X0203 3 2009-12-14 0 0000813634 INTERNATIONAL ABSORBENTS INC IAX 0001479276 IAX Acquisition Corp C/O KINDERHOOK INDUSTRIES LLC 888 SEVENTH AVENUE 16TH FLOOR NEW YORK NY 10106 1 0001439894 KINDERHOOK CAPITAL FUND III LP 888 SEVENTH AVENUE SUITE 1600 NEW YORK NY 10106 1 0001479277 IAX Canada Acquisition Co Inc C/O KINDERHOOK INDUSTRIES LLC 888 SEVENTH AVENUE 16TH FLOOR NEW YORK NY 10106 1 0001479278 International Absorbents Holdings LLC C/O KINDERHOOK INDUSTRIES LLC 888 SEVENTH AVENUE 16TH FLOOR NEW YORK NY 10106 1 0001479279 Kinderhook Capital Fund III GP LLC C/O KINDERHOOK INDUSTRIES LLC 888 SEVENTH AVENUE 16TH FLOOR NEW YORK NY 10106 1 0001479280 Michalik Robert E C/O KINDERHOOK INDUSTRIES LLC 888 SEVENTH AVENUE 16TH FLOOR NEW YORK NY 10106 1 0001479281 Tuttle Thomas L C/O KINDERHOOK INDUSTRIES LLC 888 SEVENTH AVENUE 16TH FLOOR NEW YORK NY 10106 1 0001295960 Michalik Christian P 8725 HENDERSON ROAD REN. 1 TAMPA FL 33634 1 Common Shares, No Par Value 717325 I See footnote IAX Acquisition Corporation ("Parent") and IAX Canada Acquisition Company Inc., a wholly-owned subsidiary of Parent ("Canada Sub"), and the Issuer entered into an Arrangement Agreement, dated December 14, 2009 (the "Arrangement Agreement"), pursuant to which Parent, through Canada Sub, will acquire all of the outstanding common shares of the Issuer for $4.75 per common share ("Common Shares") in cash through a plan of arrangement under the laws of British Columbia (the "Arrangement"). Under the Arrangement Agreement, upon consummation of the Arrangement (the "Effective Time"), (i) Canada Sub will acquire all of the outstanding Common Shares for $4.75 per Common Share, (ii) all stock options granted by the Issuer that have not been exercised into Common Shares prior to the Effective Time will be cancelled for cash consideration equivalent to the positive difference, if any, between $4.75 less the exercise price thereof, all in accordance with the terms of a plan of arrangement and (iii) all of the outstanding restricted stock units ("RSUs") that have not been converted into Common Shares prior to the Effective Time will be cancelled for $4.75 per RSU. The consummation of the Arrangement is subject to various closing conditions, including obtaining the approval of the Arrangement both by the Issuer's shareholders and by the Supreme Court of British Columbia. Parent is a wholly owned subsidiary of International Absorbents Holdings, LLC ("Holdings"). All of the outstanding capital stock of Holdings is owned by Kinderhook Capital Fund III, L.P. (the "Fund"). Kinderhook Capital Fund III GP, LLC (the "Fund GP") is the general partner of the Fund. Thomas L. Tuttle, Robert E. Michalik and Christian P. Michalik own 71.4% of the outstanding capital stock of the Fund GP. Parent, Canada Sub and certain shareholders of the Issuer (the "Shareholders") entered into a Support Agreement, dated December 14, 2009 ("Support Agreement"), pursuant to which the Shareholders agreed, among other things, to vote all the Issuer's Common Shares held by them in favor of the approval of the Arrangement and against other actions which could reasonably be expected to impede, delay or adversely affect the Arrangement, including a competing offer to enter into an arrangement, subject to the terms and conditions of the Support Agreement. The Reporting Persons do not have any pecuniary interest in the shares held by the Shareholders and each expressly disclaims beneficial ownership of any shares covered by the Support Agreement. /s/ IAX ACQUISITION CORPORATION, by Thomas L. Tuttle, President 2009-12-23 /s/ KINDERHOOK CAPITAL FUND III, L.P., by Kinderhook Capital Fund III GP, LLC, its general partner, by Robert E. Michalik, Managing Director 2009-12-23 /s/ IAX CANADA ACQUISITION COMPANY INC., by Thomas L. Tuttle, Director 2009-12-23 /s/ INTERNATIONAL ABSORBENTS HOLDINGS, LLC, by Thomas L. Tuttle, President 2009-12-23 /s/ KINDERHOOK CAPITAL FUND III GP, LLC, by Robert E. Michalik, Managing Director 2009-12-23 /s/ Robert E. Michalik 2009-12-23 /s/ Thomas L. Tuttle 2009-12-23 /s/ Christian P. Michalik 2009-12-23