regarding such subject matter. No amendment or modification of this
Agreement shall be binding unless in writing and signed by duly authorized
representatives of each party.
1.4 SEVERABILITY
If any provision of this Agreement is determined to be invalid or
unenforceable by an arbitrator or a court of competent jurisdiction from which
no further appeal lies or is taken, that provision shall be deemed to be severed
herefrom, and the remaining provisions of the Agreement shall not be affected
thereby and shall remain valid and enforceable; provided that in the event that
any portion of the Agreement shall have been so determined to be or become
invalid or unenforceable (the "offending portion"), Dura Products and the
Company shall negotiate in good faith such reasonable changes to the Agreement
as will best preserve the parties' intentions, benefits and obligations that
were otherwise the subject of such offending portion. If, after thirty (30) days
from the commencement of such negotiations, no agreement has been reached
between the parties concerning such matter, Dura Products and the Company shall
each have the right to submit such matter to an arbitrator appointed in
accordance with Subsection 5.6(2) of this Agreement who shall have the power to
revise or modify the Agreement for the sole purpose of preserving and realizing
such intentions, benefits and obligations of the parties.
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1.5 WAIVER
A waiver of a breach or default under this Agreement shall not be a
waiver of any other breach or default. Failure or delay by either party to
enforce compliance with any term or condition of this Agreement shall not
constitute a waiver of such term or condition.
1.6 CURRENCY
In this Agreement, all references to currency shall be references to
the lawful currency of the United States of America.
1.7 GOVERNING LAW AND ATTORNMENT
This Agreement shall be exclusively governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts. Each party
hereby attorns and submits to the non-exclusive jurisdiction of the Courts of
the Commonwealth of Massachusetts. The parties hereby waive all right to any
trial by jury and agree that, subject to section 5.6 hereof, all trials that may
arise shall be by a court of competent jurisdiction presided over by a single
judge to determine issues of fact and law.
1.8 STATUTORY REFERENCES
Unless expressly stated to the contrary, any references in this
Agreement to any law, by-law, rule, regulation, order or act of any government,
governmental body or other regulatory authority shall have been construed as a
reference thereto as enacted either as at the date hereof, or as such law,
by-law, rule, regulation, order or act may be amended, re-enacted or superseded
from time to time after the effective date hereof.
1.9 CALCULATION OF TIME PERIOD
When calculating the period of time within which or following which any
act is to be done or step taken pursuant to this Agreement, the date which is
the reference date in calculating such period shall be excluded. If the last day
of such period is not a Business Day, the period in question shall end on the
next Business Day. If under this Agreement any payment or calculation is to be
made or any other action is to be taken on a day which is not a Business Day,
that payment or calculation is to be made, and that other action is to be taken,
as applicable, on or as of the next day that is a Business Day.
1.10 GENDER AND NUMBER
Unless the context otherwise requires, words importing the singular
include the plural and vice versa and words importing gender include all
genders.
1.11 EXERCISE OF DISCRETION
Whenever either party has the right to exercise its discretion under
this Agreement, such party shall act in good faith, and not arbitrarily or in
bad faith, in exercising such discretion, and reasonably unless expressly
specified otherwise herein.
1.12 TIME OF THE ESSENCE
The parties agree that time shall be of the essence in the performance
of every obligation and duty of this Agreement.
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1.13 ACCOUNTING TERMS
All accounting terms that are not specifically defined herein, and all
accounting obligations, duties, procedures and practices that are undertaken
pursuant to this Agreement, shall be construed, interpreted and undertaken in
accordance with generally accepted accounting principles that exist in the
United States of America from time to time.
1.14 SURVIVAL
The parties agree that the provisions and restrictions described in
Sections and Subsections 2.1(2), 2.2(1), 2.4(4), 2.4(5), 3.1, 3.2, 3.3, 3.4 3.5,
3.6, 4.1(2)(v) and (vi), 4.1(3), 4.1(4), 4.1(5), 4.2, 4.3, 5.2(3), 5.4, 5.5,
5.10, 5.15, and this Section 1.14 shall survive any termination or expiration of
this Agreement.
1.15 INTERPRETATION
In the event of any inconsistencies, conflicts or contradictions
between the provisions of this Agreement and any of the Schedules attached
hereto, the provisions of this Agreement shall govern and prevail, and the
provisions of this Agreement shall have interpretive priority over any
provisions of any Schedule attached hereto to the extent of any such conflict or
contradiction.
1.16 SCHEDULES
Schedule 1 - Duraskid Technology
Schedule 2 - Portion of New York State Included in the Territory
Schedule 3 - Duraskid Products
ARTICLE TWO
LICENSE RIGHTS
2.1 LICENSE
(1) Subject to the terms and conditions of this Agreement, Dura
Products hereby grants the Company an exclusive, personal, non-transferable and
restricted right to use the Duraskid Technology solely for the purpose (the
"Purpose") of manufacturing, distributing, selling and marketing Duraskid
Products in the Territory during the Term.
(2) The Duraskid Products which are being distributed and sold by the
Company shall be of a technical quality and operational standard that is
consistent with the highest industry standards in the United States of America
for reasonably similar pallets and skids.
(3) For greater certainty, the Company shall not have the right to
sublicense any of its rights under this Agreement to any person, or to retain
the services of any other person in the exercise of its rights under this
Agreement, (whether by the retainer of an independent contractor or otherwise)
without the prior written consent of Dura Products, which may be unreasonably
withheld.
(4) For greater certainty, the Company shall not have any right to
modify, change, upgrade, innovate, create derivative works of, improve, enhance
or customize in any manner, or to any extent, any aspect of the Duraskid
Technology whatsoever.
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2.2 LEGAL COMPLIANCE AND POLICY
(1) Without limiting the obligations of the Company pursuant to Section
2.4 hereof, the Company agrees, as a fundamental condition of this Agreement,
that it shall not knowingly commit (or contribute to) any act or omission in any
connection with the manufacture, marketing, sale and distribution of Duraskid
Products that, in any manner or to any extent: (i) contravenes or breaches any
law, regulation, by-law, quasi-judicial order, or court order or judgment; or,
(ii) causes harm, loss, damage, or injury to any person whatsoever, whether in
contract, tort, equity or otherwise.
(2) The Company shall, in the performance of this Agreement, fully
comply with all restrictions, regulations, rules and policies of Dura Products,
that may be in effect from time to time and that the Company has actual notice
of, concerning the Company's activities, including without limitation those
concerning non-discrimination and equal employment, safety, sexual harassment,
environmental matters, workers rights, health matters, and security matters.
Dura Products shall, within a reasonable period of time after the date hereof,
provide the Company with a copy of all such rules, restrictions, regulations and
policies promulgated by Dura Products.
(3) Without limiting any other provisions hereof, the Company shall, in
the performance of all of its rights and obligations under this Agreement
(including without limitation, the marketing, sale and distribution of Duraskid
Products to persons in the Territory), comply with all applicable laws, rules,
regulations and by-laws of the United States and of all jurisdictions throughout
the Territory where the Company markets, distributes and sells Duraskid
Products. The Company shall obtain, and shall be solely responsible for
obtaining, all necessary permits and licenses, and for complying with all
applicable codes and regulations in connection with the exercise and performance
of its rights under this Agreement.
2.3 TEMPORARY EXPANSION OF THE TERRITORY
(1) The parties agree that as of the date hereof the Territory shall
initially and temporarily be expanded to include all of the continental United
States until such time as Dura Products, in its sole discretion from time to
time, notifies the Company in writing that it proposes to grant such licensing
rights to another person in any part of the United States outside of the
Territory, or that it wishes to sell Duraskid Products itself into such area, in
which event, such part of the United States so designated in the written notice
(the "Designated Area") shall be excluded from the Territory from and after the
date of such notice. All customers developed by the Company in the Designated
Area shall thereafter be considered customers of Dura Products or of any third
party designated by Dura Products without payment or compensation of any kind to
the Company.
(2) The temporary expansion of the Territory under this Section 2.3
shall, in all events, terminate on the earlier of (i) 18 months after the date
hereof and (ii) if pursuant to section 6.4 of the Operating Agreement, Duraskid
US or its nominees on the management committee of the Company recommend
additional funding for the Company in circumstances which requires unanimous
approval of the Company's management committee, the date, if any, upon which
Woodco or its nominees on the management committee reject such request.
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2.4 Company's Distribution Efforts
(1) The Company shall use its best efforts to market, distribute and
sell Duraskid Products in the Territory throughout the Term.
(2) The Company shall distribute and sell Duraskid Products in
accordance with this Agreement pursuant to a written contract that shall be
entered into directly between the Company (strictly on its own account) and
purchasers thereof in the Territory. All such contracts between the Company and
such purchasers shall contain the terms and conditions set out in Schedule 3
attached hereto. Except as otherwise expressly agreed to in writing between the
parties, the Company shall not have any right whatsoever to use either the name,
trademark, trade name, trade style or logo of Dura Products in any connection
with the Duraskid Products.
(3) Without limiting the obligations of the Company pursuant to Section
2.2 hereof, the Company shall apply for, and shall use its best efforts to
obtain and secure, all industry, regulatory, administrative and governmental
approvals, orders, consents, permissions, licenses, decrees, and decisions that
may be either consistent with, favourable to, or required for, the successful
commercial exploitation of Duraskid Products in the Territory at any time
throughout the Term. All such approvals, orders, consents, permissions,
licenses, decrees and decisions that are secured by the Company shall be in the
Company's own name and sole account, and the Company shall not create any
duties, obligations, responsibilities, or liability for Dura Products whatsoever
in any connection therewith.
(4) The Company shall not knowingly, in any manner or to any extent,
interfere with, harm, diminish, or otherwise adversely affect the goodwill or
reputation of Dura Products or the Duraskid Technology in any connection with
this Agreement whatsoever. The Company shall exercise its rights under this
Agreement and otherwise conduct its business in an ethical manner, and it shall
not participate in any illegal or deceptive practices that may give rise to any
civil or criminal liability whatsoever.
(5) The Company shall, upon termination of this Agreement for any
reason whatsoever, change its corporate name to delete the name "Duraskid"
therefrom within ten Business Days of such termination and agrees that it will
not thereafter use such name or any variation thereof in any corporate or trade
name. The Company hereby irrevocably constitutes and appoints Dura Products as
its true and lawful attorney-in-fact and agent for, in the name of and on behalf
of the Company to execute and deliver in the name of the Company all such
documents or instruments as may be necessary to delete the word "Duraskid" from
the Company's corporate name. Such appointment and power of attorney, being
coupled with an interest, shall not be revoked by the insolvency, or bankruptcy
of the Company and the Company hereby ratifies and confirms and agrees to ratify
and confirm all that Dura Products may lawfully do or cause to be done by virtue
of the provisions hereof.
2.5 COMPANY'S MARKETING OBLIGATIONS
(1) The Company shall provide Dura Products with information concerning
the number of Duraskid Products that are manufactured and distributed by the
Company each month during the term of, and pursuant to, this Agreement.
(2) The Company shall not make any representations, guarantees or
warranties to any person regarding the operational performance or functional
characteristics and specifications of Duraskid Products beyond those stipulated
in Schedule 3 attached hereto.
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(3) The Company shall keep Dura Products reasonably informed on a
timely basis concerning the status of all material aspects of the Company's
performance of this Agreement. Without limiting the foregoing, the Company shall
submit to Dura Products written quarterly status reports which shall identify
all significant activities undertaken by the Company, and information concerning
the distribution, sale and marketing of Duraskid Products pursuant to this
Agreement.
2.6 RESPONSIBILITIES OF DURA PRODUCTS
(1) Dura Products shall, within five Business Days following receipt by
the Company of its first extruder, deliver to the Company a copy of the Duraskid
Technology for Start-up Testing pursuant to Section 2.8. The Company shall have
the right to copy, reproduce, electronically store, and manufacture copies of
the Duraskid Technology solely in connection with, and solely for the purpose
of, this Agreement.
(2) At the Company's request, and subject to the parties reaching
mutual agreement concerning scheduling, Dura Products shall provide the Company
with an aggregate of, up to 100 person-hours of consulting and technical
assistance concerning the Duraskid Technology either at Dura Products' location
in Canada or at the Company's facilities in Massachusetts commencing as at the
date hereof, and concluding no later than 365 days thereafter. Technical
assistance that is provided at Dura Products' location in Canada will be
provided on terms and conditions that are reasonable and commensurate with
industry practice in Canada and in consideration for a fee equal to Dura
Products' cost for providing such services plus ten percent thereon, in addition
to the Company reimbursing Dura Products for all reasonable travel,
accommodation, and meal expenses incurred by Dura Products in connection
therewith. In the case of technical assistance that is provided by Dura Products
at the Company's facilities, the Company shall reimburse Dura Products for all
reasonable costs and expenses incurred by Dura Products personnel for travel and
living in connection therewith. Notwithstanding the foregoing, the Company shall
not be required to make any payments or reimbursements for technical assistance
contemplated in this Section 2.6 prior to completion of the Start-up Test.
2.7 COMPANY'S MAINTENANCE AND SUPPORT OBLIGATIONS
The Company shall be solely and exclusively responsible for the
maintenance, support, and operational servicing related to the Duraskid Products
that are distributed or sold in the Territory.
2.8 START-UP TESTING
(1) Within seventy-two (72) hours of the delivery of the Duraskid
Technology to the Company, pursuant to Subsection 2.6(1) hereof, the Company
shall commence reasonable operational and functional tests, in consultation with
Dura Products, to ensure that such delivered Duraskid Technology materially
complies with the Duraskid Technology Specifications (the "Start-up Test"). The
Start-up Test shall be fully conducted and completed within ten (10) Business
Days after Start-up Testing has commenced. For greater certainty, the Company
shall be solely responsible for the performance of all activities associated
with performing the Start-up Test. Dura Products shall have the right, at its
sole cost and expense, to be present at the Start-up Test undertaken by the
Company, however despite such consultation Dura Products agrees it shall not
interfere with any such Start-up Test undertaken by the Company. Dura Products
shall reasonably cooperate with, and provide reasonable assistance to, the
Company in connection with any such Start-up Test. Within two (2) Business Days
after the conclusion of the Start-up Test, the Company shall notify Dura
Products in writing that the Duraskid Technology either:
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a) materially complies with the Duraskid Technology
Specifications and is thereby and accordingly accepted by
the Company; or
b) does not materially comply with the Start-up Test and
thereby not accepted by the Company.
If no such notice is received within the period of time stipulated for
the Duraskid Technology's Start-up Test, then the Duraskid Technology shall be
deemed to be fully accepted by the Company.
(2) In the event that the Company delivers any such notices of
deficiencies to Dura Products, the Company's notice to Dura Products of
deficiencies shall provide Dura Products with reasonable detail of the nature of
such deficiencies, all of the circumstances in which they occurred, and
information concerning the exact nature of how such Duraskid Technology fails to
materially comply with the Duraskid Technology Specifications. Dura Products
shall correct any such deficiencies of which it receives notice under this
Section 2.8 as quickly as is reasonably possible, and in no event later than
twenty (20) Business Days. Within two (2) Business Days of the delivery of the
correction of such deficiencies by Dura Products, the Company shall recommence
such Duraskid Technology's Start-up Test pursuant to Subsection 2.8(1) hereof.
(3) If the Duraskid Technology is not accepted by the Company in strict
accordance with Subsection 2.8(1) within sixty (60) Business Days after the
Duraskid Technology was originally delivered to the Company for the commencement
of Start-up Testing, the Company may, as its absolute, sole and exclusive remedy
and relief against Dura Products, either:
a) accept the Duraskid Technology at its then current level
of operation, functionality and performance;
b) permit the Start-up Testing of such Duraskid Technology to
be continued for such reasonable period of time as the Company
may designate to Dura Products by prior written notice. If,
following the end of that reasonable period of time, such
Duraskid Technology has still not been accepted by the Company
in strict accordance with Subsection 2.8(1) hereof, the
Company may, at its option, terminate its obligations under
this Agreement effective immediately upon delivery to Dura
Products of five (5) days prior written notice; or
c) terminate this Agreement effective immediately upon five
(5) days prior written notice to Dura Products.
(4) Provided that Dura Products has adhered to the Start-up Test
requirements and deficiency correction procedures of this Section 2.8, the
non-acceptance of the Duraskid Technology by the Company shall constitute a
material and fundamental breach of this Agreement by the Company, and all rights
of termination of Dura Products set out in this Section 2.8 shall be in addition
to, and shall not restrict or limit, any other rights or remedies that Dura
Products may have against the Company, except as may otherwise be expressly
limited by this Agreement.
2.9 COOPERATION
Dura Products and the Company each agree that they shall, in good faith
and diligently, work together and reasonably cooperate with each other
concerning their respective obligations hereunder, including without limitation
to facilitate and promote the successful commercialization of the Duraskid
Products in the manner, and to the extent, contemplated by this Agreement. For
greater certainty, Dura Products shall refer all prospective customers and
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enquiries that it receives concerning the distribution of the Duraskid Products
in the Territory directly to the attention of the Company, and each party shall
promptly disclose, and provide, to the other party (in a complete and accurate
manner) any information, data, research and development innovations, technology,
product design, marketing information, scientific know-how, and engineering
methodology that may be of reasonable assistance to the other party in any
connection with this Agreement.
2.10 BRAND RECOGNITION
(1) The Company agrees that it shall distribute and sell the Duraskid
Products subject to such reasonable trademark, trade name and logo designations,
use, and restrictions concerning both Dura Products and the Duraskid Products
that Dura Products may designate in writing to the Company from time to time and
which shall be generally commensurate and consistent with industry norms for
such transactions in the Territory, including, without limitation,
specifications concerning the location and size of logo appearance on each
Duraskid Product, Duraskid Product quality requirements, and the appearance of
Dura Products' trademark on all marketing, advertising and promotional materials
used by the Company concerning the Duraskid Products. The Company agrees that
all marketing, advertising and promotional materials used by the Company
concerning Duraskid Products shall be (i) approved by Dura Products in writing
prior to such use and (ii) purchased from Dura Products, so long as Dura
Products wishes to supply same in whole or in part, at Dura Product's cost plus
10% (all shipping, taxes and insurance extra).
(2) The Company agrees that it shall not tamper with, remove, obstruct,
obscure, delete, alter or modify any proprietary notices of Dura Products that
may appear on, be imbedded in, or that may otherwise form a part of Duraskid
Technology. Furthermore, the Company shall print the following copyright notice
in the written materials that shall accompany each end-user license of the
Duraskid Products:
Copyright _ [date], parts and aspects of this product are owned
exclusively by Dura Products International Inc. of Toronto, Canada. All
rights reserved.
2.11 Performance Warranty
(1) Dura Products warrants to the Company that the Duraskid Technology
will function substantially in accordance with the Duraskid Technology
Specifications, subject to the following:
(a) the Duraskid Technology is used by the Company as expressly
set out in this Agreement; and
(b) the Duraskid Technology has not been modified, enhanced,
customized, augmented or used in conjunction with any other
equipment, process, systems, or technology whatsoever, other
than as expressly contemplated by this Agreement.
(2) Dura Products' sole obligation and the Company's sole and exclusive
remedy under this section 2.11 shall be for Dura Products to use reasonable
efforts to correct a deficiency and if such deficiency has not been corrected
within sixty (60) days of Dura Products receiving written notification from the
Company of such deficiency, Dura Products shall pay to the Company an amount
equal to the lesser of either: (i) the amount paid by the Company for the dies,
compounding equipment and extruder screws referred to in section 4.4 plus the
Company's costs directly related to the set-up of same less the Company's gross
revenue realized on the sale of such dies, compounding equipment and extruder
screws; or, (ii) $500,000. In the event that
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the dies, compounding equipment and extruder screws are sold in such
circumstances, the Company shall use its reasonable best efforts to obtain the
highest price possible for such dies, compounding equipment and extruder screws.
(3) For greater certainty, this warranty is only in respect of the
Duraskid Technology and does not extend in any way to dies, compounding
equipment, extruder screws or other equipment or materials purchased, leased, or
otherwise obtained by the Company from third parties.
ARTICLE THREE
FEES AND ROYALTIES
3.1 DURA PRODUCTS REMUNERATION
The Company shall pay Dura Products, as full and complete remuneration
under this Agreement, the following:
(1) a fixed licence fee of $1,500,000, payable in the following
installments:
one year after the date hereof - $300,000
two years after the date hereof - $300,000
three years after the date hereof - $300,000
four years after the date hereof - $300,000
five years after the date hereof - $300,000
provided, however, upon termination of this Agreement, payment
of the licence fee for periods after termination shall cease,
save and except that the licence fee shall be pro-rated for
the year during which termination of this Agreement shall
occur;
(2) a royalty (the "Royalties") of five percent (5%) of the Gross
Sales on the Duraskid Products manufactured and sold by the
Company payable monthly as specified in Section 3.4.
Unless otherwise agreed in writing by the Parties, in order to
ensure Dura Products the full percentage payments contemplated
hereunder, it is agreed that in the event any Duraskid
Technology or Duraskid Products are (1) operationally used by
the Company itself, or (2) sold to or used by any company,
firm, government, or other entity with the result that the
Company does not realize the full gross selling price which
would be realized in the sale of such Duraskid Products to any
wholly independent customer in an arms length sale on the open
market, or (3) sold as part of a transaction including other
goods or services in addition to such Duraskid Technology,
then the Royalties to be paid to Dura Products hereunder shall
be based on the selling price at which the Company then sells
or would sell such Duraskid Products to any wholly independent
customer in an arms length sale. Any Duraskid Products subject
to this paragraph which are not actually sold, shall be
considered to be sold when put into operational use by the
Company or when delivered by the Company to any third party,
and the royalty due Dura Products hereunder shall accrue to
Dura Products accordingly.
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If at any time the management committee of the Company shall
determine that any account receivable which has been included
in Gross Sales for the purpose of calculating the Royalties,
is uncollectible and should be written off, the amount of such
account receivable so written off, shall be taken into account
in calculating Gross Sales and the Royalties to be paid for
the next succeeding month.
(3) If, during the term of this agreement, Dura Products enters
into a licence agreement with a third party respecting the use
by such third party of Duraskid Technology within the
territory of the continental United States and such licence
agreement provides the third party with royalty obligations
that are more favourable to the third party than the royalty
obligations of the Company pursuant to this agreement, then
the parties hereto agree to amend this agreement such that,
beginning with the first period for which royalties are due to
Dura Products from the third party, the royalty obligations of
the Company hereunder are no less favourable than the royalty
obligations of the third party pursuant to its licence
agreement.
3.2 ROYALTY RECORDS
The Company shall keep, and provide to Dura Products once each year
(January 1st to December 31st) by March 15th of the following year a copy of
complete, true and accurate accounts and financial records, in accordance with
generally accepted accounting practice, showing all information related to the
amount of Royalties that are payable by the Company to Dura Products pursuant to
this Agreement.
3.3 PAYMENT
All Royalties shall be calculated and shall be due and payable monthly
by the Company not later than 60 days following the end of the applicable
calendar month. All Royalties are non-refundable.
3.4 INTEREST
Dura Products may in its sole and absolute discretion, without
prejudice to any other rights and remedies available to Dura Products, charge
the Company interest on any payment of Royalties or in respect of any license
fee which has not been made by its due date at a rate of ten percent (10%) per
annum, commencing upon the first day that the said payment becomes overdue.
3.5 COLLECTION
In the event that an affiliate of Dura Products ceases to own more than
a 50% membership interest in the Company and thereafter Dura Products is
required to take any form of legal action against the Company to collect any
unpaid and owing amounts, including without limitation Royalties owing to Dura
Products, and Dura Products is successful in such action, all costs, expenses
and disbursements in connection with such action shall be paid by the Company to
Dura Products, with interest owing thereon pursuant to Section 3.4 hereof. In
the event that Dura Products is unsuccessful in such action, all costs, expenses
and disbursements reasonably incurred by the Company in connection with such
action shall be reimbursed by Dura Products.
3.6 AUDITING
In the event that an affiliate of Dura Products ceases to own more than
a 50% membership interest in the Company, the Company shall make available all
of the information
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and records described in Section 3.3 hereof for auditing by, and on behalf of,
Dura Products upon thirty (30) days prior written notice by Dura Products to the
Company, which such audit shall be conducted on behalf of Dura Products by
auditors that are independent to each of the parties, provided that such audits
shall: be conducted on a Business Day during the Company's regular business
hours at the appropriate the Company facility; not unreasonably interfere with
the Company's on-going business activities; be subject to such auditors entering
into a confidentiality agreement with the Company containing reasonable terms
and conditions; and, occur no more frequently than twice every twelve (12) month
period. In the event that no discrepancies greater than $10,000 in the aggregate
between the Royalties that have been paid to Dura Products by the Company up to
the date of such audit, and the amount of Royalties that should have been paid
to Dura Products by the Company up to the date of such audit are found as a
result of such audit, then such audit shall be at Dura Products' sole cost and
expense; otherwise, the cost and expense of such audit shall be the sole
responsibility of the Company and shall be payable net thirty (30) days from the
date that Dura Products provides the Company with an invoice therefor.
ARTICLE FOUR
INTELLECTUAL PROPERTY RIGHTS
4.1 WARRANTIES
(1) Dura Products hereby represents, warrants and covenants to the
Company the following:
(i) Dura Products has full power and authority to enter into
this Agreement and to perform each and every covenant and
agreement herein contained;
(ii) this Agreement has been duly authorized, executed and
delivered by Dura Products and constitutes a valid, binding
and legally enforceable agreement of the Company;
(iii) as at the date hereof, Dura Products has no knowledge of
any claims, demands, proceedings, litigation, suits, actions,
decrees, orders, judgments, or findings whatsoever of either
any regulatory or administrative body or court of competent
jurisdiction that affect, or could in any way affect, the
ability of Dura Products to perform its obligations under this
Agreement;
(iv) the execution and delivery of this Agreement, and the
performance of the covenants and agreements herein contained,
are not, in any manner or to any extent, limited or restricted
by, and are not in conflict with, any creditor arrangements,
shareholder agreements, software contracts, equipment
contracts, or any other commercial arrangements, obligations,
contract, agreement, or instrument to which Dura Products is
bound, or by any rights of any other person;
(v) to the knowledge of Dura Products, the performance of this
Agreement by Dura Products shall not, in any manner or to any
extent whatsoever, infringe, contravene, breach, interfere
with, or harm, the rights of any other person whatsoever,
including without limitation any intellectual property rights,
copyrights, patent rights, moral rights, confidentiality
rights, equitable rights, contractual rights, common law
rights, or statutory rights; and
(vi) there is no regulatory or governmental prohibition,
restriction, limitation or judgment which has been imposed
upon Dura Products, or which otherwise
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exists and which Dura Products has knowledge of, which could,
in any way, interfere with or restrict Dura Products'
performance of its obligations under this Agreement.
(2) The Company hereby represents, warrants and covenants to Dura
Products the following:
(i) the Company has full power and authority to enter into
this Agreement and to perform each and every covenant and
agreement herein contained;
(ii) this Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid, binding and
legally enforceable agreement of the Company;
(iii) as at the effective date, the Company has no knowledge
of any claims, demands, proceedings, litigation, suits,
actions, decrees, orders, judgments, or findings whatsoever of
either any regulatory or administrative body or court of
competent jurisdiction that affect, or could in any way
affect, the ability of the Company to perform its obligations
under this Agreement;
(iv) the execution and delivery of this Agreement, and the
performance of the covenants and agreements herein contained,
are not, in any manner or to any extent, limited or restricted
by, and are not in conflict with, any creditor arrangements,
shareholder agreements, software contracts, equipment
contracts, or any other commercial arrangements, obligations,
contract, agreement, or instrument to which the Company is
bound, or by any rights of any other person;
(v) to the knowledge of the Company, the performance of this
Agreement by the Company shall not, in any manner or to any
extent whatsoever, infringe, contravene, breach, interfere
with, or harm, the rights of any other person whatsoever,
including without limitation any intellectual property rights,
copyrights, patent rights, moral rights, confidentiality
rights, equitable rights, contractual rights, common law
rights, or statutory rights; and
(vi) there is no regulatory or governmental prohibition,
restriction, limitation or judgment which has been imposed
upon the Company, or which otherwise exists and which the
Company has knowledge of, which could, in any way, interfere
with or restrict the Company's performance of its obligations
under this Agreement.
(3) THE FOREGOING WARRANTIES ARE EXCLUSIVE AND ARE GIVEN AND ACCEPTED
IN LIEU OF ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, CONCERNING THE
DURASKID TECHNOLOGY AND THIRD PARTY TECHNOLOGY AND ALL OTHER OBLIGATIONS OF THE
PARTIES, INCLUDING WITHOUT LIMITATION ANY OTHER IMPLIED WARRANTIES OR
MERCHANTABILITY, AND ANY IMPLIED WARRANTIES OF FITNESS FOR THE PURPOSE OR ANY
OTHER PARTICULAR PURPOSE. DURA PRODUCTS EXPRESSLY DENIES AND DISCLAIMS ANY
WARRANTY CONCERNING THE PERFORMANCE, OPERATION, AND THE FUNCTIONALITY OF THE
DURASKID TECHNOLOGY AND THIRD PARTY TECHNOLOGY WHATSOEVER OTHER THAN AS
EXPRESSLY PROVIDED HEREIN.
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4.2 INTELLECTUAL PROPERTY RIGHTS
(1) The parties hereto agree, acknowledge and confirm that Dura
Products shall solely and exclusively own all right, title and interest in, and
to, all Duraskid Technology and all Duraskid Modifications, including without
limitation, all patent, copyright, trade secrets, and all other intellectual
property rights whatsoever, together with all other alterations, revisions,
modifications, customizations or enhancements that may be made thereto. The
Company shall not represent to any person that all, or any part of, the Duraskid
Technology are either the property or the assets of the Company whatsoever. The
Company hereby transfers, conveys and assigns all right, title and interest in
same, to Dura Products, and the Company agrees that it shall do so in the future
in favour of Dura Products pursuant to Section 5.12 hereof. The Company shall
keep current, accurate and complete records, files, data, written materials
(e.g., instructions, user manuals, end-user notes, etc.) and information
concerning the Company's creation and development of any Duraskid Modifications
(all of which shall be the property of Dura Products) and the Duraskid
Technology and the Company shall provide all such information and materials to
Dura Products upon Dura Products' request.
(2) The Company agrees that each person who shall create any aspect of
Duraskid Modifications shall wholly and irrevocably waive (in favour of Dura
Products and in writing) any and all of their moral rights, privacy rights, and
other similar rights therein (including without limitation, to waive any rights
they may have to be associated with, and to protect the integrity of, such work)
whether such rights exist in common law, pursuant to statute, or otherwise.
4.3 CONFIDENTIALITY
(1) All information concerning Dura Products, including without
limitation all regulatory, commercial, financial, data bases, business forms and
documents, sales, commercial files, marketing, Dura Products intellectual and
industrial property, personnel, administrative, technological, customer
(including all customer information with respect to Designated Areas in Section
2.3 hereof), and any information concerning this Agreement, is hereby deemed to
be the proprietary and confidential information of Dura Products ("Dura Products
Confidential Information"). All Dura Products Confidential Information shall be
held in strict confidence by the Company and shall not be used by the Company
for its benefit, or for the benefit of any other person, or for any purpose
other than is strictly necessary for the purpose of this Agreement. All Dura
Products Confidential Information shall be held in trust by the Company strictly
for, and on behalf of, Dura Products, and the Company shall have an obligation
commensurate with such trust to prevent Dura Products Confidential Information
from being misappropriated, used without the consent of Dura Products,
wrongfully disclosed, harmed, stolen, manipulated, tampered with, copied, or
electronically transmitted or otherwise communicated, except as otherwise
expressly permitted by this Agreement, and from being sabotaged or interfered
with in any way whatsoever. The Company agrees that prior to permitting any of
its employees to have access to the Dura Products Confidential Information, it
will require each such employee to execute a confidentiality and non-use
agreement with the Company, which agreement shall be in form acceptable to Dura
Products.
(2) Except to the extent specifically authorized by Dura Products in
writing, Dura Products Confidential Information shall be maintained by the
Company in confidence throughout the term of this Agreement, and for a period of
five (5) years thereafter or such longer or shorter period, as Dura Products and
the Company may otherwise mutually agree.
(4) The obligations set forth in this Section 4.3 of this Agreement
shall not apply to any information which:
(a) appears in issued patents; or
(b) is or becomes a matter of public knowledge through no fault of the
Company.
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4.4 DIES, COMPOUNDING EQUIPMENT AND EXTRUDER SCREWS
(1) All Dies, compounding equipment and extruder screws to be used to
manufacture Duraskid Products shall be purchased by the Company from
manufacturers specified by Dura Products. Without limiting any other obligation
of the Company hereunder, the Company shall at all times maintain the Dies,
compounding equipment and extruder screws in good operating condition and shall
make all necessary repairs with respect thereto. As security for the payments
and performance of its obligations hereunder, the Company hereby grants a first
ranking security interest in and to all Dies, compounding equipment and extruder
screws now or hereafter owned by the Company and all proceeds therefrom
(collectively the "Collateral"). The parties acknowledge that value has been
given by the Company, the Company has rights (or will have rights) in the
Collateral and the parties have not agreed to postpone the time for attachment
of the said security interest.
(2) The Company agrees that it shall not, at any time during the Term,
create a security interest in, place a lien upon, encumber, use as collateral,
or otherwise pledge as security, the Collateral; provided however, the Company
may grant a security interest in respect of the compounding equipment forming
part of the Collateral with the prior written consent of Dura Products, acting
reasonably; provided, among other things, that the holder of such security
interest agrees to be bound by the terms of this Agreement.
(3) In the event that the Company commits an Event of Default, Dura
Products shall have the sole and exclusive right and option to purchase the
Collateral (or any portion thereof) from the Company at 75% of the unamortized
cost of such Collateral on the books of the Company so purchased, it being
agreed that the Collateral will be amortized over a period of three years. Upon
exercise of the aforesaid right and option, the Collateral (or applicable
portion thereof) shall be forthwith delivered to Dura Products. Nothing herein
shall limit or restrict Dura Products' security interests, rights and remedies
against the Company pursuant to subsection 4.4(1) hereof.
ARTICLE FIVE
GENERAL PROVISIONS
5.1 TERM
This Agreement, unless otherwise terminated as provided hereinafter,
shall continue in full force and effect from the date hereof until December 31,
2017 (the "Term"). If the Company is not then in default hereunder, this
Agreement may be renewed thereafter for up to eight successive ten (10) year
terms, at the election of the Company, upon written notice given to Dura
Products at least two months prior to the end of each such term, whether initial
or subsequent, of this Agreement. If this Agreement has not been renewed in the
manner herein provided, it shall expire upon completion of its current term and
shall not be regarded as continuing in effect by virtue of any continuing
relations between the parties. Cause need not be shown by either party for
failure to renew this Agreement and no compensation shall be payable with
respect to the termination of this Agreement during or at the expiration of
either the initial or any subsequent term. The parties agree that any
termination of this Agreement shall be subject to Subsection 1.14 hereof.
5.2 DEFAULT AND RIGHTS OF TERMINATION
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(1) The occurrence of any one or more of the following events (each
such event being herein referred to as an "Event of Default") shall constitute a
fundamental breach of this Agreement and shall, in addition to any other rights
and remedies either party may have, permit a party hereto to terminate this
Agreement upon twenty (20) Business Days prior written notice to the other
party:
a) if the other party breaches any material or fundamental covenant or
obligation contained in this Agreement (including without limitation
any breach of Sections or Subsections 2.1, 2.4, 2.5(2), 2.5(3), 2.2(3),
Article Three, Article Four, 5.3, 5.4, 5.6 or 5.9);
b) if a decree or order of a court having competent jurisdiction is
entered adjudging the other party bankrupt or approving as properly
filed a petition seeking or winding up of the other party under the
Massachusetts Limited Liability Company Act, Companies' Creditors
Arrangement Act (Canada), the Bankruptcy Act (Canada) or the Winding Up
Act (Canada) or the United States Bankruptcy Code or under any
analogous, comparable or similar law of any jurisdiction, or under any
other process of execution or similar effect against, or against any
substantial part of the property of the other party, or ordering for
the winding up or liquidation of its affairs, and any such decree or
order continues unstayed and in effect for a period of sixty (60) days;
c) if the other party makes any assignment in bankruptcy or makes any
other assignment for the benefit of creditors, makes any proposal under
the Massachusetts Limited Liability Company Act, Bankruptcy Act
(Canada) or any comparable law in any jurisdiction, seeks relief under
the Companies' Creditors Arrangement Act (Canada), the Winding Up Act
(Canada) or the United States Bankruptcy Code or any other bankruptcy,
insolvency, or analogous, comparable or similar law in any
jurisdiction, is adjudged bankrupt, files a petition or proposal to
take advantage of any act of insolvency, consents to or acquiesces in
the appointment of a trustee, receiver, receiver and manager, interim
receiver, custodian, sequestrator or other person with similar powers
to itself or of all of any substantial portion of its property or
assets, or files a petition or otherwise commences any proceeding
seeking any reorganization, arrangement, composition or readjustment
under the applicable bankruptcy, insolvency, moratorium, reorganization
or other similar law in any jurisdiction affecting creditors' rights or
consents to or acquiesces in, the filing of such a petition;
d) if a governmental regulatory order or final judgment or decree in
any jurisdiction which materially and adversely affects the ability of
a party hereto to fulfill its obligations to the other party under this
Agreement shall have been made, issued, obtained or entered against the
party hereto and such order, judgment or decree shall not have been
vacated, discharged or stayed pending appeal within the applicable
appeal period; and
e) if any covenant, representation or warranty made by the other party
in this Agreement, or in any undertaking, certificate or other document
that is, at any time, delivered hereunder by the other party shall
prove to have been incorrect or misleading in any material respect.
(2) Upon any termination of this Agreement, in addition to any other
rights and remedies that may be available to Dura Products, the Company shall:
(i) immediately deliver to Dura Products all of Dura Products'
property, whether in material or electronic form, including without
limitation all notes, information, intellectual property, written
materials constituting, or relating to, the Duraskid Technology;
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(ii) immediately cease all marketing, sale and distribution activities
whatsoever concerning Duraskid Products, and the Company shall deliver
to Dura Products all inventory of Duraskid Products in existence as at
the date of such termination;
(iii) pay, in full, all amounts of Royalties, licence fees and all
other amounts whatsoever that may be due and payable by the Company to
Dura Products hereunder within thirty (30) days of the date of such
termination.
5.3 INDEMNIFICATION
(1) The Company shall, at the Company's expense, fully indemnify and hold Dura
Products harmless (without limitation whatsoever, and at Dura Products' request,
defend Dura Products), from and against any and all harm, damages, loss, cost,
liability or expense whatsoever (including costs and fees of attorneys and other
professionals) whether arising in contract, tort, negligence, equity, common
law, statute or otherwise that arise out of, or in any connection with, any act
or omission of either the Company or the Company's employees, agents or
independent contractors, concerning, or in any way related to: (i) any personal
injury, harm, disease or death suffered by any Dura Products officer, director,
employee, agent or authorized representative; (ii) any damage to or destruction
of tangible or intangible property of Dura Products or any loss of use resulting
therefrom; (iii) any breach of Subsection 2.2(1), Subsection 2.2(3), Section
4.3, Subsection 2.4(3), or Subsection 2.4(4) of this Agreement; and, (iv) any
breach of a third party's patent, trade-mark, confidentiality right or
copyright, except as otherwise provided by section 5.3(2); provided that the
indemnification provided by this section shall be limited to a maximum of
$500,000 in the aggregate. Dura Products agrees that it will give the Company
prompt written notice of any claim asserted under this Section 5.3 and that the
Company will be given the opportunity to control and direct, at the Company's
expense, the investigation, preparation, defense and settlement of such claim.
Dura Products further agrees to provide the Company with reasonable assistance
in the defense or settlement thereof.
(2) To the extent that the use of Duraskid Technology in the manner contemplated
by this agreement results in a breach of a third party's patent, trade mark,
confidentiality right or copyright, Dura Products shall, at Dura Product's
expense, fully indemnify and hold the Company harmless (without limitation
whatsoever, and at the Company's request, defend the Company) from and against
any and all harm, damages, loss, cost, liability or expense whatsoever
(including costs and fees of attorneys and other professionals) in contract,
tort, negligence, equity, common law, statute or otherwise in any way arising
out of such breach; provided that the indemnification provided by this section
shall be limited to a maximum amount of $500,000 in the aggregate.
5.4 LIMITATION OF LIABILITY
Except as provided in Section 5.3 hereof, the Company and Dura Products
each agree as follows:
(a) each party's liability to the other party for any and all direct
harm, liability, expense, cost, loss or damage, whether in negligence,
tort, equity, contract or otherwise, arising out of, or in connection
with, this Agreement shall be strictly limited, in the aggregate and in
respect of all incidents or occurrences, to $500,000;
(b) each party agrees that the other party shall not be liable for any
lost profits, lost business revenue, failure to realize expected
savings or any other commercial or economic loss of any kind
whatsoever; and
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(c) UNDER NO CIRCUMSTANCES WILL EITHER PARTY BE LIABLE TO THE OTHER
PARTY FOR ANY INDIRECT, THIRD PARTY, SPECIAL, INCIDENTAL, CONSEQUENTIAL
OR EXEMPLARY EXPENSES, COSTS, LIABILITY, LOSS, OR DAMAGE WHATSOEVER.
5.5 INSURANCE
(1) The Company shall maintain general liability and errors omissions
insurance coverage to protect itself in connection with any liability whatsoever
that may arise with respect to the manufacture, sale and distribution of Dura
Products or that may arise in any connection with any act or omission of the
Company pursuant to this Agreement, including without limitation the Company's
indemnification of Dura Products pursuant to Section 5.3 of this Agreement. All
such insurance shall be of an amount, and shall be provided to the Company on
terms and conditions, that are reasonably acceptable to Dura Products.
(2) Without limiting the foregoing, all such insurance coverage shall
be evidenced by insurance policies which have terms and conditions satisfactory
to Dura Products and such insurance policies shall not be cancellable or subject
to reduction of coverage, or other modification, except after thirty (30) days'
prior written notice to Dura Products. The Company shall deliver to Dura
Products, upon request, certificates or other satisfactory evidence of any
insurance that Dura Products requires the Company to maintain hereunder and a
certified copy of the original insurance policies within thirty (30) days of
Dura Products' request.
5.6 DISPUTE RESOLUTION
The purpose of this Section 5.6 is to set forth a framework and
procedure under which the Company and Dura Products shall, in good faith, use
their reasonable efforts to resolve any disputes that may arise under this
Agreement without resort to litigation. Except with respect to Section 5.3
hereof, the parties agree to first utilize the following process to accomplish
this goal, engaging first in informal discussion, and thereafter, to
arbitration.
(1) Except with respect to Section 5.3 hereof, in the event of a dispute under
this Agreement, including without limitation, any failure of the parties to
agree on a matter requiring settlement or agreement (a "Dispute"), the party
alleging the Dispute shall provide notice giving particulars of the Dispute to
the other party (the "Notice of Dispute"). The parties each agree to appoint a
representative and to cause their respective representatives to meet as soon as
possible in an effort to resolve the Dispute. Should the Dispute not be resolved
within ten (10) Business Days of the Notice of Dispute, representatives of the
parties at a senior management level shall attempt, in good faith, to resolve
the Dispute in no more than thirty (30) Business Days from the date of the
Notice of Dispute. All such representatives of the parties shall be referred to
hereafter as "Settlement Nominees", and the thirty (30) Business Day period
shall be referred to as the "Period of Discussion".
(2) Except with respect to Section 5.3 hereof, in the event that the Settlement
Nominees are unable to resolve the Dispute during the Period of Discussion,
either party may submit, within five (5) days following the expiration of the
Period of Discussion, the Dispute to binding arbitration before a single and
sole (1) arbitrator in Boston,Massachusetts pursuant to the UNCITRAL rules,
except as modified below:
(a) such arbitration shall be the exclusive dispute settlement
procedure between the parties, and the decision of the arbitrator
shall be binding on each of Dura Products and the Company, subject
only to paragraph 5.6(2)(f) hereof and the right of each party to
appeal a decision that is contrary to law;
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(b) the parties shall have ten (10) Business Days from receipt of the
Arbitration Notice to select an arbitrator;
(c) if the parties fail to appoint an arbitrator, the party initiating
the arbitration (the "Initiating Party") will be free, upon
written notice to the other party, to request that a court of
competent jurisdiction in the Commonwealth of Massachusetts
promptly appoint an arbitrator, as applicable, and to notify each
party of such appointment;
(d) the parties shall agree in advance as to the manner in which the
arbitrator shall promptly hear witnesses and arguments, review
documents and otherwise conduct the arbitration procedures and
failing agreement within five (5) Business Days from the date of
selection of their arbitrator, the arbitrator shall formulate its
own procedural rules and promptly commence and expeditiously
conduct the arbitration proceedings;
(e) the arbitrator shall issue its decision in writing within
forty-five (45) days from the date of appointment of the
arbitrator;
(f) nothing in this Section 5.6 shall prevent either party from
applying to a court of competent jurisdiction in the Commonwealth
of Massachusetts for injunctive relief pending final disposition
of the arbitration proceeding;
(g) in no event shall the arbitrator have the jurisdiction to amend or
vary the terms of this Agreement;
(h) the arbitration award shall be given in writing and shall be final
and binding on the parties, not subject to any appeal, and shall
deal with the question of costs of arbitration and all matters
related thereto;
(i) judgement upon the award rendered may be entered in any court
having jurisdiction, or, application may be made to such court for
a judicial recognition of the award or an order of enforcement
thereof, as the case may be; and,
(j) subject to paragraph 5.6(2)(f) hereof, it shall be a condition
precedent to the bringing of any legal proceedings with respect to
the Dispute that the arbitration procedure set out in this section
5.6 shall have taken place.
The parties hereto agree that the foregoing shall apply so long as it does not
conflict with the arbitration rules of the American Arbitration Association, in
which event such rules of the American Arbitration Association shall apply.
5.7 FORCE MAJEURE
Neither party shall be liable for any failure or delay in its
performance under this Agreement due to causes, including, but not limited to,
acts of God, acts of civil or military authority, fires, epidemics, floods,
earthquakes, riots, wars, sabotage, labour shortages or disputes, and
governmental actions, which are beyond its reasonable control; provided that the
delayed party: (i) gives the other party written notice of such cause promptly,
and in any event within fifteen (15) days of discovery thereof; (ii) uses its
best efforts to correct such failure or delay in its performance. The delayed
party's time for performance or cure under this Section 5.7 shall be extended
for a period equal to the duration of the cause or sixty (60) days, whichever is
less.
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5.8 RELATIONSHIP OF THE PARTIES
Nothing in this Agreement shall either render, or be interpreted or
construed to mean, Dura Products and the Company are either partners, joint
venturers, employer/employee or principal/agent of the other. Except as
specifically provided in this Agreement, neither party shall have any authority
whatsoever to obligate or commit the other party, contractually or otherwise,
and neither party shall do anything whatsoever to represent to any person that
they have any authority to so obligate or commit the other party. Each of Dura
Products and the Company agree that each of them are independent contractors.
the Company shall only act within the scope of its actual and express authority
under this Agreement, and the Company shall not represent to any person that it
has any authority, or permission, or consent to represent, act on behalf of, or
have a commercial relationship with Dura Products except as is expressly
authorized by Dura Products under this Agreement.
5.9 ASSIGNMENT
(1) The rights and liabilities of the parties hereto shall bind and
inure to the benefit of their respective successors and permitted assigns.
(2) It is acknowledged that Dura Products has specifically contracted
for the Company's unique and special services and accordingly, the Company shall
not have the right to assign or delegate any of its rights or obligations under
this Agreement, either in whole or in part, to any person without the prior
written consent of Dura Products. Any attempted assignment in violation of the
provisions of this Section 5.9 shall be void.
(3) The Company shall not create, incur, assume or suffer to exist any
mortgage, deed of trust, lien, security interest, or other charge or encumbrance
of any nature, upon or with respect to this Agreement, any interest herein or
the Dies.
(4) Dura Products shall have the right at any time to assign this
Agreement or any part thereof to any affiliate of Dura Products without the
consent of the Company.
5.10 NOTICES
All notices, consents or other communications to any party under this
Agreement shall be in writing and shall be deemed to be sufficiently given if
delivered by overnight courier, in which case the notice shall be deemed to have
been received two (2) business days after the sending thereof, or if delivered
by hand to a representative of such party, in which case the notice shall be
deemed to have been received on the date of delivery thereof, or if sent by
telecopier to such party, in which case the notice shall be deemed to have been
received on the business day (in the locality of the addressee) following the
sending thereof (provided it is received or reproduced at the address of the
addressee on paper), addressed as follows:
(a) if to the Company, to it at:
c/o Wood Recycling Inc.
3 Wheeling Avenue
Woburn, Massachusetts
01801
Attention: Management Committee
Telephone: 508-535-4144
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Telecopier: 508-535-4252
(b) if to Dura Products, to it at:
60 Carrier Drive
Etobicoke, Ontario
M9W 5R1
Attention: Chief Financial Officer
Telephone: 416-679-0556
Telecopier: 416-679-0614
Any party may change the address to which all notices, consents or other
communications are to be sent by giving written notice of such change of address
to the other parties in conformity with this section.
5.11 NO WAIVER
Failure by either party to enforce any provision of this Agreement
shall not be deemed a waiver of future enforcement of that or any other
provisions.
5.12 FURTHER ASSURANCES
Each of Dura Products and the Company agree that they shall execute and
deliver all further documents, filings and agreements that contain reasonable
terms and conditions, and do all things that are reasonably necessary to realize
and perfect the intention of this Agreement and the obligations set out herein.
5.13 GOVERNMENTAL ALTERATION OR MODIFICATION
If, at any time during the term of this Agreement, any government or
agency of the United States or any jurisdictions of the Territory should,
directly or indirectly, alter or modify any term or condition of this Agreement
by legislation or by-law, in a manner which is material or adverse to any party
hereto, or if any party is unable to receive any payments contemplated by this
Agreement as the result of any such governmental action, then such party may, in
its sole discretion, terminate this Agreement forthwith in its entirety by
giving written notice to that effect to the other party hereto. It is expressly
understood and agreed by the parties hereto that in the event of such
termination the party electing to terminate this Agreement pursuant to this
Section 5.13 shall incur no liability whatsoever to the other party hereto for
any alleged default or breach in the performance of this Agreement arising from
the exercise of the right herein provided to terminate this Agreement.
5.14 NO MERGER
The parties agree and acknowledge that none of the warranties,
representations and covenants contained in this Agreement shall merge upon
either the execution and delivery of this Agreement by both parties, or upon the
full payment (or any partial payments) of the Royalties, and that all such
warranties, representations, and covenants shall continue in full force and
effect both throughout the Term.
-23-
5.15 EQUITABLE REMEDIES
The Company hereby acknowledges and agrees that any breach whatsoever
of the covenants, provisions and restrictions herein contained by the Company
shall cause, and shall be deemed to be, a breach of its fiduciary obligations to
Dura Products and to cause serious commercial, economic and trade damage and
injury to Dura Products for which monetary damages do not, alone or in part,
adequately compensate Dura Products. In that regard, the parties agree that the
Company's obligations toward Dura Products in this Agreement shall be fiduciary
in nature. Therefore, the Company hereby waives all of its rights concerning,
and agrees that it shall not oppose, defend against, or attempt to prevent Dura
Products from obtaining, from any court of competent jurisdiction interim and
permanent equitable relief, including without limitation injunctive relief, in
the event of any such breach. As well, and without limiting the generality of
the foregoing, Dura Products shall have the unrestricted right to seek an
accounting of all profits and benefits arising from any such breach. All such
rights and remedies shall be cumulative and in addition to any and all other
rights and remedies whatsoever to which Dura Products may otherwise be entitled,
except as otherwise expressly limited by this Agreement.
5.16 REMEDIES CUMULATIVE
Unless otherwise provided herein, all rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
otherwise shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any right, power or remedy thereof by any party shall not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party, except as otherwise expressly limited by this Agreement.
5.17 PUBLIC ANNOUNCEMENTS
No party shall make any public statement or issue any press release
concerning the transaction contemplated by this Agreement except as necessary to
comply with requirements of any law, regulation, or the order or judgment of a
court or tribunal of competent jurisdiction. If any such public statement or
release is so required, the parties shall use all reasonable efforts, acting in
good faith, to agree upon a text for such statement or release.
IN WITNESS WHEREOF each of the parties hereto hereby execute and
deliver this Agreement as of the date first above mentioned.
DURA PRODUCTS DURASKID (NEW ENGLAND), L.L.C.
INTERNATIONAL INC.
By: __________________________
By: ______________________________ Name: __________________________
Name: ______________________________ Title: __________________________
Title: ______________________________
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SCHEDULE 1
DURASKID TECHNOLOGY
Cellulose fibre and plastics are combined with proprietary coupling agents and
compounded with a custom desgined high-density mixer that yields a homogeneous
cellulose/plastic mixture. The mixture is then extruded into profiles using
thermo-plastic extruders in which the mechanical properties of the constituent
material components are enhanced using a proprietary die design.
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SCHEDULE 2
PORTION OF NEW YORK STATE INCLUDED
IN THE TERRITORY
That part of New York State bounded by Hwy. 88 between Binghamton and Albany and
Hwy. 90 between Albany and Pittsfield, Massachusetts and shall include all
cities and towns along Highways 88 and 90 falling within the State of New York.
-26-
SCHEDULE 3
END-USER PROVISIONS
RESTRICTIONS ON USE. End-User is authorized to use the Duraskid Product only in
connection with, and for the benefit of, the personal use and internal
operations of End-User, and not for redistribution or resale. The End-User shall
not have any right whatsoever to, and agrees that it shall not, resell, license,
sublicense, convey, transfer, or otherwise alienate the Duraskid Product to any
other person.
PROPRIETARY MARKINGS. End-User agrees not to tamper with, obstruct, conceal,
manipulate, modify, alter, remove or destroy any proprietary markings and logos
of Dura Products International Inc., including, without limitation, any
copyright, patent, trademark, or confidentiality notices placed upon, or
contained within, the Duraskid Product or any related materials or
documentation.
INTELLECTUAL PROPERTY RIGHTS PROTECTION. End-User agrees that the Duraskid
Product is comprised of confidential information and trade secrets of Dura
Products International Inc. End-User agrees that such confidential information
and trade secrets are not licensed to End-User pursuant to this Agreement, and
that all right, title and interest therein is owned exclusively by Dura Products
International Inc.
EXCLUSION OF LIABILITY. END-USER AGREES, ACKNOWLEDGES AND CONFIRMS THAT DURA
PRODUCTS INTERNATIONAL INC. SHALL NOT, IN ANY MANNER OR TO ANY EXTENT, BE LIABLE
TO END-USER OR ANY OTHER PERSON FOR ANY HARM, DAMAGE, INJURY, LOSS, LIABILITY,
EXPENSE, COST OR ANY CAUSE OF ACTION, CLAIM, DEMAND, SUIT, PROCEEDING OR
JUDGMENT IN ANY CONNECTION WITH EITHER DURASKID PRODUCT OR THIS AGREEMENT, OR
ANY ACT OR OMISSION OF THE COMPANY, REGARDLESS OF HOW SUCH MAY ARISE, WHETHER IN
CONTRACT, TORT, NEGLIGENCE, EQUITY, AT COMMON LAW, OR OTHERWISE. WITHOUT
LIMITING THE FOREGOING, THE COMPANY SHALL NOT BE LIABLE FOR ANY DIRECT,
INDIRECT, SPECIAL, CONSEQUENTIAL, THIRD PARTY, ECONOMIC LOSS, LOST OPPORTUNITY,
OR ANY OTHER DAMAGES OR LIABILITY WHATSOEVER TO ANY PERSON THAT MAY ARISE IN ANY
CONNECTION WITH EITHER DURASKID PRODUCT, THIS AGREEMENT, OR ANY ACT OR OMISSION
OF THE COMPANY.
EXHIBIT 3.11
STOCK OPTION AGREEMENT
THIS AGREEMENT made as of the 15th day of October, 1997.
B E T W E E N:
DURA PRODUCTS INTERNATIONAL INC.,
a company incorporated under the laws of
the Province of Ontario
(hereinafter called "Dura Products")
OF THE FIRST PART;
- and -
ENVIRONMENTAL COMPOSITE
PRODUCTS L.L.C.,
(hereinafter called "Woodco")
OF THE SECOND PART.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
sum of One Dollar ($1.00) and other good and valuable consideration now paid by
each of the parties hereto to the other (the receipt and sufficiency of which is
hereby acknowledged), the parties hereto agree as follows:
1. In this agreement:
"Closing Date" has the meaning attributed thereto in the Joint Venture
Agreement;
"common share" means the common shares without par value in the capital
stock of Dura Products as constituted at the date of this agreement;
"expiry date" means 4:30 p.m. (Toronto time) on the 20th business day
following the Closing Date;
"Joint Venture Agreement" means that certain agreement dated as of
September 23, 1997 among Woodco, Dura Products and various other
parties relating to the formation of a joint venture corporation to
manufacture, sell and distribute Duraskids in the territory defined
therein;
"optioned securities" has the meaning attributed thereto in section 2
hereof;
-2-
"purchase price per share" means 85% of the closing market price of a
common share of Dura Products on the business day preceding the Closing
Date (as defined in the Joint Venture Agreement);
"unit" means a unit described in section 4 hereof consisting of a
common share and a share purchase warrant entitling the holder to
purchase common shares.
2. Subject to the provisions hereinafter set forth and subject to compliance
with applicable securities laws and the rules of any applicable stock exchange,
Dura Products hereby grants to Woodco an irrevocable and non-assignable option
to purchase that number of common shares of Dura Products (or as hereinafter
provided, units) (hereinafter called the "optioned securities") having an
aggregate minimum purchase price of $250,000 (Cdn.) and a maximum purchase price
of $1,000,000 (Cdn.). The option hereby granted shall be exercisable on one
occastion only.
3. If Woodco wishes to exercise the option granted in section 2 hereof for an
aggregate purchase price of $500,000 (Cdn.) or less but equal to or greater than
$250,000 (Cdn.), it shall exercise the said option and pay for the said common
shares prior to the expiry date and shall be entitled to receive, as hereinafter
provided, that number of common shares equal to the aggregate purchase price
tendered divided by the purchase price per share. Woodco shall not be entitled
to receive any fractional shares.
4. If Woodco wishes to exercise the option granted in section 2 hereof for an
aggregate purchase price of greater than $500,000 (Cdn.), it shall so notify
Dura Products in writing not later than 15 business days following the Closing
Date whereupon Woodco shall pay the aggregate purchase price therefor specified
in such notice not later than the expiry date and shall receive, as hereinafter
provided, units consisting of:
(a) that number of common shares equal to the aggregate purchase
price tendered divided by the purchase price per share; and
(b) a share purchase warrant entitling Woodco to purchase that
number of common shares equal to the aggregate purchase price
tendered in excess of $500,000 (Cdn.) divided by the purchase
price per share. The share purchase warrant shall expire 18
months following the date of issue and shall be exercisable at
a price equal to 125% of the market price of the common shares
on the date of issue.
Any exercise of the option granted in section 2 hereof for an aggregate purchase
price of greater than $500,000 (Cdn.) shall be in multiples of $50,000 (Cdn.).
5. The option hereby granted shall be exercisable by Woodco tendering a notice
in writing at the executive offices of Dura Products in Toronto, specifying the
number of common shares (or, if applicable, units) being purchased, together
with a certified cheque in favour of Dura Products in an amount equal to the
full purchase price of the number of common shares (or units) so specified. Upon
any such exercise of option as aforesaid, Dura Products shall forthwith cause
the Transfer Agent and Registrar of Dura Products to deliver to Woodco, as soon
as practicable thereafter, a certificate or certificates in the name of Woodco
representing in the aggregate such number of common shares (and, if applicable,
a share purchase warrant substantially in the form annexed hereto) as Woodco
shall have then paid for.
-3-
6. Except with the prior consent of Dura Products but subject in all events to
applicable securities laws and the requirements of any applicable stock
exchanges, Woodco shall not sell, transfer or otherwise dispose of any of common
shares acquired pursuant to the exercise of the option herein granted prior to
the date which is 18 months after the date of the exercise thereof.
7. Nothing herein contained or done pursuant hereto shall obligate Woodco to
purchase and/or pay for any optioned securities except those optioned securities
in respect of which Woodco shall have exercised its option to purchase hereunder
in the manner hereinbefore provided.
8. In the event of any subdivision or redivision of the common shares of Dura
Products at any time prior to the expiry date into a greater number of common
shares or the payment by Dura Products of a stock dividend, Dura Products shall
deliver at the time of any exercise thereafter of the option hereby granted such
additional number of common shares as would have resulted from such subdivision
or redivision or would have been received as a result of such stock dividend as
the case may be, if such exercise of the option hereby granted had been prior to
the date of such subdivision or redivision. In the event of any consolidation or
change of the common shares of Dura Products at any time prior to the expiry
date into a lesser number of common shares, the number of common shares
deliverable by Dura Products on any exercise thereafter of the option hereby
granted shall be reduced to such number of common shares as would have resulted
from such consolidation or change if such exercise of the option hereby granted
had been prior to the date of such consolidation or change.
9. Woodco shall have no right whatsoever as a shareholder in respect of any of
the optioned securities (including any right to receive dividends or other
distribution therefrom or thereon).
10. Time shall be of the essence of this agreement.
11. This agreement shall enure to the benefit of and be binding upon Dura
Products, its successors and assigns. This agreement shall not be assignable by
Woodco.
12. This agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the Province of Ontario
and the federal laws of Canada applicable therein. Each of the parties hereto
hereby irrevocably attorns to the jurisdiction of the courts of the Province of
Ontario.
IN WITNESS WHEREOF this agreement has been executed by the parties
hereto.
SIGNED, SEALED AND DELIVERED) DURA PRODUCTS INTERNATIONAL
) INC.
)
in the presence of ) Per:________________________
)
) Per:________________________
)
) ENVIRONMENTAL COMPOSITE
) PRODUCTS L.L.C.
)
Per:________________________
DURA PRODUCTS INTERNATIONAL INC.
SHARE PURCHASE WARRANT
THIS WARRANT WILL BE VOID AND OF NO VALUE UNLESS EXERCISED ON OR BEFORE 4:30
P.M. TORONTO TIME IN TORONTO ON ____, 199_.
THIS IS TO CERTIFY THAT for value received, Environmental Composite
Products L.L.C. (the "holder" or "registered holder"), being the holder of this
Share Purchase Warrant (the "Warrant") is entitled to purchase at any time and
from time to time on or before the close of business on o , 199o (the "Expiry
Date") ___________________fully paid and non-assessable common shares without
nominal or par value (the "Common shares") of Dura Products International Inc.
(the "Corporation"), subject to the terms and conditions hereinafter referred to
and at the subscription price of $o (Canadian funds) per Common Share, or such
other amount as may be determined from time to time pursuant to the provisions
of Schedule "A" hereto (the "Exercise Price"), payable as hereinafter provided
(the aggregate purchase price of those Common Shares in respect of which this
Warrant is exercised in whole or in part each time this Warrant is exercised is
hereinafter called the "Aggregate Purchase Price").
The right to purchase Common Shares of the Corporation under this
Warrant may only be exercised by the holder on or before the Expiry Date by:
(a) duly completing and executing the subscription in the form
attached as Schedule "B" hereto; and
(b) surrendering this Warrant to the Corporation, at its office in
Toronto, together with a bank draft or certified cheque
payable to the order of the Corporation, at par in Toronto, in
the amount of the Aggregate Purchase Price.
Upon surrender and payment, the holder shall be deemed for all purposes
to be the holder of record of the Common Shares. The Corporation covenants that
it will forthwith cause a certificate or certificates representing the Common
Shares to be mailed to the holder at the address specified in the subscription
form.
The holder may subscribe for and purchase any lesser number of Common
Shares than the number of Common Shares purchasable under this Warrant and in
such event shall be entitled to receive a new Warrant in respect of the balance
of the Common Shares purchasable under this Warrant not then subscribed for and
purchased.
The terms and conditions pertaining to this Warrant are set forth in
Schedule "A" hereto, the provisions of which are hereby incorporated by
reference into this Warrant.
The holding of this Warrant shall not make the holder a shareholder of
the Corporation and does not entitle the holder to any right or interest with
respect thereto except as expressly provided herein.
THE COMMON SHARES REFERRED TO IN THIS WARRANT ARE BEING OFFERED IN
CANADA BUT NOT IN THE UNITED STATES OF AMERICA OR ITS TERRITORIES OR
POSSESSIONS. THE ISSUANCE AND DELIVERY OF THIS WARRANT ARE NOT AND UNDER NO
CIRCUMSTANCES ARE TO BE CONSTRUED AS AN OFFERING OF ANY SUCH COMMON SHARES FOR
SALE IN THE UNITED STATES OF AMERICA OR ANY TERRITORY OR POSSESSION THEREOF OR A
SOLICITATION OF AN OFFER FROM ANY UNITED STATES RESIDENT TO BUY ANY OF SUCH
COMMON SHARES. THE COMMON SHARES IN RESPECT OF WHICH THIS WARRANT IS ISSUED ARE
NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 OF THE UNITED STATES AND
AMENDMENTS THERETO.
DURA PRODUCTS INTERNATIONAL INC.
Per: _____________________________________
Authorized Officer
Per:______________________________________
Authorized Officer
SCHEDULE "A"
TERMS AND CONDITIONS ATTACHING TO THE
SHARE PURCHASE WARRANT OF
DURA PRODUCTS INTERNATIONAL INC.
ARTICLE I
INTERPRETATION
Section 1.01 Definitions
In the following provisions applicable to the within Warrant, and
except as the context otherwise requires:
"Aggregate Purchase Price" means the Exercise Price then in effect
multiplied by the number of Common Shares in respect of which this
Warrant is exercised in whole or in part each time the Warrant is
exercised;
"Common Shares" means fully paid and non-assessable common shares of
the Corporation and, except where the context hereof otherwise
requires, includes Common Shares to be issued upon the exercise of the
Warrant;
"Current Market Price" means, as at any date when the Current Market
Price is to be determined, the weighted average price at which the
Common Shares have been traded on a Stock Exchange during the 20
consecutive trading days ending not more than 5 days immediately
preceding such date. In the event the Common Shares are not traded on a
Stock Exchange, but are then quoted on the Canadian Dealing Network
Inc., as at any date when the Current Market Price is to be determined,
the weighted average price at which the Common Shares have been quoted
on the Canadian Dealing Network Inc. during the twenty consecutive
trading days ending not more than five days immediately preceding such
date. In the event the Common Shares are not quoted on the Canadian
Dealing Network Inc., the Current Market Price thereof shall be
determined by the board of directors of the Corporation, which
determination shall be conclusive;
"Exercise Price" means the price for which Common Shares may be
purchased upon the exercise of the Warrant, which price shall initially
be the sum of $o per Common Share [125% of the closing price on the
business date preceding the date of issue], subject to adjustment as
hereinafter provided in Section 5.01;
"Expiry Date" means 4:30 p.m., Toronto time, ono , 199o [insert date
which is 18 months from date of issue];
"Stock Exchange" means a stock exchange in Canada on which the Common
Shares are listed and in the event the Common Shares are listed on more
than one stock exchange in Canada, any reference to a Stock Exchange
shall be deemed to be a reference to such stock exchange as shall be
designated by the board of directors of the Corporation;
-7-
"Warrant" means the share purchase warrant attached hereto in
registered form entitling the holder thereof, upon tender thereof and
payment of the Exercise Price, to subscribe for o Common Shares,
subject to adjustment as hereinafter provided in Section 5.01; and
"Warrantholder" or "holder" means the holder of the Warrant attached
hereto;
Section 1.02 Weekends and Holidays
If the date for the taking of any action hereunder is a Saturday,
Sunday or a legal holiday, such action shall be taken on the next succeeding
business day with the force and effect as if made on the nominal date.
Section 1.03 Time
Time shall be of the essence hereof and of the Warrant issued
hereunder.
Section 1.04 Applicable Law
This Schedule and the Warrant shall be construed in accordance with the
laws of the Province of Ontario and shall be treated in all respects as Ontario
contracts.
ARTICLE II
ISSUE OF WARRANT
Section 2.01 Form and Terms of Warrant
The Warrant shall entitle the holder thereof to subscribe, on or before
the Expiry Date, o Common Shares in accordance with the provisions of Article IV
hereof, subject to adjustment as hereinafter provided in Section 5.01.
Section 2.02 Ownership of Warrant
The Corporation may deem and treat the registered holder of the Warrant
as the absolute owner thereof for all purposes and the Corporation shall not be
affected by any notice to the contrary. The registered holder of the Warrant
shall be entitled to the rights and privileges attaching thereto and the issue
of Common Shares by the Corporation upon exercise of the Warrant by the
registered holder thereof in accordance with the terms and conditions herein
contained shall discharge all responsibilities of the Corporation with respect
to such Warrant, and the Corporation shall not be bound to inquire into the
title of any such registered holder.
Section 2.03 Warrantholder Not a Shareholder
The Warrantholder shall not, as such, be deemed or regarded as a
shareholder of the Corporation nor shall such Warrantholder be entitled to any
right or interest except as is expressly provided in this Schedule and the
Warrant.
-8-
Section 2.04 Enforcement of Warrantholder's Rights
It is expressly agreed and declared that the obligations under this
Schedule and the Warrant are solely corporate obligations of the Corporation and
that no personal liability whatsoever shall attach to or be incurred by a
present or former shareholder, officer or director of the Corporation. All
rights and claims against a shareholder, officer or director of the Corporation
are expressly waived as a condition of and as consideration for the issuance of
the Warrant.
Section 2.05 Loss, Mutilation, Destruction or Theft of Warrant
If the Warrant is lost, mutilated, destroyed or stolen, the Corporation
may, on such reasonable terms as to cost and indemnity or otherwise as it may
impose, issue and sign a new Warrant similar as to denomination, tenor and date
as the Warrant so lost, mutilated, destroyed or stolen.
ARTICLE III
COVENANTS OF THE CORPORATION
The Corporation covenants and agrees with the Warrantholder that so
long as the Warrant remains outstanding:
Section 3.01 To Reserve Common Shares
The Corporation is duly authorized to create and issue the Warrant and
the Warrant is valid and enforceable against the Corporation and, subject to the
provisions hereof, the Corporation will cause the Common Shares from time to
time subscribed for and purchased pursuant to the exercise of the Warrant, and
the certificates representing such Common Shares, to be duly issued. At all
times prior to the Expiry Date, while the Warrant is outstanding, the
Corporation shall reserve and there shall remain unissued out of its authorized
capital a number of Common Shares or other securities sufficient to enable the
Corporation to meet its obligation to issue Common Shares or other securities
pursuant to the exercise of the Warrant from time to time. All Common Shares
issued upon exercise of the Warrant shall be issued as fully paid and
non-assessable.
Section 3.02 To Execute Further Assurances
The Corporation will do, execute, acknowledge and deliver or cause to
be done, executed, acknowledged and delivered, all other acts, deeds and
assurances in law as may reasonably require for better accomplishing and
effecting the intentions and provisions hereof.
Section 3.03 To Give Notice of Certain Events
So long as the Warrant is outstanding, the Corporation will give to the
holder at least 14 days' prior notice of the effective date or record date of
any event which gives rise to an adjustment pursuant to Section 5.01. Any such
notice shall be sufficiently given if given in accordance with Section 6.01. The
Corporation further covenants and agrees that it will not within the said notice
periods take any corporate action which would deprive the holder of the
-9-
Warrant of the opportunity of exercising the right to purchase Common Shares
during the said periods and thereby to participate as a shareholder in respect
to any of the matters referred to in this Section.
ARTICLE IV
EXERCISE AND CANCELLATION OF WARRANT
Section 4.01 Exercise of Warrant
The Warrantholder who desires to exercise the Warrant shall, prior to
the Expiry Date: (a) duly complete and execute the subscription in the form
attached as Schedule "B" hereto; (b) surrender the Warrant to the Corporation at
its principal office in the Municipality of Metropolitan of Toronto; and (c) pay
the Aggregate Purchase Price by bank draft or certified cheque payable to the
Corporation at par in Toronto.
If any of the Common Shares subscribed for are to be issued to a person
other than the Warrantholder, the Warrantholder shall pay the requisite transfer
fees and charges, if any, to the Corporation. Upon surrender and payment, as
aforesaid, the person in whose name the Common Shares are to be issued, as
specified in the subscription form, shall be deemed for all purposes (except in
respect of the right to receive notice of any meeting if the record date for
notice of the meeting is prior to the date the person is registered as a
shareholder on the books of the Corporation) to be the holder of record of the
Common Shares issued to such person and shall be entitled to delivery of a
certificate representing the Common Shares.
Subject to the provisions of Section 4.03, the Corporation shall cause
the certificate to be mailed to the person at the address specified in the
subscription form within 10 days of the surrender of the Warrant and payment of
the Aggregate Purchase Price and requisite transfer fees and charges.
Section 4.02 Partial Exercise of Warrant
The Warrantholder may subscribe for and purchase a lesser number of
Common Shares than the number of Common Shares purchasable under the Warrant, in
which case the Warrantholder shall be entitled to receive a new Warrant in
respect of the Common Shares purchasable under the said Warrant and not then
subscribed for and purchased, and the Corporation shall issue a new Warrant upon
surrender of such Warrant, if satisfied that the new Warrant is properly
issuable.
Section 4.03 Postponement of Delivery of Certificate
The Corporation shall not be required to deliver certificates for
Common Shares during the period when the stock transfer books of the Corporation
are closed due to an impending meeting of shareholders or a proposed payment of
dividends or for any other purpose and, in the event of a surrender of the
Warrant for the purchase of Common Shares during such period, the delivery of
certificates may be postponed for a period not exceeding 10 days after the date
of the reopening of the stock transfer books.
-10-
Section 4.04 Warrant Void After Expiry Date
After the Expiry Date, no holder of an unexercised Warrant shall have
any rights under the Warrant, and the Warrant shall be void and of no value or
effect. All provisions of the Warrant and of this Schedule are subject to this
Section.
Section 4.05 Hold Period Attached to Common Shares
Except with the prior consent of the Corporation but subject in all
events to applicable securities laws and the requirements of any applicable
stock exchanges, by its acceptance of the Warrant, the holder shall not sell,
transfer or otherwise dispose of any of Common Shares acquired pursuant to the
exercise of the Warrant prior to the date which is 18 months after the date of
the exercise thereof.
ARTICLE V
ADJUSTMENT PROVISIONS
Section 5.01 Adjustment of Subscription Rights
The subscription rights under the Warrant shall be subject to
adjustment from time to time as follows:
(a) in the event the Corporation shall, at any time while the Warrant is
outstanding:
(i) subdivide its outstanding Common Shares into a greater number of
shares;
(ii) combine or consolidate its outstanding Common Shares into a
smaller number of shares; or
(iii) issue Common Shares, or securities exchangeable for or
convertible into Common Shares to the holders of any of its
outstanding shares by way of a stock dividend;
the Exercise Price shall be adjusted effective immediately after the
record date at which the holders of Common Shares are determined for
the purposes of any of the foregoing events to a price determined by
multiplying the Exercise Price in effect on such record date by a
fraction, the numerator of which shall be the number of Common Shares
outstanding on such record date, and the denominator shall be the
number of Common Shares outstanding after the completion of the
applicable event, including in the case where securities exchangeable
for or convertible into Common Shares are distributed, the number of
Common Shares that would have been outstanding had the securities been
exchanged for or converted into Common Shares on such record date. Such
adjustments shall be made successively whenever any event referred to
in this Section 5.01 shall occur and any such issuance of securities by
way of a stock dividend shall be deemed to have been made on the record
date for the stock dividend for the purpose of calculating the number
of outstanding Common Shares under this Section 5.01.
(b) In the event the Corporation shall fix a record date for the issuance
of rights, options or warrants, other than options issued to employees
pursuant to a stock option or stock
-11-
purchase plan approved by the directors of the Corporation, to all or
substantially all the holders of its outstanding Common Shares
entitling them for a period expiring not more than 60 days after such
record date, to subscribe for or purchase Common Shares (or securities
exchangeable for or convertible into Common Shares) at a price per
share (or having an exchange or conversion price per share) less than
95% of the Current Market Price on such record date, the Exercise Price
shall be adjusted immediately after the date upon which such rights,
options or warrants expire so that it shall equal a rate determined by
multiplying the Exercise Price in effect on such expiry date by a
fraction, of which the numerator shall be the total number of Common
Shares outstanding on such expiry date (exclusive of those Common
Shares issued upon the exercise of such rights, options or warrants)
plus a number of Common Shares equal to the number arrived at by
dividing the aggregate price of the total number of additional Common
Shares subscribed for or purchased upon the exercise of such rights,
options or warrants (or the aggregate exchange or conversion price of
the convertible securities so subscribed for or purchased) by the
Current Market Price of a Common Share, and of which the denominator
shall be the total number of Common Shares outstanding on such expiry
date (exclusive of those Common Shares issued upon the exercise of such
rights, options or warrants) plus the total number of Common shares
subscribed for or purchased upon the exercise of such rights, options
or warrants (or into which the exchangeable or convertible securities
so subscribed for or purchased are exchangeable or convertible). Any
Common Shares owned by or held for the account of the Corporation,
including those owned by any subsidiary of the Corporation, shall be
deemed not to be outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such an expiry date
occurs.
(c) In the event the Corporation shall fix a record date for the making of
a distribution to all or substantially all of the holders of its
outstanding Common Shares of:
(i) shares of any class other than Common shares or securities
exchangeable for or convertible into Common Shares issued by
way of a stock dividend;
(ii) rights, options or warrants, excluding those referred to in
clause 5.01(b);
(iii) evidences of its indebtedness; or
(iv) assets of the Corporation, excluding cash dividends other than
cash dividends to the extent that the aggregate amount of cash
dividends paid by the Corporation on its Common Shares in any
fiscal year of the Corporation exceeds 100% of the aggregate
net income of the Corporation for the immediately preceding
five fiscal years less cash dividends paid on any of its
shares during such fiscal years;
then in each such case the Exercise Price shall be adjusted immediately
after such record date, or in the case of such record date being fixed
for the issuance of such rights, options or warrants, immediately after
the date upon which such rights, options or warrants expire, so that it
shall equal the rate determined by multiplying the Exercise Price in
effect on such record date, or expiry date, as the case may be, by a
fraction, of which the numerator shall be the total number of Common
Shares outstanding on such record date or expiry date (exclusive of
those Common Shares issued upon the exercise of such rights, options or
warrants), multiplied by the Current Market Price per Common share on
such record date or expiry date, less the aggregate fair market value
(as determined by the
-12-
board of directors, whose determination shall be conclusive) of such
shares, evidences of indebtedness or assets distributed or the fair
market value (as determined by the board of directors, whose
determination shall be conclusive) of the securities issued upon the
exercise of such rights, options or warrants, and of which the
denominator shall be the total number of Common Shares outstanding on
such record date or expiry date (inclusive of those Common Shares
issued upon the exercise of such rights, options or warrants)
multiplied by the Current Market Price per Common Share on such record
date or expiry date. Any Common Shares owned by or held for the account
of the Corporation, including those owned by a subsidiary of the
Corporation, shall be deemed not to be outstanding for the purpose of
any such computation. Such adjustment shall be made successively
whenever such a record date is fixed or such expiry date occurs. To the
extent that such distribution of shares, evidences of indebtedness or
assets is not so made, the Exercise Price shall be readjusted to the
Exercise Price which would then be in effect based upon such shares,
evidences of indebtedness or assets actually distributed.
Section 5.02 No Adjustments
No adjustments of the subscription rights or Exercise Price shall be
made pursuant to Clause 5.01 if the Warrantholder was permitted to participate
in the issuance of such rights, options or warrants or such distribution, as the
case may be, as though and to the same effect as if it had exercised the Warrant
and had acquired Common Shares prior to the issuance of such rights, options or
warrants or such distribution, as the case may be.
Section 5.03 Adjustments Cumulative
The adjustments provided for in this Article V are cumulative. No
adjustment of the Exercise Price shall be made in any case in which the
resulting adjustment to the Exercise Price would be less than 1% of the then
Exercise Price, but in such case any adjustment that would otherwise have been
required then to be made shall be carried forward and made at the time of, and
together with, the next subsequent adjustment to the Exercise Price which,
together with any and all such adjustments so carried forward, shall result in
an adjustment in the Exercise Price of not less than 1%.
Section 5.04 Certificate
When any action is taken which requires an adjustment of the Exercise
Price to be made under Sections 5.01 or 5.06, the Corporation shall forthwith
prepare a certificate signed by the President or Vice-President and by the
Secretary, an Assistance Secretary or the Treasurer of the Corporation, setting
forth the details of the action taken, the Exercise Price before adjustment and
the details of the computation of the adjusted Exercise Price. The Corporation
shall exhibit a copy of such certificate from time to time to a Warrantholder
desiring to inspect the same. The Corporation may retain a firm of independent
chartered accountants, who may be the auditors of the Corporation, to make any
computation required under Sections 5.01 or 5.06, and any computation so made
shall be final and binding on the Corporation and the Warrantholder. Such firm
of independent accountants may, as to questions of law, request and rely upon an
opinion of independent counsel, who may be counsel for the Corporation. Any such
determination shall be conclusive and binding on the Corporation and the
Warrantholder.
-13-
Section 5.05 No Fractional Shares
If, following the application of Section 5.01, the number of Common
Shares issuable on the exercise of the Warrant would not be a whole number, upon
the exercise of the Warrant the Corporation shall not be required to issue a
fractional share. The Corporation shall round up any fractional share to the
next highest whole number and shall issue and deliver such whole number of
Common Shares.
Section 5.06 Reclassification and Reorganization
In case of, after the date hereof, any reclassification or change of
the Common shares, other than a change contemplated in Section 5.01, or in the
case of any reorganization, amalgamation, consolidation or merger of the
Corporation with or into any other corporation, or in the case of any sale of
the properties and assets of the Corporation as, or substantially as, an
entirety to any other corporation, the Warrant shall, after such
reclassification, change, reorganization, amalgamation, consolidation, merger or
sale, be exercisable to acquire the number of shares or other securities or
property of the Corporation, or such continuing, successor or purchasing
corporation, as the case may be, to which a holder of the number of Common
Shares as would have been issued if such Warrant had been exercised immediately
prior to such reclassification, change, reorganization, amalgamation,
consolidation, merger or sale would have been entitled upon such
reclassification, change, reorganization, amalgamation, consolidation, merger or
sale.
Section 5.07 Corporation's Rights Not Limited
Nothing in this Article V shall be construed as affecting or limiting
in any way the right of the Corporation to amend its articles or to effect any
redesignation, reclassification, consolidation, subdivision, redivision,
exchange, conversion or other capital reorganization affecting Common Shares or
any other shares of its capital.
Section 5.08 Adjustment of Provisions
If, in the opinion of the board of directors, the provisions of this
Article V are not strictly applicable, or if strictly applicable, would not
fairly protect the rights of the Warrantholders or the Corporation in accordance
with the intent and purposes hereof, the board of directors shall make any
adjustment in such provisions as the board of directors deems appropriate.
Section 5.09 Shares to be Reserved
As a condition precedent to the taking of any action which would
require an adjustment in any of the subscription rights pursuant to the Warrant,
the Corporation shall take any corporate action which may be necessary in order
that the Corporation has unissued and reserved in its authorized capital and may
validly and legally issue as fully paid and non-assessable all the Common Shares
or other securities which the Warrantholder is entitled to receive on the full
exercise of the Warrant in accordance with the provisions hereof.
-14-
ARTICLE VI
NOTICES
Section 6.01 Notice
Any notice or other written communication required or permitted
hereunder shall be in writing and:
(a) delivered personally to the party or, if the party is a
corporation, an officer of the party to whom it is directed;
(b) sent by registered mail, postage prepaid, return receipt
requested (provided that such notice or other written
communication shall not be forwarded by mail if on the date of
mailing there exists an actual or imminent postal service
disruption in the city from which such communication is to be
mailed or in which the address of the recipient is found); or
(c) sent by confirmed telecopy, cable or other means of prepaid,
transmitted or recorded communication.
All such notices shall be addressed to the party to whom it is directed
at the following addresses:
If to the Corporation:
Dura Products International Inc.
60 Carrier Drive
Etobicoke, Ontario
M9W 5R1
Attention: Chief Financial Officer
If to the Warrantholder:
the address of the Warrantholder last provided to the Corporation by
the Warrantholder.
Any party may at any time change its address hereunder by giving notice
of such change of address to the other party or parties in the manner specified
in this paragraph. Any such notice or other written communication, if mailed by
prepared registered mail, shall be effective on the day of receipt; if given by
telex, telegram or telecopy or other form of prepaid, transmitted or recorded
communication, shall be effective on the first business day after the sending
thereof; and if given by personal delivery, shall be effective on the day of
delivery.
-15-
ARTICLE VII
FORMAL DATE
Section 7.01 Formal Date
The Warrant may be referred to as bearing the formal date of o , 199o ,
irrespective of the actual date of execution.
SCHEDULE "B"
SUBSCRIPTION FORM
The undersigned holder of the within Warrant hereby exercises the right
to purchase and hereby subscribes for o Common Shares according to the terms of
the within Warrant and herewith makes payment of the subscription price in full
for the said number of Common Shares.
The said Common Shares are to be registered as follows:
Name Address in Full Number of Shares
o o o
DATED this day of , 199_ .
-----------------------------------------
Signature of Subscriber
-----------------------------------------
Print Name of Subscriber
-----------------------------------------
Address in full of Subscriber
INSTRUCTIONS TO WARRANTHOLDER
TO SUBSCRIBE - Fill in the Subscription Form above and sign on the line
"Signature of Subscriber". Print your full name and full address on the lines
provided and then send or deliver this Warrant with the total subscription price
for the Common Shares purchased to o at its office at o . The subscription price
should be paid in cash or by certified cheque made payable to o at par in
Toronto.
To be effective, this Warrant with the completed subscription form and
the applicable payment must be received by the Corporation before 4:30 p.m.
Toronto time on o , 199o . For your own protection, the Warrant, subscription
form and payment should be delivered or forwarded by registered mail.
The maximum number of Common Shares for which you may subscribe is set
out on the face page of the Warrant.
Certificates for Common Shares purchased will be delivered or mailed as
soon as practicable after your purchase.
THIS WARRANT WILL EXPIRE AT 4:30 P.M., TORONTO TIME, ON O , 199O AND
MUST BE EXERCISED BEFORE THAT TIME, OTHERWISE THIS WARRANT WILL BE VOID AND OF
NO EFFECT.
EXHIBIT 11
----------
<TABLE>
<CAPTION>
SIX MONTH SIX MONTH
PERIOD PERIOD YEAR ENDED YEAR ENDED YEAR ENDED
ENDED JUNE ENDED JUNE DECEMBER DECEMBER DECEMBER
30/97 30/96 31, 1996 31, 1995 31, 1994
- ----------------------------------------------------------------------------------------
Canadian
GAAP
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net loss for the
period $1,004,012 $414,620 $1,314,126 $615,315 $813,610
- ----------------------------------------------------------------------------------------
Weighted
average #
common
shares o/s for
the period 15,956,578 7,823,019 9,564,501 5,759,927 5,759,927
- ----------------------------------------------------------------------------------------
Loss per share
is net loss
divided by
weighted
average # o/s $(0.063) $(0.053) $(0.137) $(0.107) $(0.141)
- ----------------------------------------------------------------------------------------
Note fully
diluted eps is
not presented
as it would in
all periods be
anti-dilutive
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
US GAAP
- ----------------------------------------------------------------------------------------
Net loss for the
period $1,004,012 $414,620 $1,314,126 $148,120
- ----------------------------------------------------------------------------------------
Weighted
average #
common
shares o/s for
the period 15,956,578 7,823,019 9,564,501 5,759,927
- ----------------------------------------------------------------------------------------
Loss per share
is net loss
divided by
weighted
average # o/s $(0.063) $(0.053) $(0.137) $(0.026)
- ----------------------------------------------------------------------------------------
Pro-forma loss
for the peiod $1,389,802 $1,040,620 $1,940,126 $332,497
- ----------------------------------------------------------------------------------------
Pro-forma loss
per share is
- ----------------------------------------------------------------------------------------
pro-forma loss
divided by
weighted
average # o/s $(0.087) $(0.133) $(0.203) $(0.058)
- ----------------------------------------------------------------------------------------
Note under US
GAAP there
are no
common stock
equivalents as
in all periods
they would be
anti-dilutive
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
