UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JANUARY 18, 2011
(JANUARY 18, 2011)
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
(Exact name of registrant as specified in its charter)
NEVADA 000-28323 98-0368586
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
64 DIVISION AVENUE, SUITE 106, LEVITTOWN, NEW YORK 11756-2999
(Address of principal executive offices) (Zip Code)
(516) 605-0388
Registrant's telephone number, including area code
1530-9TH AVENUE S.E., CALGARY, ALBERTA, CANADA T2G 0T7
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On January 18, 2011 Tire International Environmental Solutions Inc. (the
"Company") completed a Purchase Agreement (the "Agreement") with Antonio Care,
the Company's Chief Executive Officer. Under the Agreement, the Company is
acquiring all of the outstanding stock of Tonmik Import/Export Solutions, Inc
("Tonmik") in exchange for the Company's $1.7 million cash flow note (the
"Note"). Tonmik is a Montreal based distributor of recycled rubber products to
big box retailers that are currently manufactured using purchased recycled crumb
rubber at its facility in China. Tonmik has been operating its Chinese
manufacturing facility for 6 years. The Company expects to develop a fully
integrated scrap-tire-to-finished product business capitalizing on the consumer
demand for Tonmik finished product order flow that could not be maximized with
the Tonmik Chinese facilities. The Note is payable in quarterly installments of
interest at 10% per annum and principal to the extent of 50% of Tonmik's free
cash flow after all of its operating, debt and any new equipment costs are
satisfied with a final installment due on December 31, 2015. The purchase of the
Tonmik shares will be completed upon the delivery of the Tonmik December 31,
2010 financial statements, certificates of corporate good standing and the
deliver of all of the Tonmik shares. Upon completion of the acquisition of
Tonmik the Company will become an operating company. Tonmik reported for the
nine months ended September 30, 2010 $2.7 million in revenue and $442,000 in
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") and
$1.1 million in revenue and $207,000 in EBITDA is for year ended December 31,
2009. See the attached Purchase Agreement (Attachment I) and Tonmik Financial
Statements (Attachment II).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
January 18, 2011
By: /s/ Martin J. Sergi
Martin J. Sergi
Chief Financial Officer
PURCHASE AGREEMENT
BY AND BETWEEN
TIRE INTERNATIONAL ENVIRONMENTAL SYSTEMS, INC.
AS THE BUYER,
AND
ANTONIO CARE
AS THE SELLER
DATED AS OF JANUARY 18, 2011
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT, dated as of January 18, 2011 (this "Agreement"),
is made by and between Tire International Environmental Systems, Inc., a Nevada
corporation (the "Buyer") and Antonio Care (the "Seller").
W I T N E S S E T H:
WHEREAS, the Seller is the sole stockholder of Tonmik Import/Export
Solutions, Inc. a corporation organized under the laws of Quebec ("Tonmik");
WHEREAS, the Buyer desires to purchase from the Seller, and the Seller
desires to sell, assign and transfer to the Buyer, all of the issued and
outstanding Stock (as defined below) of Tonmik;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements hereinafter contained, the
parties hereby agree as follows:
ARTICLE I DEFINITIONS
For purposes of this Agreement, unless the context clearly indicates
otherwise, the following terms shall have the following meanings:
"Buyer" has the meaning set forth in the introductory paragraph of
this Agreement.
"Buyer Indemnitees" has the meaning set forth in Section 12.1(a) of
this Agreement.
"Claims" means all demands, claims, actions or causes of action,
assessments, suits, proceedings, disputes, investigations, Losses, damages,
costs, expenses, liabilities, judgments, awards, fines, sanctions, penalties,
charges, and/or amounts paid in settlement, including, without limitation,
costs, fees and expenses of attorneys, court costs, experts, accountants,
appraisers, consultants, witnesses, investigators or any other Persons employed
or retained in connection with any of the foregoing.
"Closing" has the meaning set forth in Section 4.1 of this
Agreement.
"Closing Date" has the meaning set forth in Section 4.1 of this
Agreement.
"Confidential Information" has the meaning set forth in Section
8.4(c) of this Agreement.
"Environment" has the meaning set forth in Section 5.17(g) of this
Agreement.
"Environmental Condition" means a condition of the soil, subsoil,
surface waters, groundwater, stream sediments or air, including the presence or
Release of a Hazardous Substance, at, under, or migrating from a property that,
by virtue of Environmental Laws and the operation and ownership of Tonmik's
business, (a) requires investigatory, corrective or remedial measures by Tonmik
or the Buyer or (b) comprises a basis for claims against, demands of or
liabilities of Tonmik or the Buyer by any Person, including, without limitation,
adjacent land owners. "Environmental Condition" shall be limited to those
conditions existing before or after the Closing Date resulting from any
activity, inactivity or operations of Tonmik before the Closing Date.
"Environmental Laws" means applicable Federal, provincial, regional,
municipal or local statutes, regulations or by-laws and all policies, directives
or guidelines issued by a Governmental Authority, any of which relate to the
protection of the Environment.
"Equipment and Machinery" means (a) all the equipment, machinery,
fixtures and improvements, tooling, spare parts, supplies, furniture, mobile
equipment, tractors, trailers, and vehicles owned or leased by Tonmik on the
Closing Date, and all replacements for any of the foregoing, (b) any rights of
Tonmik to the warranties (to the extent assignable) and licenses with respect to
the aforesaid items, and (c) any related Claims, credits, rights of recovery and
set-off with respect to any of the foregoing.
"Files and Records" means all files and records, whether in hard
copy, magnetic or electronic format, of Tonmik relating to its business or
employees, including, without limitation, customer files, equipment maintenance
records, warranty records for equipment, maintenance records and sales tax
exemption certificates.
"Financial Statements" has the meaning set forth in Section 5.6 of
this Agreement.
"GAAP" means the generally accepted accounting principles for
financial reporting in Canada.
"Governmental Authority" means any agency, department, court or any
other administrative, legislative or regulatory authority of any foreign,
Federal, state, provincial, local or municipal governmental body.
"Governmental Authorizations" has the meaning set forth in Section
5.10 of this Agreement.
"Hazardous Substance" means any pollutant, contaminant, hazardous
substance, radioactive substance, toxic substance, hazardous waste, medical
waste, radioactive waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos, polychlorinated biphenyls, or any hazardous or
toxic constituent thereof, and includes, but is not limited to, any substance or
material defined or regulated as such under Environmental Laws.
"Insurance Policies" has the meaning set forth in Section 5.15 of
this Agreement.
"Intellectual Property" has the meaning set forth in Section 5.18 of
this Agreement.
"Licenses and Permits" has the meaning set forth in Section 5.10 of
this Agreement.
"Lien" means any lien, mortgage, deed of trust, security interest,
charge, pledge, retention of title agreement, title defect, easement,
encroachment, condition, reservation, restriction, covenant, right of way or
other encumbrance affecting title.
"Losses" has the meaning set forth in Section 12.1(a) of this
Agreement.
"Organizational Documents" means the certificate or articles of
incorporation, memorandum or articles of association, certificate of formation,
operating, partnership or limited liability company agreement, by-laws or
similar organizational or governing documents or instruments, including all
amendments thereto of a Person.
"Party's Event of Breach" has the meaning set forth in Section 12.4
of this Agreement.
"Party Indemnitee" has the meaning set forth in Section 12.4 of this
Agreement.
"Permitted Liens" means (i) Liens for Taxes not yet due and payable,
(ii) Liens arising under worker's compensation, unemployment insurance, social
security, retirement, and similar legislation and (iii) any other Liens listed
on Tonmik's balance sheet dated as of December 31, 2010.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or any Governmental Authority.
"Purchase Price" has the meaning set forth in Section 3.1(a) of this
Agreement.
"Purchased Company" means Tonmik.
"Purchased Intellectual Property" has the meaning set forth in
Section 5.18 of this Agreement.
"Purchased Stock" has the meaning set forth in Section 2.1(a) of
this Agreement.
"Release" means the releasing, spilling, emitting, leaking, pumping,
injecting, depositing, disposing or discharging into the Environment of any
Hazardous Substance.
"Rights" has the meaning set forth in Section 5.3 of this Agreement.
"Seller" has the meaning set forth in the introductory paragraph of
this Agreement.
"Seller Confidential Information" has the meaning set forth in
Section 9.2 of this Agreement.
"Seller Indemnitees" has the meaning set forth in Section 12.2(a) of
this Agreement.
"Seller Liabilities" shall mean each of the following liabilities,
obligations or commitments:
(a) any liabilities of Tonmik in existence as of or arising
prior to or on the Closing that are not specifically disclosed in writing
by the Seller pursuant to this Agreement and the exhibits and schedules
hereto;
(b) all liabilities associated with the Purchased Stock
relating to any Claims, litigation or arbitrations in existence as of or
arising prior to or on the Closing not disclosed on Tonmik's balance sheet
dated as of December 31, 2010;
(c) any Losses (which, for purposes hereof, shall include the
costs of remediation of any violation of any Environmental Law or of an
Environmental Condition) associated with the Purchased Stock arising from
or in any way relating to any Environmental Condition, or any actual or
alleged violation of Environmental Law (including the failure to have or
obtain Permits required by any Environmental Law) occurring or commencing
prior to the Closing Date;
(d) Any liability associated with the Purchased Stock for,
relating to or in respect of:
(i) Taxes of Tonmik for any Pre-Closing Tax Period not
disclosed on Tonmik's balance sheet dated as of December 31, 2010;
(ii) Any provision of state, provincial, local, or
foreign law for Taxes of the Seller at any time before the Closing with Tonmik
and any liability for Taxes of any Person by contract, agreement or otherwise
arising prior to the Closing; and
(iii) breaches by the Seller of the representations and
warranties set forth in Section 5.8 and for breaches by the Seller of the
covenants, obligations and agreements set forth in Article VIII;
(e) To the extent not reflected on Tonmik's balance sheet dated
as of December 31, 2010, any liabilities in respect of the employment or
termination of any employees of Tonmik, relating to the period prior to the
Closing (including, without limitation, any Claims, civil penalty or other
cause of action by any current or former employee, governmental entity, or
any other party against the Buyer), except for liabilities relating to
accrued but unused vacation days and sick time with respect to employees
who remain employed by Tonmik after the Closing;
(f) any liability or obligation associated with the Purchased
Stock with respect to Real Property used by Tonmik arising or relating to
any condition existing prior to the Closing; or
(g) Any liability associated with the Purchased Stock with
respect to Benefit Plans arising prior to the Closing Date not disclosed on
Tonmik's balance sheet dated as of December 31, 2010.
"Seller Liability Cap" means the initial principal balance of the
Secured Promissory Note issued to the Buyer as consideration for the purchase of
the Purchased Stock.
"Seller's Event of Breach" has the meaning set forth in Section
12.1(a) of this Agreement.
"Stock" with respect to Tonmik, means shares of capital stock or any
other equity securities, and any other shares of stock issued or issuable
therefore, or any options, warrants or other rights to acquire any of the above.
"Taxes" means any Federal, state, provincial, local, foreign, or
other tax of any kind whatsoever (together with any interest, penalties, or
additions imposed with respect thereto), including, without limitation, income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, service, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, intangible property,
sales, use, transfer, recording, registration, value added, alternative or
add-on minimum, estimated, rental, lease, ad valorem, or other tax.
"Tax Returns" means any return, report, information return or other
document (including any related or supporting information) filed or required to
be filed with any governmental authority in connection with the determination,
assessment, collection or administration of any Taxes.
"Tonmik" has the meaning set forth in the introductory paragraph of
this Agreement.
"Tonmik Material Adverse Effect" has the meaning set forth in
Section 5.1 of this Agreement.
"Transaction Expenses" has the meaning set forth in Section 16.4 of
this Agreement.
ARTICLE II
PURCHASE AND SALE
SECTION 2.1 TRANSFER OF STOCK AND ASSETS
(a) Subject to the terms and conditions set forth in this
Agreement, the Seller shall sell, convey, transfer, assign and deliver to
the Buyer, and the Buyer shall purchase and accept from the Seller, on the
Closing Date all of the issued and outstanding Stock of Tonmik, (the
"Purchased Stock").
(b) The sale, transfer, conveyance, assignment and delivery by
the Seller of the Purchased Stock shall be made free and clear of all
Liens.
ARTICLE III
PURCHASE PRICE
SECTION 3.1 PURCHASE PRICE. Subject to the terms and conditions set
forth in this Agreement, the aggregate purchase price to be paid to the
Seller for the Purchased Stock shall be One Million Seven Hundred Thousand
and no/100 US Dollars (US$1,700,000.00)(the "Purchase Price"), expressed in
Dollars.
SECTION 3.2 PAYMENT OF PURCHASE PRICE. Subject to the terms and
conditions set forth in this Agreement, the Buyer shall issue a promissory
note on the Closing Date to the Seller, having an initial par value, equal
to the Purchase Price, bearing interest at the rate of 10% (the "Promissory
Note"). Said Promissory Note shall provide for the payment of interest
quarterly, beginning on the last day of March, 2011 and continuing on the
last day of each following calendar quarter. Interest shall be calculated
on the basis of twelve months of 30 days each and a year of 360 days.
Principal payments would be made quarterly on the last day of each calendar
quarter, being on the last day of March, 2011 and shall be equal to 50% of
available cash flow (defined as cash after debt service on existing Tonmik
debt and necessary equipment purchases), with a final maturity on December
31, 2015.
ARTICLE IV
CLOSING
SECTION 4.1 CLOSING. The closing of the sale and purchase of the
Purchased Stock contemplated hereby (the "Closing") shall take place at the
offices of Buyer, at 10:00 a.m. on the fifth Business Day following the
satisfaction or waiver by the party entitled to the benefit of such
condition of each of the conditions set forth in Articles XIII and XIV, or
on such other date and place as shall be mutually agreed upon by the Seller
and the Buyer (the "Closing Date").
SECTION 4.2 ITEMS TO BE DELIVERED BY THE SELLER AT THE CLOSING.
In addition to the other deliveries or actions required to be delivered or
performed hereby, at the Closing, the Seller shall deliver or cause to be
delivered to the Buyer the following:
(a) A certificate duly executed and delivered representing the
Purchased Stock registered in the name of the Buyer;
(b) The corporate seal and all of the minute books and stock
transfer books of Tonmik;
(c) Copies of the Organizational Documents of Tonmik, certified
by the appropriate official of its jurisdiction of incorporation;
(d) Certificates from the appropriate official of the
jurisdiction of incorporation to the effect that Tonmik is in good standing
and subsisting in such jurisdiction; and
(e) A Tonmik balance sheet, dated as of December 31, 2010,
prepared in accordance with GAAP.
SECTION 4.3 ITEMS TO BE DELIVERED BY THE BUYER AT THE CLOSING.
In addition to the other deliveries or actions required to be delivered or
performed hereby, at the Closing, the Buyer shall deliver or cause to be
delivered to the Seller the following:
(a) The officer's certificate contemplated by Section 13.1;
(b) The Promissory Note.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer that the statements
contained in this Article V are true and correct, except as set forth in the
disclosure schedule provided by the Seller to the Buyer on the date hereof (the
"Disclosure Schedule").
SECTION 5.1 CORPORATE ORGANIZATION. Tonmik is a corporation that is
duly incorporated, validly existing and in good standing under the laws of
the jurisdiction of its incorporation, and it has all requisite corporate
or other power and authority to own its properties and assets and to
conduct its business as now conducted. Tonmik is duly qualified to do
business as a foreign corporation in good standing in every jurisdiction in
which the character or location of the properties and other assets owned or
leased by it or the nature of the business conducted by it makes such
qualification necessary; except where the failure to so qualify would not
reasonably be expected to result in a material adverse effect on Tonmik, or
its business (a "Tonmik Material Adverse Effect").
SECTION 5.2 AUTHORIZATION AND VALIDITY OF AGREEMENTS. The Seller has
all requisite power and authority to enter into, execute and deliver this
Agreement and to carry out his obligations hereunder and thereunder. This
Agreement and the other agreements and instruments delivered by the Seller
pursuant to this Agreement have been duly executed and delivered by the
Seller and constitute his valid and binding obligation, enforceable against
him in accordance with their respective terms.
SECTION 5.3 CAPITALIZATION. Schedule 5.3 sets forth the authorized
Stock of Tonmik and the owners of record of all of the issued and
outstanding Stock of Tonmik. The Seller is the record owner of, and has
full power and authority to convey, the Purchased Stock free and clear of
any Lien, and, upon delivery of and payment for such Purchased Stock as
herein provided, the Buyer will acquire good and valid title thereto, free
and clear of any Lien. There is no other Stock outstanding and no other
outstanding options, warrants, convertible or exchangeable securities,
subscriptions, rights (including any preemptive, registration or
anti-dilutive rights), stock appreciation rights, calls or commitments,
agreements or understandings of any character whatsoever (collectively,
"Rights") requiring the issuance or sale of shares of any Stock of Tonmik,
and there are no contracts or other agreements by which Tonmik may become
bound to issue additional shares of Stock or any Rights.
SECTION 5.4 NO CONFLICT OR VIOLATION. The execution, delivery and
performance by the Seller of this Agreement and the other agreements and
instruments delivered by him pursuant to this Agreement do not and will not
(a) violate or conflict with any provision of Tonmik's Organizational
Documents, (b) violate any provision of law, or any order, judgment or
decree of any Governmental Authority applicable to the Seller, (c) violate
or conflict with, or result in a breach of or constitute (with due notice
or lapse of time or both) a default under, or result in the termination of,
or accelerate the performance required by, any contract, lease, loan
agreement or other agreement or instrument to which any of the properties
or assets of Tonmik or any of the Purchased Stock is subject, or (d) result
in the cancellation, modification, revocation or suspension of any of the
Licenses and Permits.
SECTION 5.5 CONSENTS AND APPROVALS. There are no consents, waivers,
authorizations, filings with or approvals of any Governmental Authority or
of any other Person that are required in connection with the execution and
delivery by the Seller of this Agreement and the consummation of the
transactions contemplated hereby, except for those consents, waivers,
authorization, filings and approvals, the absence of which would not
reasonably be expected to result in a Seller Material Adverse Effect.
SECTION 5.6 FINANCIAL STATEMENTS. Attached as Schedule 5.6 are true
and complete copies of the unaudited balance sheet for Tonmik as of
September 30, 2010, and the related statements of income and cash flows for
the period ended on such date, together with the notes and schedules
thereto, as applicable. The financial statements described in this Section
5.6, including the notes and schedules thereto, are referred to herein
collectively as the "Financial Statements." The Financial Statements (a)
have been prepared in accordance with GAAP, consistently with the
accounting practices previously employed by Tonmik (except as indicated in
the notes thereto), (b) present fairly the financial position, results of
operations and cash flows of Tonmik as of the date thereof and for the
period then ended, (c) are complete, correct and in accordance with the
books of account and records of Tonmik, and (d) can be reconciled with the
financial records maintained and the accounting methods applied by Tonmik
Companies for Canadian and provincial income tax purposes.
SECTION 5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Since September 30, 2010, there has not been:
(i) Any material adverse change in the business, operations,
properties or condition (financial or other) of Tonmik, taken as a whole, and no
factor or condition exists and no event has occurred that would reasonably be
expected to result in any such change;
(ii) Any material loss, damage, or other casualty to Tonmik,
taken as a whole, whether or not covered by insurance; or
(b) Since September 30, 2010, Tonmik has operated its Business
in the ordinary course of business consistent with past practice and have
not:
(i) incurred or failed to pay or satisfy any material
obligation or liability (whether accrued, contingent or otherwise) relating to
the operations of the Business;
(ii) incurred or failed to discharge or satisfy any Lien that
is not a Permitted Lien;
(iii) intentionally defaulted on any obligation, or
unintentionally defaulted on any material obligation relating to its Business;
(iv) taken or omitted to take any other action, which would,
had it been taken subsequent to the date hereof, constitute a breach of the
provisions of Section 8.1; or
(v) entered into any agreement or made any commitment to do
any of the foregoing.
SECTION 5.8 TAX MATTERS.
(a) (i) Tonmik has not made any payments, are not obligated to
make any payments, and is not a party to any agreement that could obligate
it to make any payments that will not be deductible under the Internal
Revenue Code Section 280G.
(ii) All installments or other payments on account of Taxes
that relate to periods for which Tax Returns are not yet due have been paid on a
timely basis. There are no arrangements providing for an extension of time with
respect to the filing of, or assessment or reassessment of, any Tax Return of
Tonmik or the payment of any Taxes payable by Tonmik. Canadian Federal and
provincial income tax assessments have been issued to Tonmik covering all past
periods up to and including the fiscal years ended on or before September 30,
2009 and such assessments, if any amounts were owing in respect thereof, have
been paid or settled, and only fiscal years ended subsequent to September 30,
2009 remain open for assessment of additional Taxes. There are no actions, suits
or other proceedings or claims in progress, pending or threatened against Tonmik
in respect of any Taxes, and in particular there are no currently outstanding
reassessments, written inquiries or written notices of deficiencies which have
been issued or raised, as the case may be, by any governmental authority
relating to any such Taxes. No claim has ever been made by an authority in a
jurisdiction where Tonmik does not, file Tax Returns that Tonmik is or may be
subject to taxation by that jurisdiction.
(iii) Tonmik have withheld, collected and paid to the proper
Governmental Authority all Taxes required to have been withheld, collected and
paid by Tonmik including, without limitation, any Taxes in connection with (A)
amounts paid or owing to any shareholder, employee or any non-resident of Canada
and (B) goods and services received from or provided to any Person.
(iv) No steps have been taken by any Governmental Authority
to assess any additional Taxes (including any source deductions or Employment
Insurance or Canada Pension Plan premiums) against Tonmik for any period for
which Tax Returns have been filed nor are there any actual or pending
investigations of any such entity relating to Taxes. The Seller has made
available to the Buyer correct and complete copies of all of the Tax Returns of
Tonmik and all written notices of assessment which have been received by Tonmik,
examination reports or statements of deficiencies assessed against or agreed to
by Tonmik for all taxable periods for which the statute of limitations has not
yet closed and any correspondence relating thereto.
(v) Tonmik (A) is not a party to any Tax allocation or
sharing agreement, (B) has not been a member of an affiliated, combined or
unitary group filing a combined, unitary or other return for provincial, local
or foreign tax purposes reflecting the income, assets, or activities of
Affiliates, or (C) has no liability for the Taxes of any Person other than
itself under any provision of Federal, provincial, local or foreign law as a
transferee or successor, or by contract, or otherwise. Tonmik is not a party to
any joint venture, partnership or other arrangement or contract that could be
treated as a partnership for Tax purposes.
(vi) The tax basis of the assets of Tonmik by category,
including the classification of such assets and the amounts claimed for capital
cost allowances with respect to the depreciable property or legible capital
property as reflected in its Tax Returns and related work papers is true and
correct.
(vii) There are no circumstances existing at or prior to the
Closing Date which could, in themselves, result in the application of any of
Sections 80 to 80.03 of the Income Tax Act (Canada) (the "ITA") or any
equivalent provincial or foreign provision to Tonmik. Tonmik has not (A) made
any election pursuant to Section 80.04 of the ITA or any equivalent provincial
or foreign provision in which it is an eligible transferee, (B) filed, or will
file in respect of any taxation year ending on or before the Closing Date, an
agreement pursuant to Section 191.3 of the ITA or any equivalent provincial or
foreign provision, (C) claimed, and shall not claim in its Tax Returns for any
taxation year ending on the Closing Date, any reserve under any of Sections
40(1)(a)(iii) or 20(1)(n) of the ITA or any equivalent provincial provision of
any amount could be included in the income of Tonmik for any period ending after
the Closing Date in respect of any such reserve, or (D) deducted any amounts in
computing its income in a taxation year which may be included in income in a
subsequent year under Section 78 of the ITA.
(viii) The shares of Tonmik are not taxable Canadian property
for purposes of the ITA.
(ix) Tonmik is not a non-resident of Canada under the ITA.
SECTION 5.9 OPERATION OF THE BUSINESS; SUFFICIENCY OF ASSETS. Tonmik
has good and marketable title to all of the assets owned or used by it and,
upon consummation of the transactions contemplated by this Agreement, such
assets shall be free and clear of all Liens, other than Permitted Liens.
The assets owned or used by Tonmik comprise all assets and services
required for the continued conduct of the Business as now being conducted
by Tonmik. The assets owned or used by Tonmik in connection with the
Business are adequate for the purposes for which such assets are currently
used or are held for use, and are in working repair and operating condition
and there are no facts or conditions affecting such assets which could,
individually or in the aggregate, interfere materially with the use or
operation thereof as currently used or operated.
SECTION 5.10 LICENSES AND PERMITS. Schedule 5.10 sets forth a true
and complete list, including the owner or holder thereof, of all of the
material licenses, permits, franchises, authorizations, registrations,
approvals and certificates of occupancy (or their equivalent)
("Governmental Authorizations") issued or granted to Tonmik by any
Governmental Authority (collectively, the "Licenses and Permits"), and all
pending applications therefor. Such scheduled Licenses and Permits comprise
all of the Governmental Authorizations necessary or required for the
operation of the Business as currently conducted. All material Governmental
Authorizations held by Tonmik or used in connection with the Business have
been duly obtained, are valid and in full force and effect, and are not
subject to any pending or threatened administrative or judicial proceeding
to revoke, cancel, suspend or declare any such Governmental Authorization
invalid in any respect; The Governmental Authorizations are owned or held,
as applicable, by Tonmik free and clear of all Liens.
SECTION 5.11 COMPLIANCE WITH LAW. The operations of Tonmik and its
Business have been conducted in accordance with all applicable laws,
regulations, orders and other requirements of all Governmental Authorities
having jurisdiction over Tonmik and its assets, properties and operations.
Neither the Seller nor Tonmik has received written notice of any violation
of any such law, regulation, order or other legal requirement, or are in
default with respect to any order, writ, judgment, award, injunction or
decree of any Governmental Authority.
SECTION 5.12 LITIGATION. There are no Claims pending or, to the
knowledge of the Seller, threatened, before any Governmental Authority
brought by or against the Seller, Tonmik or Tonmik's officers, directors,
employees, agents or Affiliates involving, affecting or relating to
Tonmik's Business, Tonmik, or the Purchased Stock or the transactions
contemplated by this Agreement. Neither the Seller nor Tonmik are subject
to any order, writ, judgment, award, injunction or decree of any
Governmental Authority specifically naming Tonmik that affects or would
reasonably be expected to affect Tonmik's Business, Tonmik, the Purchased
Stock, or that would or would reasonably be expected to interfere with the
transactions contemplated by this Agreement. Schedule 5.12 lists all
pending or threatened litigation brought by or against the Seller, Tonmik
or its Business, or the Purchased Stock.
SECTION 5.13 LABOR MATTERS.
(a) Tonmik is not a party to (i) any employment agreement or
consulting agreement with any Person, (ii) any agreement, policy or past
practice that requires it to pay termination or severance pay to salaried,
non-exempt or hourly employees (other than as required by law), (iii) any
collective bargaining agreement or other labor union contract, nor does the
Seller know of any activities or proceedings of any labor union to organize
any employees of Tonmik, (iv) or subject to any conciliation agreements,
consent decrees or settlements with respect to their employees. The
transactions contemplated hereby do not cause or give rise to the payment
of any severance or "change of control" payments to any employee of Tonmik.
(b) Tonmik is in compliance in all material respects with all
applicable laws relating to employment and employment practices, wages,
hours, and terms and conditions of employment.
(c) There is no unfair labor practice charge or complaint
pending or to the knowledge of the Seller and Tonmik threatened before any
Governmental Authority relating to Tonmik, including, without limitation,
the Canada Industrial Relations Board and any labor relations board of any
province or territory of Canada.
(d) There is no labor strike, material slowdown or material
work stoppage or lockout pending or threatened against or affecting Tonmik,
and Tonmik has not experienced any strike, material slowdown or material
work stoppage, lockout or other collective labor action by or with respect
to their employees.
(e) There is no representation, claim or petition pending
before any Governmental Authority, including, without limitation, the
Canada Industrial Relations Board and any labor relations board of any
province or territory of Canada, and no question concerning representation
exists relating to the employees of Tonmik.
(f) There are no charges with respect to or relating to Tonmik
pending before any Governmental Authority responsible for the prevention of
unlawful employment practices.
(g) Neither the Seller nor Tonmik has received written notice
from any Governmental Authority responsible for the enforcement of labor or
employment laws of an intention to conduct an investigation of it relating
to the Business and no such investigation is in progress.
(h) Neither the Seller nor Tonmik has any liability in Canada
for sick leave, vacation time, severance pay or similar items or any
occupational disease of any of its employees, former employees or other
Persons.
SECTION 5.14 EMPLOYEE PLANS.
(a) Schedule 5.14(a) sets forth a complete and correct list of
all benefit plans and all employment, compensation, bonus, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance, change of control or other benefit plans, programs or
arrangements, in each case, which are maintained, contributed to or
sponsored by Tonmik on behalf of any current or former employees of the
Business, or for which Tonmik has any liability, contingent or otherwise
(collectively, the "Benefit Plans").
(b) The Benefit Plans have been operated and administered in
all material respects in accordance with their terms and the requirements
of applicable law, except for such failures as would not reasonably be
expected to result in a Seller Material Adverse Effect. All contributions
and all payments required to have been made to or under any Benefit Plan
have been properly made, except for such failures as would not reasonably
be expected to result in a Seller Material Adverse Effect.
(c) There is no Claim (excluding claims for benefits incurred
in the ordinary course) that is pending or, to the knowledge of the Seller,
threatened with respect to any of the Benefit Plans.
(d) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in
any payment becoming due to any current or former employee or consultant of
Tonmik, (ii) increase any benefits under any Benefit Plan, or (iii) result
in the acceleration of the time of payment, vesting or other rights with
respect to any benefits under any Benefit Plan.
(e) All pension plans maintained or required to be maintained
by Tonmik are duly registered under, and have been maintained in accordance
with, all applicable laws, including, without limitation, the
administrative policies of Canada Customs and Revenue Agency.
SECTION 5.15 INSURANCE. Schedule 5.15 lists the fidelity bonds and
the aggregate coverage amount and type and generally applicable deductibles
of all insurance policies insuring, or maintained by, Tonmik (the
"Insurance Policies") with respect to the Business. The Insurance Policies
(together with all riders and amendments thereto) are in full force and
effect and all premiums due on the Insurance Policies have been paid.
Tonmik have complied with the provisions of the Insurance Policies. Neither
the Seller nor Tonmik has received any written notice canceling or
threatening to cancel or refusing to renew any of the Insurance Policies.
The rights of the insured under the Insurance Policies will not be
terminated or adversely affected by the transactions contemplated hereby.
The Seller has made available, or has caused to be made available, to the
Buyer or its representatives true and complete originals or copies of all
of the Insurance Policies. The Insurance Policies are sufficient to comply
with all requirements of applicable law and Licenses and Permits, and are
in amounts and coverages customary in the industry for similarly situated
companies.
SECTION 5.16 OWNED REAL PROPERTY; LEASED REAL PROPERTY.
(a) (i) Schedule 5.16(a)(I ) sets forth a complete and accurate description of
the real property owned by Tonmik (the "Owned Real Property").
(ii) All building, structures and improvements on the Owned
Real Property and the operations therein conducted conform in all material
respects to all applicable zoning and building laws, Environmental Laws,
ordinances and administrative regulations, and neither the Seller nor Tonmik has
received any written notice of violation of the foregoing from any Governmental
Authority, and all such buildings, structures, improvements and fixtures are in
good order, condition and repair.
(iii) Neither the Seller nor Tonmik has received any written
notice nor has any knowledge that any operations on or uses of the Owned Real
Property constitute non-conforming uses under any applicable building, zoning,
land use or other similar statutes, laws, ordinances, regulations, permits or
other requirements. Neither the Seller nor Tonmik has knowledge of or has
received any written notice of any pending or contemplated rezoning proceeding
affecting the Owned Real Property.
(iv) The Owned Real Property has access to public roads,
streets or the like or valid easements over private streets, roads or other
private property providing ingress to and egress from such Owned Real Property.
(v) Neither the Seller nor Tonmik has received any written
notice from any utility company or municipality of any fact or condition which
could reasonably be expected to result in the discontinuation of presently
available or otherwise necessary sewer, water, electric, gas, telephone or other
utilities or services for the Owned Real Property. The Owned Real Property has
adequate rights of access to all water, sewer, sanitary sewer and storm drain
facilities and community services. All public utilities necessary or convenient
to the full use, occupancy, disposition and enjoyment of the Owned Real Property
are located in the public right-of-way abutting the Owned Real Property and all
such utilities are connected so as to serve the Owned Real Property without
passing over other property.
(vi) Neither the Seller nor Tonmik has knowledge of any
proposed reassessment of the Owned Real Property by the local taxing agencies,
and there is no pending or threatened special assessment, tax reduction
proceeding or other action which could reasonably be expected to increase or
decrease real property taxes or assessments against the Owned Real Property.
(b) The Owned Real Property is not subject to any right or
option of any other Person to purchase or lease or otherwise obtain title
to an interest in the Owned Real Property. No Person other than Tonmik has
any right to use, occupy or lease any of the Owned Real Property.
(c) A list of all of the leases (the "Leases") affecting any
real property with respect to which Tonmik is a lessor or lessee is set
forth on Schedule 5.16(c) (the "Leased Real Property"). Schedule 5.16(c)
sets forth the lessor, lessee, commencement date, termination date, renewal
or expansion options (if any), options to purchase such Leased Real
Property and annual rents for each Lease and the amount of any security
deposit delivered pursuant to such Lease. Each of the Leases is valid and
enforceable in accordance with its terms and is in full force and effect.
The Seller has made available, or has caused to be made available, to the
Buyer true and complete copies of each Lease and all documents relating to
such Leases including, without limitation, any non-disturbance and
recognition agreements, subordination agreements, attornment agreements and
agreements regarding the term or rental of any of the Leases. Neither
Tonmik, nor any other party to any Lease, is in default of its obligations
thereunder or has delivered or received any written notice of default under
any Lease, nor has any event occurred which, with the giving of notice, the
passage of time or both, would constitute a default under any Lease.
(d) The plumbing, electrical, heating, air conditioning,
ventilating and all other mechanical or structural systems of all buildings
and structures located on the Owned Real Property and the Leased Real
Property are in good order, condition and repair and the roof, basement and
foundation walls of all buildings and structures located on the Owned Real
Property and the Leased Real Property are free of leaks and other defects
that would reasonably be expected to have an adverse effect on their
continued use for the purposes for which they are currently used and are
suitable for their actual current use. Tonmik is in possession of valid
certificates of occupancy with respect to all buildings and structures
located on the Owned Real Property and the Leased Real Property.
(e) There are no proceedings in eminent domain or other similar
proceedings pending which affect any of the Owned Real Property and the
Leased Real Property nor, to the knowledge of Seller, is any such matter
threatened. Except as disclosed on Schedule 5.16(e), there exists no writ,
injunction, decree, order or judgment outstanding relating to the
ownership, lease, use, occupancy or operation of any Owned Real Property or
any Leased Real Property, nor, to the knowledge of Seller, is any such
matter threatened.
(f) Neither the Seller nor Tonmik has received written notice
of any violation of any applicable statutes, laws, ordinances, regulations,
permits or other requirements of any government, or any agency body or
subdivision thereof, pertaining to the use, operation, or construction of
the Owned Real Property or the Leased Real Property (including, without
limitation, those relating to zoning, building, fire, health and safety,
environmental control and safety, or the Americans with Disabilities Act or
other similar state, provincial, local or foreign legislation) and no such
violations exist.
(g) Neither the Seller nor Tonmik has received written notice
from any of its insurance carriers of any defects or inadequacies in any
Owned Real Property or any Leased Real Property which, if not corrected,
would result in termination of any Insurance Policy or insurance coverage
therefore or an increase in the cost thereof.
(h) The buildings, driveways and all other structures and
improvements upon the Owned Real Property and the Leased Real Property are
within the boundary lines of such property or have the benefit of valid
easements and there are no encroachments thereon that would adversely
affect the current use thereof.
SECTION 5.17 ENVIRONMENTAL MATTERS. Each of the Buyer and the Seller
agree that the only representations and warranties of the Seller herein as
to any environmental matters are those contained in this Section 5.17.
Without limiting the generality of the foregoing, the Buyer specifically
acknowledges that the representations and warranties contained in Sections
5.10, 5.11 and 5.12 do not relate to environmental matters.
(a) All of the Licenses and Permits required under
Environmental Laws and material to the operation of the Business have been
obtained and maintained in effect in good standing by Tonmik. The Seller is
aware of no material change in the facts or circumstances reported or
assumed in the applications for such Licenses and Permits. Tonmik is in
compliance, and at all times have complied in all material respects, with
all Environmental Laws applicable to the operations associated with the
Business, the Owned Real Property, the Leased Real Property and each of the
properties formerly owned, leased or operated by them with respect to the
periods during which Tonmik owned, leased or operated such properties (the
"Former Real Property") and with all of the Licenses and Permits issued
pursuant to any Environmental Law, except where the failure to do so would
not reasonably be expected to have a Seller Material Adverse Effect.
Neither the Seller nor Tonmik has received any written notice of any
violation with respect to any of such Licenses or Permits, which violations
are outstanding or uncured as of the date hereof, and no proceeding is
pending, or to the knowledge of the Seller, threatened, to revoke or limit
any of such Licenses or Permits. All of such Licenses and Permits are
listed on Schedule 5.17(a).
(b) To the Seller's knowledge, Tonmik has not performed or
suffered any act which could give rise to, or has otherwise incurred,
individually or in the aggregate, a material liability to any Person,
including itself, under any Environmental Law, nor has the Seller or Tonmik
received notice of any such liability or any Claim therefor or submitted
notice pursuant to Section 103 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq. ("CERCLA") to
any governmental agency nor provided information in response to a request
for information pursuant to Section 104(e) of CERCLA or any analogous
state, provincial or local information gathering authority.
(c) No Hazardous Substance has been Released on, at, or beneath
any of the Owned Real Property, the Leased Real Property or the Former Real
Property or any surface waters or groundwaters thereon or thereunder by the
Seller or Tonmik or, to their knowledge, by any other Persons, in excess of
the levels prescribed or permitted under Environmental Laws.
(d) To the Seller's knowledge, there are not and have not been
any aboveground or underground storage tanks, polychlorinated biphenyls or
asbestos-containing materials located at or within the Owned Real Property
or the Leased Real Property that were used in the conduct of the Business.
(e) None of the Owned Real Property, the Leased Real Property
or the Former Real Property is identified or, to the Seller's knowledge,
proposed for listing on the National Priorities List under 40 C.F.R. ss.300
Appendix B, or any analogous list of any Government Authority and neither
the Seller nor Tonmik is aware of any Environmental Conditions on such
properties which, if known to a Governmental Authority, would mandate the
inclusion of such property on any such list.
(f) The Seller has furnished, or caused to be furnished, to the
Buyer copies of all environmental studies, assessments or reports relating
to Tonmik, the Leased Real Property, the Owned Real Property and the Former
Real Property in its possession or under its control.
(g) To the Seller's knowledge, none of the Owned Real Property,
the Leased Real Property or the Former Real Property, or any current or
previous business operations conducted by Tonmik, is the subject of any
pending or threatened investigation or judicial or administrative
proceeding, notice, decree or settlement respecting any actual, potential
or alleged violation of any Environmental Law, or any Releases of Hazardous
Substances into any surface water, ground water, drinking water supply,
soil, land surface, subsurface strata, or ambient air, or in the workplace
at a level that exceeds standards established by an applicable Governmental
Authority (collectively, the "Environment"). Neither the Seller nor Tonmik
has received in writing from any Governmental Authority, insurance company
or other Person: any request for information that Tonmik is the subject of
an investigation under Environmental Laws; notice of any potential or
alleged violations of any Environmental Laws or of any proposed order under
any Environmental Laws; or any order or proposed order requiring any of
such parties to prepare studies, action plans, or clean-up strategies as
required by an Environmental Law because of an Environmental Condition on
any of the Owned Real Property, the Leased Real Property or the Former Real
Property.
(h) The Seller has not, with respect to the Business, reported
any violation of any applicable Environmental Law to any Governmental
Authority; and no Releases have occurred on any of the Owned Real Property,
Leased Real Property or Former Real Property while those properties were
used by Tonmik for the operation of its Business or, to Seller's knowledge,
previously, which would require Tonmik to report to any Governmental
Authority under CERCLA or any analogous state, provincial or foreign law.
(i) Tonmik has not sent, transported, or directly arranged for
the transport of any solid waste or Hazardous Substance, whether generated
by Tonmik or another Person, to any site listed on the National Priorities
List or, to the Seller's knowledge, proposed for listing on the National
Priorities List or any analogous state or provincial list of sites.
(j) There is not now, nor has there been, on or in any Owned
Real Property, Leased Real Property or Former Real Property during the
periods when Tonmik owned, leased or operated such properties, any
treatment, recycling, storage or disposal of any hazardous waste, as those
terms are defined under 40 C.F.R. Part 261 or any state, provincial or
foreign equivalent, except in material compliance with Environmental Laws.
SECTION 5.18 INTELLECTUAL PROPERTY AND OTHER TANGIBLE ASSETS.
Schedule 5.18 contains a list of all domestic and foreign patents, patent
rights, patents pending, patent applications and registrations, industrial
designs, trademarks, trademark rights, trademark applications, trademark
registrations, trade names, trade name rights, domain names, service marks,
registered copyrights, computer software, databases, licenses and other
proprietary rights and all know how relating to the foregoing
(collectively, the "Intellectual Property") owned, licensed or used by
Tonmik (the "Purchased Intellectual Property"), and indicates the owner
and/or licensee and registration status and registration number thereof.
Except as indicated on Schedule 5.18, Tonmik owns, or has a valid license
to use, the Purchased Intellectual Property in the manner currently used by
it. The Purchased Intellectual Property is valid and neither the Seller nor
Tonmik has received, or has knowledge of, any written challenges to the
validity thereof. Tonmik is not infringing upon or in violation of the
Intellectual Property of any other Person. To the knowledge of the Seller
and Tonmik, none of the Purchased Intellectual Property is being infringed
upon by any Person or is otherwise used or available for use by any Person
other than Tonmik.
SECTION 5.19 ORGANIZATIONAL DOCUMENTS. Copies of the certificates of
incorporation of Tonmik (as certified by a Governmental Authority of the
jurisdiction of its organization) and copies of the by-laws of Tonmik and
all amendments thereto and all other Organizational Documents of Tonmik
have been made available to the Buyer, and such copies, as so amended, are
true, complete and accurate. Tonmik is not in violation of any of its
Organizational Documents.
SECTION 5.20 UNLAWFUL OR UNDISCLOSED PAYMENTS. Neither the Seller,
with respect to the conduct of the Business, nor Tonmik, nor any Person
acting on their behalves, has made any payments or otherwise provided any
benefits, direct or indirect, to any customer, supplier, Governmental
Authority or otherwise, or to any employee or agent thereof, for the
purpose of acquiring purchase or sales relationships, or otherwise, that:
(a) may be unknown or undisclosed to the employers of any
Persons who received any such payments (provided that payments reflected in
the financial records of any such Persons shall be deemed known and
disclosed);
(b) are unlawful, in any respect; or
(c) are not fully disclosed as such on the books and records of
Tonmik (and have been disclosed in writing to the Buyer).
SECTION 5.21 DISCLOSURE OF CONFIDENTIAL INFORMATION TO OTHERS;
NON-COMPETITION AGREEMENTS.
(a) There are no currently existing and effective contracts or
agreements to which Tonmik is a party and which restrict it from engaging
in the Business as currently conducted or from competing with any other
Person.
(b) There are no non-disclosure or similar such agreements to
which the Seller or Tonmik is a party that binds either of them with
respect to information provided to Tonmik other than any such agreements
entered into in the ordinary course of business.
(c) There are no non-disclosure, non-competition or similar
such agreements with respect to which Tonmik is a beneficiary.
SECTION 5.22 CLOSURE BONDS. Schedule 5.22 sets forth a description of
all of the "closure bonds" issued to or on behalf of, guaranteed by or
otherwise controlled by Tonmik, or by the Seller with respect to the
Business to be transferred to the Buyer (the "Closure Bonds").
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
SECTION 6.1 CORPORATE ORGANIZATION. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada, and has all requisite corporate power and authority to own
its properties and assets as now conducted.
SECTION 6.2 CAPITALIZATION OF THE BUYER. Other than the Stock in the
Buyer held by [Investco LLC], there is no other Stock outstanding and no
other Rights requiring the issuance or sale of any Stock of the Buyer, and
there are no contracts or other agreements by which Buyer may become bound
to issue additional Stock or any Rights relating such Stock. Neither the
Buyer nor, to the Buyer's knowledge, its stockholders, is a party to any
voting trust, proxy, or other agreement or understanding with respect to
the voting of any Stock of any of Buyer.
SECTION 6.3 AUTHORIZATION AND VALIDITY OF AGREEMENTS. The Buyer has
all requisite corporate power and authority to enter into this Agreement
and the other agreements and instruments delivered by the Buyer under this
Agreement and to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and the other agreements and
instruments delivered by the Buyer under this Agreement and the performance
of the Buyer's obligations hereunder and thereunder have been duly
authorized by all necessary action by the members of the Buyer, and no
other corporate proceedings on the part of the Buyer are necessary to
authorize such execution, delivery and performance. This Agreement and the
other agreements and instruments delivered by the Buyer under this
Agreement have been duly executed by the Buyer and constitute its valid and
binding obligations, enforceable against it in accordance with their
respective terms.
SECTION 6.4 NO CONFLICT OR VIOLATION. The execution, delivery and
performance by Buyer of this Agreement and the other agreements and
instruments delivered by it pursuant to this Agreement do not and will not
(a) violate or conflict with any provision of Buyer's Organizational
Documents, (b) violate any provision of law, or any order, judgment or
decree of any Governmental Authority applicable to the Buyer, (c) violate
or conflict with, or result in a breach of or constitute (with due notice
or lapse of time or both) a default under, or result in the termination of,
or accelerate the performance required by, any contract, lease, loan
agreement or other agreement or instrument to which any of the properties
or assets of Buyer is subject; except, in the case of clauses (b) and (c)
above, for such violations, conflicts, breaches, defaults, terminations,
accelerations, which would not reasonably be expected to result in a
material adverse effect on the Buyer.
SECTION 6.5 CONSENTS AND APPROVALS. The execution, delivery and
performance of this Agreement on behalf of the Buyer do not require the
consent, waiver, authorization or approval of any Governmental Authority or
of any other Person.
SECTION 6.6 INVESTMENT PURPOSES. The Buyer is acquiring the Purchased
Stock for its own account for investment and not with a view to the
distribution thereof, and agrees that it shall not make any sale, transfer
or other disposition of such Stock in violation of the Securities Act of
1933, as amended, or the rules and regulations thereunder.
ARTICLE VII
INTENTIONALLY OMITTED
ARTICLE VIII
COVENANTS OF THE SELLER
SECTION 8.1 CONDUCT OF BUSINESS PRIOR TO THE CLOSING DATE.
(a) Without the prior written consent of the Buyer, between the
date hereof and the Closing Date, the Seller shall not, and shall cause
Tonmik not to, except (1) as required or expressly permitted pursuant to
the terms hereof, (2) as set forth on Schedule 8.1(a), or (3) in the
ordinary course of business consistent with past practice:
(i) make any material change in the conduct of its Business
(ii) take any action that would cause any of the
representations and warranties made by it in this Agreement not to remain true
and correct in all materials respects;
(iii) adopt any new employee benefit plan or arrangement for
Tonmik employees, or increase the compensation of its employees other than
pursuant to plans, arrangements or increases generally applicable to employees
of Tonmik; or
(iv) commit to do any of the foregoing.
(b) From and after the date hereof through the Closing Date,
the Seller shall, and shall cause Tonmik to:
(i) use commercially reasonable efforts to continue to
maintain, in all material respects, its Business in accordance with present
practices in a condition suitable for their current use,
(ii) file, when due or required, its Federal, state,
provincial, foreign and other Tax Returns required to be filed and pay when due
all the Taxes, unless the validity thereof is contested in good faith and by
appropriate proceedings diligently conducted;
(iii) keep, and cause Tonmik to keep, the Files and Records
in the ordinary course consistent with past practice;
(iv) use commercially reasonable efforts to continue, and to
cause Tonmik to continue, to maintain existing business relationships with
customers with respect to the Business; and
(v) notify the Buyer no later than three (3) Business Days
following the date of any notice or other communication from any Governmental
Authority, in connection with the transactions contemplated by this Agreement.
SECTION 8.2 CONSENTS AND APPROVALS. Prior to the Closing, the Seller
(a) shall, at its own cost and expense, use commercially reasonable efforts
to obtain all necessary consents, waivers, authorizations, and approvals of
all Governmental Authorities and all other Persons required in connection
with the execution, delivery and performance by the Seller of this
Agreement and the other agreements and instruments required to consummate
the transactions contemplated hereby, and (b) shall diligently assist and
cooperate with the Buyer in preparing and filing all documents, including
permits, transfers, modifications and applications required to be submitted
by the Buyer to any Governmental Authority, in connection with such
transactions and in obtaining any governmental consents, waivers,
authorizations or approvals which may be required to be obtained by the
Buyer in connection with such transactions (which assistance and
cooperation shall include, without limitation, timely furnishing to the
Buyer all information concerning the Seller that counsel to the Buyer
determines is required to be included in such documents or would be helpful
in obtaining any such consent, waiver, notation, authorization or
approval).
SECTION 8.3 GOVERNMENTAL FILINGS. As soon as practicable, the Seller
and the Buyer shall make any and all filings and submissions to any
Governmental Authority which are required to be made in connection with the
transactions contemplated hereby. The Seller shall furnish to the Buyer
such information and assistance as the Buyer may reasonably request in
connection with the preparation by them of any such filings or submissions.
The Seller shall supply the Buyer and the Buyer shall supply the Seller
with copies of all correspondence, filings or communications (or memoranda
setting forth the substance thereof) between such party or its
representatives, on the one hand, and any Governmental Authority or members
of their respective staffs, on the other hand, with respect to this
Agreement or the transactions contemplated hereby.
SECTION 8.4 NON-COMPETE AND NON-SOLICITATION PROVISIONS;
CONFIDENTIALITY.
(a) The Seller agree that, without the prior written consent of
the Buyer, for a period of five (5) years after the Closing Date, the
Seller may not, within the United States, Canada or Mexico, directly or
indirectly (whether as a stockholder, director, officer, employee,
principal, member, manager, agent, trustee, partner, joint venturer,
financing source, consultant or employee or in any other capacity
whatsoever), engage in the business of collecting, processing and recycling
automobile, truck and other vehicle tires or the manufacturing of products
there from.
(b) The Seller acknowledges and agrees that the value to the
Buyer of the transactions contemplated by this Agreement would be
substantially diminished if the Seller were to solicit the employment of
any employees of Tonmik on the date hereof or on or after the Closing Date.
The Seller agrees that, without the prior written consent of the Buyer, for
the five (5) year period commencing on the Closing Date he will not make,
offer, solicit or induce to enter into, any written or oral arrangement,
agreement or understanding regarding employment or retention as a
consultant with any person who is, on the date hereof, an employee of
Tonmik.
(c) The Seller recognizes and acknowledges that information
about Tonmik and its Business or relating specifically to the services
provided by Tonmik or any phase of its operations or business or financial
affairs that is not a matter of public record, including, without
limitation, techniques, know-how, plans, contracts, business methods,
strategies, technologies, trade secrets, customers, subscribers,
distributors, suppliers, inventions and computer programs (collectively,
the "Confidential Information"), is not generally known to its competitors.
Notwithstanding the foregoing, Confidential Information shall not include
any information which is or becomes generally available to the public other
than as a result of disclosure in violation of this Agreement. Accordingly,
the Seller will not, at any time after the date hereof, directly or
indirectly, without the prior written consent of the Buyer: (i) use any
Confidential Information for his own benefit; or (ii) except as may be
required by law, divulge, disclose or make accessible any of the
Confidential Information or any part thereof to any Person for any reason
or purpose whatsoever. In the event that the Seller becomes legally
compelled to disclose any of the Confidential Information, the Seller will
provide the Buyer with prompt notice so that the Buyer may seek a
protective order or other appropriate remedy and/or waive compliance with
the provisions of this Section 8.4(c). In the event that such protective
order or other remedy is not obtained, or that the Buyer waives compliance
with this Section 8.4(c), the Seller will furnish only that portion of the
Confidential Information which is legally required.
(d) The Seller specifically acknowledges and agrees that the
value to the Buyer of the transactions contemplated by this Agreement would
be substantially diminished if the Seller does not comply in all respects
with this Section 8.4, and the Seller has agreed to the covenants set forth
in this Section 8.4 as an inducement to the Buyer to enter into this
Agreement. The Seller acknowledges that the Buyer would not purchase the
Purchased Stock but for the agreements and covenants of the Seller set
forth in this Section 8.4. The Seller acknowledges and agrees that the
covenants set forth in this Section 8.4are commercially reasonable and
reasonably necessary to protect the interests the Buyer intends to acquire
hereunder. The Buyer and the Seller agree that the Buyer will suffer
substantial damages in the event of a breach of the provisions of this
Section 8.4, the amount of which may be difficult to establish promptly and
with certainty. The Seller acknowledges and agrees that a monetary remedy
for a breach of the covenants set forth in this Section 8.4 hereof may be
inadequate and further agree that such a breach would cause the Buyer
irreparable harm, and that the Buyer shall be entitled to temporary and
permanent injunctive relief without the necessity of proving actual
damages.
(e) If a court of competent jurisdiction determines that any of
the provisions of this Section 8.4 is unenforceable because of the scope,
duration or area of applicability of such provision(s), it is the intention
of the parties that the court making such determination (i) shall modify
such scope, duration or area, or all of them, only to the extent required
to cause such provisions to be deemed enforceable; and (ii) that such
provision(s) as so modified shall then be deemed by such court to be
applicable and enforceable in such modified form and shall be enforced.
SECTION 8.5 DISCLOSURE. Until the Closing, the Seller shall have the
continuing obligation to promptly supplement or amend the written
disclosures being made pursuant to this Agreement with respect to any
matter hereafter arising or discovered which, if existing or known at the
date of this Agreement, would have been required to be set forth or
described in such written disclosures; provided, however, that for the
purpose of the rights and obligations of the parties hereunder, any such
supplemental disclosure shall not be deemed to have been disclosed as of
the date of this Agreement for purposes of Section 14.1, but if the Closing
occurs, such disclosure shall be deemed to have been disclosed for purposes
of Section 12.1. Until the Closing, the Seller shall promptly give to the
Buyer written notice upon learning of or having knowledge of any matter
that may constitute a breach of any representation, warranty, agreement or
covenant contained in this Agreement, which notice shall identify and
describe the breach in reasonable detail.
SECTION 8.6 CLOSURE BONDS. The Seller shall cause Tonmik to keep all
of its Closure Bonds in effect.
ARTICLE IX
COVENANTS OF THE BUYER
SECTION 9.1 ACTIONS PRIOR TO THE CLOSING DATE. Between the date
hereof and the Closing Date, the Buyer shall not take any action which
shall cause it to be in breach of any of its representations, warranties,
covenants or agreements contained in this Agreement. The Buyer shall use
its best efforts to perform all its obligations and satisfy all conditions
to Closing to be performed or satisfied by it under this Agreement as soon
as practicable, but in no event later than the Closing Date. Until the
Closing, the Buyer shall promptly give to the Seller written notice upon
learning of or having knowledge of any matter that may constitute a breach
of any representation, warranty, agreement or covenant of the Buyer
contained in this Agreement, which notice shall identify and describe the
breach in reasonable detail.
SECTION 9.2 CONFIDENTIALITY. The Buyer recognizes and acknowledges
that all information about Tonmik and its Business or relating to the
services provided Tonmik or any phase of its operations or business or
financial affairs that is not a matter of public record, including, without
limitation, techniques, know-how, plans, contracts, business methods,
strategies, technologies, trade secrets, customers, subscribers,
distributors, suppliers, inventions and computer programs (collectively,
the "Seller Confidential Information"), is not generally known to its
competitors. Notwithstanding the foregoing, Seller Confidential Information
shall not include any information which is or becomes generally available
to the public other than as a result of disclosure in violation of this
Agreement. Accordingly, the Buyer will not, at any time prior to the
Closing Date, except as necessary for the consummation of the transactions
contemplated hereby, directly or indirectly, without the prior written
consent of the Seller: (i) use the Seller Confidential Information for its
own benefit; (ii) except as may be required by law, divulge, disclose or
make accessible any of the Seller Confidential Information or any part
thereof to any Person for any reason or purpose whatsoever; or (iii) render
any services to any Person to whom any of the Seller Confidential
Information, in whole or in part, has been disclosed or is threatened to be
disclosed by or at the instance of the Buyer. In the event that the Buyer
becomes legally compelled to disclose any of the Seller Confidential
Information, the Buyer will provide the Seller with prompt notice so that
the Seller may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Section 9.2. In the event that
such protective order or other remedy is not obtained, or that the Seller
waives compliance with this Section 9.2, the Buyer will furnish only that
portion of the Seller Confidential Information which is legally required.
The Buyer acknowledges and agrees that the covenants set forth in this
Section 9.2 are commercially reasonable and reasonably necessary to protect
the interests of the Seller hereunder. The Buyer agrees that the Seller
will suffer substantial damages in the event of a breach of the provisions
of this Section 9.2, the amount of which may be difficult to establish
promptly and with certainty. The Buyer acknowledges and agrees that a
monetary remedy for a breach of the covenants set forth in this Section 9.2
hereof may be inadequate and further agrees that such a breach would cause
the Seller irreparable harm, and that the Seller shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
actual damages. If a court of competent jurisdiction determines that any of
the provisions of this Section 9.2 is unenforceable because of the scope,
duration or area of applicability of such provision(s), it is the intention
of the parties that the court making such determination (i) shall modify
such scope, duration or area, or all of them, only to the extent required
to cause such provisions to be deemed enforceable; and (ii) that such
provision(s) as so modified shall then be deemed by such court to be
applicable and enforceable in such modified form and shall be enforced.
SECTION 9.3 CONSENTS AND APPROVALS. The Buyer shall, at its cost and
expense, use reasonable efforts to obtain all necessary consents and
approvals of third parties required to be obtained by it to effect the
transactions contemplated by this Agreement.
ARTICLE X
TAXES
SECTION 10.1 TAX RETURNS. For any Pre-Closing Tax Period that is not
part of a Straddle Period, the Seller shall and shall cause Tonmik to,
timely prepare and file with the appropriate authorities all income Tax
Returns required to be filed by or with respect to Tonmik regardless of the
due date of such Tax Returns, and shall pay all Taxes shown to be due or
required to be paid on such Tax Returns, unless a reserve for such taxes is
shown on Tonmik's balance sheet dated as of December 31, 2010. The Seller
also shall prepare and timely file, or cause Tonmik to prepare and timely
file, all other Tax Returns required to be filed by or with respect to
Tonmik that are due on or before the Closing Date, and the Seller shall pay
all Taxes shown to be due or required to be paid on such Tax Returns unless
a reserve for such taxes is shown on Tonmik's balance sheet dated as of
December 31, 2010. The Buyer shall timely prepare and file, or cause Tonmik
to prepare and timely file, all other Tax Returns required to be filed by
or with respect to Tonmik, and shall pay, or cause Tonmik to pay, all Taxes
shown to be due or required to be paid on those Tax Returns. Each party
that prepares Tax Returns pursuant to this Section 10.1 shall permit the
other party a reasonable opportunity to review and comment on such Tax
Returns and shall make such changes as are reasonably requested
SECTION 10.2 COOPERATION. The Seller, the Buyer, and Tonmik shall
reasonably cooperate, and shall cause their respective Affiliates,
officers, employees, agents, auditors, and other representatives to
reasonably cooperate, in preparing and filing all Tax Returns relating to
Taxes of Tonmik, including maintaining and making available to each other
all records necessary in connection with such Taxes and in resolving all
disputes and audits with respect to all taxable periods relating to such
Taxes. The Buyer and the Seller recognize and agree that the other party
and its Affiliates will need access from time to time after the Closing to
certain accounting and Tax records and information held by such party and
its respective Affiliates to the extent such records and information
pertain to events occurring on or before the Closing Date. Therefore, each
of the Buyer and the Seller shall, and the Buyer shall cause Tonmik to, (a)
properly retain and maintain such records and information in accordance
with the past custom and practice of such Person until such time as such
retention and maintenance is no longer reasonably necessary, provided that
such records and information shall be retained and maintained until the
expiration of the applicable statute of limitations, and (b) allow the
other party, its Affiliates and their agents and representatives, at times
and dates mutually acceptable to the parties, to inspect, review and make
copies of such records and information as such other party may deem
necessary or appropriate from time to time, such activities to be conducted
during normal business hours and at the other party's expense.
Notwithstanding anything to the contrary in this Agreement, the provisions
of this Section 10.2 shall be effective until the expiration of the
applicable statute of limitations.
SECTION 10.3 REFUNDS. Except as otherwise provided in this Section
10.3, any refunds or credits of Taxes of Tonmik for any Pre-Closing Tax
Period that is not part of a Straddle Period, not shown as an asset on
Tonmik's balance sheet dated as of December 31, 2010 shall be for the
account of the Seller. Any refunds or credits of Taxes of Tonmik for any
Straddle Period, not shown as an asset on Tonmik's balance sheet dated as
of December 31, 2010, shall be equitably apportioned between the Seller and
the Buyer (based on each party's respective indemnification obligations
with respect to such Taxes). Any other refunds or credits of Taxes of
Tonmik shall be for the account of the Buyer.
SECTION 10.4 AMENDED RETURNS. The Seller shall be responsible for
filing any amended Tax Returns for Pre-Closing Tax Periods that are not
part of a Straddle Period that are required as a result of examination
adjustments made by the Internal Revenue Service or by the applicable
Federal, state, provincial, local, or foreign taxing authorities for such
taxable years as finally determined. For those jurisdictions in which
separate income Tax Returns are filed by Tonmik, any required amended
income Tax Returns resulting from such examination adjustments, as finally
determined, shall be prepared by the Seller and made available to the Buyer
for approval (which shall not be unreasonably withheld), signature and
filing at least ten (10) days before the due date for filing such amended
income Tax Returns.
SECTION 10.5 AUDITS. The Seller shall allow the Buyer and its counsel
to participate in any audits of Tonmik income Tax Returns to the extent
that such returns relate to pre-closing periods. The Seller shall not
settle any such audit in a manner that would adversely affect the Buyer or
Tonmik after the Closing Date.
SECTION 10.6 CONFLICT. In the event of a conflict between the
provisions of this Article X and any other provisions of this Agreement,
the provisions of this Article X shall control.
ARTICLE XI
EMPLOYEE BENEFITS
SECTION 11.1 EMPLOYMENT MATTERS.
(a) Notwithstanding anything to the contrary contained herein,
Schedule 11.1 sets forth a list of those current employees of, and
consultants to, Tonmik who the Seller expects will be employees of or
consultants to the Buyer or Tonmik as of the Closing and the Seller has not
granted any other person any right to become an employee of or consultant
to Tonmik after the Closing.
(b) Nothing contained herein shall restrict the Buyer in the
future in the exercise of its independent business judgment as to the terms
and conditions under which the employment of the employees of Tonmik shall
continue, the duration of such employment, the basis on which such
employment is terminated or the benefits provided to such employees.
SECTION 11.2 SELLER'S EMPLOYEE BENEFITS INDEMNIFICATION.
(a) The Buyer shall not assume any Benefit Plan or liability or
obligation under any plan, contract, payroll practice or other arrangement
that the Seller or the Controlled Purchased Companies sponsor, contribute
to, or participate in on the date hereof, or that they have or may have any
liability or obligation under, whether or not disclosed under this
Agreement or in any schedule or exhibit hereto.
(b) The Buyer shall not assume, and the Seller shall retain and
indemnify and hold the Buyer and the Controlled Purchased Companies
harmless from and against, all liabilities and claims that may be brought
(i) by current or former employees (or their respective dependants and
beneficiaries) of the Controlled Purchased Companies in connection with
their employment or termination of employment with any Controlled Purchased
Company on or prior to the Closing Date, (ii) with respect to any Benefit
Plan, including, without limitation, any liability for payment of any claim
thereunder, or that otherwise arose, as a result of events or conditions
occurring on or prior to the Closing Date, or (iii) by current or former
independent contractors of any of the Controlled Purchased Companies (or
their respective dependents and beneficiaries) in connection with (A) any
challenge to their classification as an independent contractor or (B) any
Benefit Plan, or (iv) any Benefit Plan or arrangement maintained by any
ERISA Affiliate of any of the Controlled Purchased Companies.
SECTION 11.3 The Seller shall be responsible and retain all liability
for giving notification of and providing health care continuation coverage
to current or former employees of any of the Controlled Purchased Companies
and other "qualified beneficiaries" within the meaning of and as required
by ERISA, as amended by the Consolidated Omnibus Budget Reconciliation Act
of 1985 ("COBRA"), and shall indemnify and hold the Buyer and the Purchased
Companies harmless against any liability arising out of any such failure to
comply with COBRA; provided, however, that the Buyer shall be responsible
and liable for giving notice and providing COBRA continuation coverage to
any employee of any of the Controlled Purchased Companies in connection
with the Buyer's group medical plan as a result of events occurring after
the Closing Date.
ARTICLE XII
INDEMNIFICATION
SECTION 12.1 INDEMNIFICATION BY THE SELLER.
(a) Subject to Section 12.1(b), notwithstanding the Closing and
regardless of any investigation at any time made by or on behalf of the
Buyer, the Seller shall indemnify and defend, save and hold harmless the
Buyer, any Affiliate of the Buyer (other than the Seller, but including the
Purchased Company), and their respective directors, officers, employees,
agents and attorneys (the "Buyer Indemnitees"), from and against any
damage, liability, loss, cost, expense (including all costs of any
investigation and reasonable attorneys', experts' and consultants' fees),
deficiency, interest, penalty, impositions, assessments or fines
(collectively, "Losses") arising out of or resulting from the Seller's
Event of Breach. As used herein, "Seller's Event of Breach" shall be and
mean any one or more of the following:
(i) any untruth or inaccuracy in any representation or
warranty of the Seller in this Agreement or in any certificate delivered by the
Seller at Closing;
(ii) any failure of the Seller duly to perform or observe any
term, provision, covenant, agreement or condition contained in this Agreement on
the part of the Seller to be performed or observed;
(iii) any Claim for taxes or interest thereon resulting from
for the failure of the Buyer to withhold Taxes owed by the Seller from the
Purchase Price under any applicable Law; and
(iv) any Claim or cause of action by any party against any
Buyer Indemnitee with respect to the Seller Liabilities.
(b) The liability of the Seller in connection with or arising
out of this Agreement shall be limited to an aggregate amount equal to the
Seller Liability Cap. After the Closing the rights of any Buyer Indemnitee
hereunder shall be the exclusive remedy of the Buyer Indemnitees with
respect to claims for which a remedy exists pursuant to this Section 12.1
(including without limitation, claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement contained in this Agreement). Notwithstanding the foregoing, in
the event that, as a matter of statute or the actions of the Seller prior
to the Closing, the Seller would have been liable for a Loss even though
such Loss was incurred by Tonmik, the Seller shall become liable for such
Loss to the extent required by law.
(c) In no event shall the Seller be responsible and liable for
any Losses that are consequential, in the nature of lost profits,
diminution in value, damage to reputation or the like, special or punitive
or otherwise not actual Losses. The Buyer Indemnitiees shall use
commercially reasonable efforts to pursue all legal rights and remedies
available in order to minimize the Losses for which indemnification is
provided to the Buyer Indemnitees by the Seller under this Section 12.1.
(d) In determining the amounts for any Losses hereunder for
which the Buyer is entitled to assert a claim for indemnification, the
amount of any such Losses shall be determined after deducting therefrom the
amount of any insurance proceeds received by the Buyer in respect of such
Losses (which recoveries the Buyer agrees to use its best efforts to
obtain). If an indemnification payment is received by the Buyer and the
Buyer later receives insurance proceeds in respect of the related Loss, the
Buyer shall immediately pay to the Seller a sum equal to the lesser of (i)
the actual amount of insurance proceeds received, or (ii) the actual amount
of the indemnification repayment previously paid by the Seller with respect
to such Losses.
SECTION 12.2 INDEMNIFICATION BY THE BUYER.
(a) Subject to Section 12.2(b), notwithstanding the Closing or
the delivery of the Purchased Stock, the Buyer shall indemnify and defend,
save and hold harmless the Seller and its agents and attorneys (the "Seller
Indemnitees") from and against any Losses arising out of or resulting from,
or shall pay or become obligated to pay any sum on account of, any Buyer's
Event of Breach. As used herein, "Buyer's Event of Breach" shall be and
mean any one or more of the following:
(i) Any untruth or inaccuracy in any representation of Buyer
or the breach of any warranty of Buyer in this Agreement or in any certificate
delivered by Buyer at Closing;
(ii) all Claims arising out of or relating to occurrences of
any nature relating to the Purchased Stock , Tonmik and its Business after the
Closing Date, whether in contract or tort; and
(iii) any failure of the Buyer to duly to perform or observe
any term, provision, covenant, agreement or condition contained in this
Agreement on the part of the Buyer to be performed or observed.
(b) The liability of (i) the Buyer in connection with or
arising out of this Agreement shall be limited to an aggregate amount equal
to the Buyer Liability Cap; In addition, after the Closing, the rights of
the Seller Indemnitee hereunder shall be the exclusive remedy of the Seller
Indemnitees with respect to claims for which a remedy exists pursuant to
this Section 12.2 (including without limitation, claims resulting from or
relating to any misrepresentation, breach of warranty or failure to perform
any covenant or agreement contained in this Agreement). Notwithstanding the
foregoing, in the event that, as a matter of statute or the actions of the
Buyer after the Closing, the Buyer or any Buyer Affiliate would have been
liable for a Loss even though such Loss was incurred by Tonmik, the Buyer
or such Buyer Affiliate shall become liable for such Loss to the extent
required by law. In no event shall Buyer be responsible and liable for any
Losses that are consequential, in the nature of lost profits, diminution in
value, damage to reputation or the like, special or punitive or otherwise
not actual Losses. The Seller Indemnitiees shall use commercially
reasonable efforts to pursue all legal rights and remedies available in
order to minimize the Losses for which indemnification is provided to the
Seller Indemnitees by the Buyer under this Section 12.2.
(c) In determining the amounts for any Losses hereunder for which
the Buyer is entitled to assert a claim for indemnification, the amount of any
such Losses shall be determined after deducting therefrom the amount of any
insurance proceeds received by the Seller in respect of such Losses (which
recoveries the Seller agrees to use its best efforts to obtain). If an
indemnification payment is received by the Seller and the Seller later receives
insurance proceeds in respect of the related Loss, the Seller shall immediately
pay to the Buyer a sum equal to the lesser of (i) the actual amount of insurance
proceeds received, or (ii) the actual amount of the indemnification repayment
previously paid by the Buyer with respect to such Losses.
(d) In no event shall Buyer be responsible and liable for any Losses
that are consequential, in the nature of lost profits, diminution in value,
damage to reputation or the like, special or punitive or otherwise not actual
Losses. The Seller Indemnitiees shall use commercially reasonable efforts to
pursue all legal rights and remedies available in order to minimize the Losses
for which indemnification is provided to the Seller Indemnitees by the Buyer
under this Section 12.2.
SECTION 12.3 TERM OF INDEMNIFICATION. Except as set forth below, the
obligations to indemnify under Section 12.1 and Section 12.2 hereof shall
only apply in respect of Losses asserted on or before the date that is two
(2) years following the Closing Date. Notwithstanding the foregoing, (a)
the obligation to indemnify under Section 12.1 hereof in respect of the
authority of the Seller, the capitalization of Tonmik, Taxes, and
violations of Environmental Laws, shall apply in respect of Losses asserted
prior to the end of the statutory period for bringing such claims, and (b)
the obligation to indemnify under Section 12.2 hereof in respect of the
authority of the Buyer shall apply in respect of Losses asserted prior to
the end of the statutory period for bringing such claims.
SECTION 12.4 PROCEDURES FOR INDEMNIFICATION. If the Seller's Event of
Breach or a Buyer's Event of Breach (a "Party's Event of Breach") occurs or
is alleged and a Buyer Indemnitee or a Seller Indemnitee (a "Party
Indemnitee") asserts that the other party has become obligated to it
pursuant to Section 12.1 or Section 12.2, or if any Claim is begun, made or
instituted as a result of which the other party may become obligated to a
Party Indemnitee hereunder, such Party Indemnitee shall give prompt notice
to the other party. The Party Indemnitee shall permit the other party (at
its expense) to assume the defense of any Claim; provided, however, that
(a) the counsel for the other party who shall conduct the defense shall be
reasonably satisfactory to the Party Indemnitee (it being understood that
if the Seller is required to defend a Claim hereunder that Hale and Dorr
LLP is satisfactory for such purpose), (b) the Party Indemnitee may
participate in such defense at its own expense, and (c) the omission by the
Party Indemnitee to give notice as provided herein shall not relieve the
other party of its indemnification obligation except to the extent that
such omission results in a failure of actual notice to the other party and
the other party is damaged as a result of such failure to give notice.
Except with the prior written consent of the Party Indemnitee, the other
party shall not, in the defense of any such Claim, consent to entry of any
judgment or enter into any settlement that provides for injunctive or other
nonmonetary relief affecting the Party Indemnitee or that does not include
as an unconditional term thereof the giving by each claimant or plaintiff
to such Party Indemnitee of a release from all liability with respect to
such Claim or litigation. In the event that the Party Indemnitee shall in
good faith determine that the conduct of any defense of any Claim subject
to indemnification hereunder or any proposed settlement of any such Claim
by the other party might be reasonably be expected to affect adversely the
ability of the Party Indemnitee to conduct the affairs of the Business in
the ordinary course, the Party Indemnitee shall have the right at all times
to take over and assume control over the defense, settlement, negotiations
or litigation relating to any such Claim at the sole cost of the other
party (including without limitation reasonable attorneys' fees and
disbursements and other amounts paid as the result of such Claim). In the
event that the Party Indemnitee does so take over and assume control over
the defense of a Claim pursuant to the immediately preceding sentence, the
Party Indemnitee (i) shall be entitled to satisfy or settle any such Claim
on a reasonable basis, without prior notice to or consent from the other
party, (ii) may subsequently make a claim for indemnification with respect
to such satisfaction or settlement of such Claim in accordance with the
provisions of this Article XII, and (iii) shall be reimbursed, in
accordance with the provisions of this Article XII, for any such Losses
satisfied or settled and for which the Party Indemnitee establishes that it
is entitled to indemnification pursuant to this Article XII. In any such
claim for indemnification, the Party Indemnitee agrees that the amount paid
to any such third party shall not be determinative of the amount of Claims
or Losses suffered by the Party Indemnitee or introduced as evidence of the
amount of such Claims or Losses in any such claim for indemnification, and
the other party shall have the right to dispute the Party Indemnitee's
entitlement to indemnification and the amount for which it is entitled to
indemnification under the terms of this Article XII. In the event that the
other party does not accept and continue the defense of any matter as
provided above, the Party Indemnitee shall have the full right to defend
against any such Claim, and to satisfy or settle any such Claim, without
prior notice to or consent from the other party, subject in each case to
the limitations set forth in the prior two sentences of this Section 12.4.
In any other event, the Party Indemnitee shall have no right to settle or
agree to pay any claim to which it is entitled to indemnification
hereunder.
SECTION 12.5 PURCHASE PRICE ADJUSTMENT. The Buyer and the Seller
shall treat any payments under this Article XII as an adjustment to the
Purchase Price for all Federal, provincial, state and local income tax
purposes.
ARTICLE XIII
CONDITIONS PRECEDENT TO PERFORMANCE BY THE SELLER
The obligations of the Seller to consummate the transactions contemplated
by this Agreement are subject to the fulfillment, at or before the Closing Date,
of the following conditions, any one or more of which may be waived by the
Seller in its sole discretion:
SECTION 13.1 REPRESENTATIONS AND WARRANTIES OF THE BUYER. The
representations and warranties of the Buyer contained in this Agreement
shall be true and correct (i) at and as of the date hereof, and (ii) on and
as of the Closing Date with the same effect as though made on and as of the
Closing Date, except in either such case (i) or (ii) where the failure to
be so true and correct would not reasonably be expected to have a Buyer
Material Adverse Effect, and the Seller shall have received a certificate
dated the Closing Date and signed by any officer of the Buyer to that
effect.
SECTION 13.2 PERFORMANCE OF THE OBLIGATIONS OF THE BUYER. The Buyer
shall have performed in all material respects all obligations required
under this Agreement to be performed by the Buyer on or before the Closing
Date, and the Seller shall have received a certificate dated the Closing
Date and signed by any officer of the Buyer to that effect.
SECTION 13.3 CONSENTS AND APPROVALS. All consents, waivers,
authorizations and approvals of any Governmental Authority required or
desired in connection with the execution, delivery and performance of this
Agreement shall have been duly obtained and shall be in full force and
effect on the Closing Date.
SECTION 13.4 NO VIOLATION OF ORDERS. No preliminary or permanent
injunction or other order issued by any Governmental Authority, nor any
statute, rule, regulation, decree or executive order promulgated or enacted
by any Governmental Authority, that declares this Agreement invalid or
unenforceable in any respect or that prevents the consummation of the
transactions contemplated hereby shall be in effect, and no action or
proceeding before any Governmental Authority shall have been instituted or
threatened by any government or Governmental Authority which seeks to
prevent or delay the consummation of the transactions contemplated by this
Agreement or which challenges the validity or enforceability of this
Agreement, and which in any such case has a reasonable likelihood of
success in the opinion of counsel to the Seller.
SECTION 13.5 DELIVERY OF DOCUMENTS. Each document required to be
delivered pursuant to Section 4.3 must have been delivered.
ARTICLE XIV
CONDITIONS PRECEDENT TO PERFORMANCE BY THE BUYER
The obligations of the Buyer to consummate the transactions contemplated
by this Agreement are subject to the fulfillment, at or before the Closing Date,
of the following conditions, any one or more of which may be waived by the Buyer
in its sole discretion:
SECTION 14.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER. The
representations and warranties of the Seller contained in this Agreement
shall be true and correct (i) at and as of the date hereof, and (ii) on and
as of the Closing Date with the same effect as though made on and as of the
Closing Date, except in either such case (i) or (ii) where the failure to
be so true and correct would not reasonably be expected to have a Seller
Material Adverse Effect, and the Buyer shall have received certificates
dated the Closing Date and signed by the Seller to that effect.
SECTION 14.2 PERFORMANCE OF THE OBLIGATIONS OF THE SELLER. The Seller
shall have performed in all material respects all obligations required
under this Agreement to be performed by it on or before the Closing Date,
and the Buyer shall have received certificates dated as of the Closing Date
and signed by Seller to that effect.
SECTION 14.3 CONSENTS AND APPROVALS. All consents, waivers,
novations, authorizations and approvals of any Governmental Authority and
of any other consent, waiver, novations, authorization and approvals set
forth on Schedule 5.5 of this Agreement shall have been duly obtained and
shall be in full force and effect on the Closing Date.
SECTION 14.4 NO VIOLATION OF ORDERS. No preliminary or permanent
injunction or other order issued by any Governmental Authority, nor any
statute, rule, regulation, decree or executive order promulgated or enacted
by any Governmental Authority, that declares this Agreement invalid in any
respect or that prevents the consummation of the transactions contemplated
hereby, or that materially and adversely affects the assets, properties,
operations, net income or financial condition of Tonmik or its Business
shall be in effect, and no action or proceeding before any Governmental
Authority shall have been instituted by any government or Governmental
Authority which seeks to prevent or delay the consummation of the
transactions contemplated by this Agreement or which challenges the
validity or enforceability of this Agreement, and which in any such case
has a reasonable likelihood of success in the opinion of counsel to the
Buyer.
SECTION 14.5 NO MATERIAL ADVERSE CHANGE. During the period from
October 1, 2010 through the Closing, there shall not have been any change
in the business, operations, or financial condition of Tonmik or its
Business that would reasonably be expected to have a Seller Material
Adverse Effect.
SECTION 14.6 DELIVERY OF DOCUMENTS. Each document required to be
delivered pursuant to Section 4.2 must have been delivered.
SECTION 14.7 LICENSES AND PERMITS. All Licenses and Permits shall be
in full force and effect except for Licenses and Permits which if not in
full force and effect would not reasonably be expected to result in a
Seller Material Adverse Effect.
ARTICLE XV
TERMINATION
SECTION 15.1 CONDITIONS OF TERMINATION. Notwithstanding anything to
the contrary contained herein, this Agreement may be terminated at any time
before the Closing: (a) by mutual consent of the Seller and the Buyer, (b)
by either the Seller or the Buyer if the other party shall have breached
this Agreement in any material respect and such breach cannot be cured by
December 31, 2010 (c) by the Seller if at said date, any of the conditions
set forth in Article XIII shall not have been met, unless the Seller's
breach of this Agreement is the reason for the failure of such conditions
to be satisfied, or (d) by the Buyer if at said date, any of the conditions
set forth in Article XIV shall not have been met, unless the Buyer's breach
of this Agreement is the reason for the failure of such conditions to be
satisfied.
SECTION 15.2 PROCEDURE UPON TERMINATION. In the event of termination
by the Seller or by the Buyer or by the Seller and the Buyer pursuant to
Section 15.1 and written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement are
terminated as provided herein:
(a) the Seller and the Buyer each will return all documents,
work papers and other material of the other party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same;
(b) All Confidential Information received by the Seller or the
Buyer with respect to the business of the other party or its subsidiaries
shall be treated in accordance with Section 8.7; and
(c) such termination shall not in any way limit or restrict the
rights and remedies of the Seller or the Buyer against the other party
hereto which has violated or breached any of the representations,
warranties, agreements or other provisions of this Agreement prior to the
termination hereof.
SECTION 15.3 EFFECT OF TERMINATION. In the event of termination
pursuant to Section 15.1, or as otherwise provided in this Agreement, this
Agreement shall become null and void and have no effect, with no liability
on the part of the parties, or their directors, officers, agents or
stockholders, with respect to this Agreement, except for (a) the liability
of a party for expenses pursuant to Section 16.4, (b) liability for breach
of this Agreement, and (c) the provisions of Section 8.7(c) and Section 9.2
.
ARTICLE XVI
MISCELLANEOUS
SECTION 16.1 SURVIVAL OF PROVISIONS. The respective representations,
warranties, covenants and agreements of each of the parties to this
Agreement made herein or in any certificate or other instrument delivered
by one of the parties to this Agreement (except covenants and agreements
which are expressly required to be performed and are performed in full on
or before the Closing Date), shall be considered to have been relied upon
by the other party to this Agreement, as the case may be, and shall survive
the Closing Date for a period of two (2) years following the Closing Date,
provided that the representations and warranties regarding the corporate or
other authority of the Seller and the Buyer, the capitalization of TONMIK,
Taxes and violations of Environmental Laws, shall survive until the end of
the statutory period for bringing Claims related thereto.
SECTION 16.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided in
this Agreement, no party hereto shall assign this Agreement or any rights
or obligations hereunder without the prior written consent of the other
party hereto and any such attempted assignment without such prior written
consent shall be void and of no force and effect. This Agreement shall
inure to the benefit of and shall be binding upon the successors and
permitted assigns of the parties hereto.
SECTION 16.3 GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE
CONSTRUED, PERFORMED AND ENFORCED IN ACCORDANCE WITH, AND GOVERNED BY, THE
LAWS OF THE STATE OF NEVEDA, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICTS OF LAWS THEREOF. THE PARTIES HERETO IRREVOCABLY ELECT AS THE SOLE
JUDICIAL FORUM FOR THE ADJUDICATION OF ANY MATTERS ARISING UNDER OR IN
CONNECTION WITH THIS AGREEMENT, AND CONSENT TO THE JURISDICTION OF, ANY
STATE OR FEDERAL COURT SITTING FOR LAS VEGAS, NEVADA
SECTION 16.4 TRANSACTION EXPENSES. Each party hereto shall pay its
own expenses, including without limitation, any legal fees (both U.S. and
foreign), accounting fees, fees and expenses of consultants and travel and
similar expenses (collectively, the "Transaction Expenses"). The Seller
shall pay all recording and filing fees that may be imposed by reason of
the sale, transfer, assignment and delivery of the Purchased Stock.
SECTION 16.5 BROKER'S AND FINDER'S FEES. Tonmik is a party to an
agreement with Prosperity Systems, Inc. which provides for payments by
Tonmik to Prosperity Systems, Inc. under a variety of situations in varying
amounts. The Seller shall be solely responsible for the payment of any fees
due to Prosperity Systems, Inc. and shall indemnify the Buyer for any
claims that may be made against it due to such agreement .. The Buyer
represents and warrants that it has dealt with no broker or finder in
connection with any of the transactions contemplated by this Agreement and,
insofar as it knows, no other broker or other Person is entitled to any
commission or finder's fee in connection with any of the transactions
contemplated hereby.
SECTION 16.6 FURTHER ASSURANCES. The Seller shall, at any time and
from time to time after the Closing Date, upon the reasonable request of
the Buyer and at the expense of the Seller, do, execute, acknowledge and
deliver, or cause to be done, executed, acknowledged and delivered, all
such further deeds, assignments, transfers and conveyances as may be
required for the better assigning, transferring, granting, conveying and
confirming to the Buyer or its successors and assigns, or for aiding and
assisting in collecting and reducing to possession, the Purchased Stock.
SECTION 16.7 PUBLIC ANNOUNCEMENTS. Following the execution and
delivery of this Agreement, the Buyer may announce publicly that it has
reached an agreement with respect to the transactions contemplated herein.
Thereafter, prior to the Closing Date, no party hereto shall (and each
party hereto shall cause each of Affiliates, successors and assigns not to)
furnish any communication (written or oral) to any third party or to the
public generally if the subject matter thereof relates to the existence of
the Agreement or the other party's involvement herein or to the
transactions contemplated hereby without the prior approval of the other
party hereto as to the content thereof, which approval may be granted or
withheld in the other party's sole discretion; provided however, that the
foregoing shall not be deemed to prohibit any disclosure required by any
applicable law or Governmental Authority having jurisdiction over such
matters, although in any event, the disclosing party shall provide the
other party the content of the proposed disclosure and shall reflect all
reasonable comments thereon made by the other party. After the Closing
Date, the Seller and the Buyer shall consult with each other before
issuing, and provide each other the opportunity to review and comment upon,
any press release or other public statements with respect to the
transactions contemplated by this Agreement, and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by applicable law or government regulation or
decree, court process or by obligations pursuant to any listing agreement
with any national securities exchange.
SECTION 16.8 SEVERABILITY. In the event that any part of this
Agreement is declared by any court or other judicial or administrative body
to be null, void or unenforceable, said provision shall survive to the
extent it is not so declared, and all of the other provisions of this
Agreement shall remain in full force and effect.
SECTION 16.9 NOTICES. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed
to have been duly given (a) on the date of service if served personally on
the party to whom notice is to be given, (b) on the day of transmission if
sent via facsimile transmission to the facsimile number given below, (c) on
the day after delivery to an overnight courier service, or (d) on the fifth
day after mailing, if mailed to the party to whom notice is to be given, by
first class mail, registered or certified, postage prepaid and properly
addressed, to the party as follows:
If to the Seller: Antonio Care
9805 Boul Henri Bourassa
Montreal QC
Canada H1C 1G5
If to the Buyer: Tire International Environmental Systems, Inc.
9805 Boul Henri Bourassa
Montreal QC
Canada H1C 1G5
with a copy (which shall not constitute notice) to:
Robert E. Wetzel
20 Braeburn Lane
Barrington Hills, Illinois 60010
Any party may change its address for the purpose of this Section 16.9
by giving the other party written notice of its new address in the manner set
forth above.
SECTION 16.10 AMENDMENTS; WAIVERS. This Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by
the parties hereto, or in the case of a waiver, by the party waiving
compliance. Any waiver by any party of any condition, or of the breach of
any provision, term, covenant, representation or warranty contained in this
Agreement, in any one or more instances, shall not be deemed to be nor
construed as a further or continuing waiver of any such condition, or of
the breach of any other provision, term, covenant, representation or
warranty of this Agreement.
SECTION 16.11 ENTIRE AGREEMENT. This Agreement and the other
documents referred to herein contain the entire understanding between the
parties hereto with respect to the transactions contemplated hereby and
supersede and replace all prior and contemporaneous agreements and
understandings, oral or written, with regard to such transactions.
SECTION 16.12 SECTION AND PARAGRAPH HEADINGS. The section and
paragraph headings in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
SECTION 16.13 NO THIRD PARTY BENEFICIARIES. This Agreement does not
create and shall not be construed as creating any rights enforceable by any
Person who or which is not a party to this Agreement.
SECTION 16.14 GENDER; NUMBER. As used in this Agreement, the
masculine shall include the feminine and the neuter, the singular shall
include the plural and the plural shall include the singular as the context
may require.
SECTION 16.15 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Purchase
Agreement as of the date first above written.
TIRE INTERNATIONAL ENVIRONMENTAL SYSTEMS, INC.
By: /s/ Martin J. Sergi
Name: Martin J. Sergi
Title: Chief Financial Officer
By: /s/ Antonio Care
Antonio Care
Tonmik Import/Export Solutions Inc
Financial Statements
September 30, 2010
Notice to Reader 2
Financial Statements
Earnings and Deficit 3
Balance Sheet 4
Notes to Financial Statements 5 - 6
Notice to Reader
On the basis of information provided by management, we have compiled the balance
sheet of Tonmik Import/Export Solutions Inc. as at September 30, 2010 and the
statement of earnings and deficit for the nine-month period then ended.
We have not performed an audit or a review engagement in respect of these
financial statements and, accordingly, we express no assurance thereon.
Readers are cautioned that these statements may not be appropriate for their
purposes.
Prior to compiling Tonmik Import/Export Solutions Inc.'s financial statements,
we prepared journal entries having a material impact on the financial
statements.
The accounts for the year ended December 31, 2009, shown for comparative
purposes, were reviewed by other chartered accountants.
Chartered Accountants
/s/ Raymond Chabot Grant Thorton LLP
Laval, December 20, 2010
TONMIK IMPORT/EXPORT SOLUTIONS INC.
EARNINGS AND DEFICIT
For the nine-month period ended September 30, 2010
(Unaudited - See Notice to Reader)
2010-09-30 2009-12-31
(9 MONTHS) (12 months)
$ $
SALES 2,701,056 1,090,276
Inventory, beginning of period 1,706,579 868,737
Material purchases 451,273 1,196,618
-------- ----------
2,157,852 2,065,355
Inventory, end of period 327,789 1,706,579
-------- ----------
1,830,063 358,776
---------- --------
GROSS PROFIT 870,993 731,500
---------- --------
Operating expenses
Commissions 51,000 24,124
Rental expenses 27,926 43,076
Insurance 15,560
Data processing 15,455 6,115
Office supplies and expenses 7,917 10,025
Advertising and promotion 5,543 51,832
Travel 74,728 58,825
Professional and consulting fees 171,975 181,750
Management and administration fees 59,878 86,403
Doubtful accounts 22,153
Taxes and permits 3,864 11,010
Telephone and utilities 11,121 13,060
Factoring fees 191,781 21,882
Interest on long-term debt 139,369 113,492
Interest and bank charges 39,867 15,338
Amortization of property and equipment 68,642 20,939
------- -------
869,066 695,584
-------- --------
NET EARNINGS 1,927 35,916
Deficit, beginning of period (426,376) (462,292)
---------- ----------
Deficit, end of period (424,449) (426,376)
========== ==========
TONMIK IMPORT/EXPORT SOLUTIONS INC.
BALANCE SHEET
September 30, 2010
(Unaudited - See Notice to Reader)
2010-09-30 2009-12-31
$ $
ASSETS
Current assets
Cash 21,251
Accounts receivable 31,792 49,792
Inventory 327,789 1,706,579
Advance receivable 57,500
Advances to a subsidiary, without interest 1,223,268
Advances to an unrelated entity 59,860
------- -
1,642,709 1,835,122
Deferred financing costs 50,000
Investments (Note 2) 582,842 1,009,642
Property and equipment (Note 3) 378,390 20,233
-------- -------
2,603,941 2,914,997
========== ==========
LIABILITIES
Current liabilities
Bank indebtedness 17,455
Accounts payable and accrued liabilities 133,436 579,059
Advances to a company under common control, without interest or repayment
terms 14,140
Instalments on long-term debt 735,000 429,814
-------- --------
885,891 1,023,013
Advances, without interest or repayment terms
Related party 34,595
Shareholder 492,094 493,094
Long-term debt (Note 4) 1,065,810 1,275,266
---------- ----------
2,478,390 2,791,373
SHAREHOLDERS' EQUITY
Capital stock (Note 5) 550,000 550,000
Deficit (424,449) (426,376)
---------- ----------
125,551 123,624
-------- --------
2,603,941 2,914,997
========== ==========
On behalf of the Board,
/s/ Antonio Care
Director
TONMIK IMPORT/EXPORT SOLUTIONS INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2010
(Unaudited - See Notice to Reader)
1 - GOVERNING STATUTES AND NATURE OF OPERATIONS
The Company, incorporated under the Canada Business Corporations Act on November
7, 2005, acts as a distributor of rubber products.
2 - INVESTMENTS
2010-09-30 2009-12-31
$ $
Investment in shares of a wholly-owned foreign corporation, Qingdao T.I.E.
Solutions Rubber Products Co. Ltd., at cost 582,842 582,842
Investment in a joint venture, representing 58.82% of the foreign entity
formerly operating as Qingdao Good Rubber Product Co. Ltd., dissolved during the
year 426,800
-------- ----------
582,842 1,009,642
======== ==========
3 - PROPERTY AND EQUIPMENT
2010-09-30
-----------
COST ACCUMULATED AMORTIZATION NET
----- ------------------------- ----
$ $ $
Equipment and machinery 439,400 73,064 366,336
Furniture and fixtures 25,727 14,145 11,582
Computer equipment 23,895 23,423 472
------- ------- ----
489,022 110,632 378,390
======== ======== ========
2009-12-31
-----------
Cost Accumulated amortization Net
----- ------------------------- ----
$ $ $
Equipment and machinery 12,600 7,519 5,081
Furniture and fixtures 25,727 11,250 14,477
Computer equipment 23,895 23,220 675
Website 6,750 6,750
------ ------ -------
68,972 48,739 20,233
======= ======= =======
4 - LONG-TERM DEBT
CURRENT
PORTION 2010-09-30 2009-12-31
-------- ----------- -----------
$ $ $
Demand non-revolving term loan, Placement Fraine Inc., secured
by a fourth ranking immoveable hypothec on the director's
personal residence and a separate personal guarantee signed by
the director, 12% per annum payable monthly, originally due
January 2011 250,000 250,000 165,000
TONMIK IMPORT/EXPORT SOLUTIONS INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2010
(Unaudited - See Notice to Reader)
Convertible promissory note for the original amount of
$268,700, Perfica Solutions Inc., 8% per annum payable
quarterly, originally due in February 2009 175,000 175,000 175,000
Demand loan, Kesmat Investments Inc., secured by a
second-ranking security interest on the accounts receivable and
a personal guarantee from a shareholder for the entire amount,
prime plus 5% per annum payable monthly, payable in quarterly
instalments of $65,000 capital with the balance due October
2011 260,000 963,310 895,266
Demand non-revolving term loan for an original amount of
$450,000, Bank of Montreal, secured by EDC Export Development
Program, prime plus 3.25%, payable by monthly instalments of
$12,500 capital plus interest commencing January 2011 50,000 412,500 450,000
Term loan, Express Finance, 1.55% per month, repaid during the
period 19,814
-------- -------- --------
1,800,810 1,705,080
Instalments due within one year 735,000 735,000 429,814
-------- --------
1,065,810 1,275,266
========== ========== ==========
5 - CAPITAL STOCK
The Company discloses information on the authorized capital stock only for the
classes of shares that have been issued.
AUTHORIZED
Unlimited number of class "A" common shares, voting and participating, without
par value
2010-09-30 2009-12-31
----------- -----------
$ $
ISSUED AND FULLY PAID
10,540,000 class "A" common shares 550,000 550,000
======== ========
6 - COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with the
presentation adopted in the current year.
