June 1, 2004
Dr. John W. Verbicky, Jr.
President & CEO
Envirokare Tech, Inc.
5850 T.G. Lee Blvd.
Suite 535
Orlando, Florida 32822
Re: Exclusivity Agreement with NOVA Chemicals Inc.
Dear John:
In connection with the negotiations regarding any transaction (the
"Transaction") between Envirokare Tech, Inc. ("Envirokare") and NOVA Chemicals
Inc. ("NOVA"), Envirokare has provided NOVA with information regarding
Envirokare and its affiliates (specifically Envirokare Composites Corporation)
and access to Envirokare's management. Subject to the terms and conditions set
forth in this Letter Agreement (the "Agreement"), NOVA wishes to investigate and
negotiate a possible Transaction.
1. Between the date of this Agreement and 5:00 p.m. on August 31, 2004 (the
"Exclusive Period"), Envirokare will not, directly or indirectly, through any
officer, director, employee, affiliate, attorney, financial advisor or other
agent, take any action to solicit, initiate, seek or encourage any inquiry or
proposal from, furnish any information to, or participate in any discussions or
negotiations with, any third party (other than NOVA or an affiliate thereof
designated by NOVA) regarding any transaction related to the use, license or
sublicense of the TPF Technology (any such transaction being a "Third Party
Transaction"), except as provided for in this Agreement. Envirokare agrees that,
except as provided in this agreement, it will not accept or enter into any
agreement concerning any Third Party Transaction during the Exclusive Period.
Envirokare shall be responsible for any breach of this Agreement by its
respective officers, directors, employees, agents, advisors or representatives.
2. During the Exclusive Period, Envirokare will notify NOVA immediately after
receipt by Envirokare (or any of its officers, directors, employees, affiliates,
representatives, advisors or other agents) of any proposal for or inquiry
respecting any Third Party Transaction. Such notice to NOVA will indicate in
reasonable detail the identity of the person or entity making the proposal or
inquiry and the terms and conditions of such proposal or inquiry.
3. Notwithstanding the restrictions set forth in Sections 1 and 2 of this
Agreement, Envirokare may pursue a Third Party Transaction provided that it (a)
provides the notices as required by Paragraph 2 herein, (b) provides NOVA with
the right of first refusal to proceed with Envirokare on substantially similar
terms and conditions as the proposed Third Party Transaction; and (c) NOVA
declines to proceed in such a manner. If Envirokare proposes to proceed with a
Third Party Transaction and NOVA decides not to exercise its right of first
refusal, then NOVA may immediately put the Warrant (as defined in Section 6
below) to Envirokare for the greater of $250,000 or fair market value of the
Warrant payable in cash.
4. Envirokare and NOVA continue to be bound by the terms of the Confidentiality
Agreement between the parties dated November 12, 2003. Subject to the terms of
that Confidentiality Agreement, neither Envirokare nor NOVA will make any public
announcement concerning this Agreement, the discussions or negotiations between
the parties, or any other matters relating to the proposed transaction. However,
after consultation with the other parties hereto, any party may at any time make
disclosure if it is advised by outside legal counsel that such disclosure is
required under applicable law, regulatory authority, or stock exchange listing
agreement.
5. During the Exclusive Period, Envirokare and NOVA will continue to negotiate
and discuss the potential Transaction. In order to provide NOVA with the
opportunity to continue such discussions and negotiations, Envirokare shall
allow NOVA access to any information requested by NOVA that is necessary to
continue its evaluation of the proposed transaction. In addition, Envirokare
will take all reasonable steps necessary to remedy the intellectual property
concerns which have been raised by NOVA during the Exclusive Period. Envirokare
will keep NOVA apprised as to the status of such activities on a regular basis,
and will afford NOVA the ability to review and provide comments on the progress
of such activities as well as any documents that are generated to address such
intellectual property issues. NOVA shall not be under any obligation to continue
the discussions or negotiations or to proceed with any proposed transaction for
any reason whatsoever.
6. As consideration for such Exclusive Period on the terms discussed herein and
for the grant of warrants as provided in Paragraph 7 herein, NOVA shall pay to
Envirokare the sum of two hundred fifty thousand dollars ($250,000). Such
payment shall be made immediately following execution of this Agreement and
shall be non-refundable except in the event of any breach of this Agreement or
misrepresentation of any information provided by Envirokare to NOVA pursuant to
this Agreement. Immediately following execution of this Agreement, Envirokare
shall issue to NOVA a Common Stock Purchase Warrant in the form attached as
Attachment A hereto (the "Warrant").
7. If the negotiations and discussions detailed in this Agreement result in a
definitive agreement between the parties for a Transaction, NOVA will receive
shares in Envirokare worth the $250,000 investment at the then current market
price. In this event, the warrants issued in conjunction with this agreement may
be cancelled at the discretion of Envirokare.(JWV)
8. Except as specifically set forth in this Agreement, Envirokare and NOVA
acknowledge that this Agreement is not intended to, and does not create any
binding obligation on any party hereto with respect to any transaction or other
agreement between the parties. Any such obligation will only arise from the
execution of definitive agreement regarding any such transaction.
9. This Agreement will be governed by the laws of the State of New York without
regard to its conflict of law principles. In any action between the parties
arising out of or relating to this Agreement or any of the transactions
contemplated by this Agreement: (i) each of the parties irrevocably and
unconditionally consents and submits to the exclusive jurisdiction and venue of
the State and Federal courts located in New York, New York; (ii) if any such
action is commenced in a state court then, subject to applicable law, no party
shall object to the removal of such action to any Federal Court located in New
York, New York; (iii) each of the parties irrevocably waive the right to trial
by jury; and (iv) each of the parties irrevocably consents to service of process
by first class certified mail, return receipt requested, postage prepaid.
10. The parties agree that monetary damages would not be a sufficient remedy for
any breach of this Agreement by Envirokare and that NOVA shall be entitled to
equitable relief, including injunction and specific performance, as a remedy for
such breaches. Such remedy shall not be deemed to be the exclusive remedy for a
breach by Envirokare of this Agreement, but shall be in addition to all other
remedies available at law or equity to NOVA. This Agreement (A) may not be
amended or modified except by an instrument in writing and signed by both
parties; and (B) may be executed in one or more counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same Agreement.
Please acknowledge your acceptance of and agreement to the foregoing by signing
and returning to the undersigned as soon as possible.
Sincerely,
NOVA Chemicals Inc.
By: /s/ J. Alan Cirttenden By: /s/ R. Bruce Forbes
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Name: J. Alan Crittenden Name: R. Bruce Forbes
Title: Vice President, Commerical Legal Title: V.P. Legal-Responsible Care
Accepted and Agreed to as of the date first written above.
Envirokare Tech, Inc.
By: /s/ John W. Verbicky, Jr.
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Name: John W. Verbicky, Jr.
Title: President and CEO