UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
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OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: June 30, 1997
TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d)
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OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-20179
RECYCLING INDUSTRIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Colorado 84-1103445
- -------------------------------- ---------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
384 Inverness Drive South, Suite 211
Englewood, Colorado 80112
- ------------------------------------------------ --------------
(Mailing Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (303) 790-7372
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock as of the close of the period covered by this Report.
NUMBER OF SHARES OUTSTANDING AS OF:
CLASS June 30, 1997
- ---------------------------- -----------------------------------
Common Stock, $.001 Par Value 13,884,000
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION PAGE
- ------------------------------- ----
Item 1. Financial Statements*
Consolidated Balance Sheets -June 30, 1997
and September 30, 1996 1-2
Consolidated Statements of Operations for the three and nine
months ended June 30, 1997 and 1996 3-4
Consolidated Statement of Stockholders' Equity for the
nine months ended June 30, 1997 5
Consolidated Statements of Cash Flows for the nine
months ended June 30, 1997 and 1996 6
Notes to the Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
PART II -- OTHER INFORMATION
- ----------------------------
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 15
* The accompanying interim financial statements have not been audited by an
independent certified public accountant. Only those statements corresponding
to a fiscal year-end (September 30) are audited.
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and September 30, 1996
(Thousands of Dollars)
ASSETS
------
June 30, 1997 September 30, 1996
-------------- ------------------
CURRENT ASSETS:
Cash $ 469 $ 1,450
Accounts receivable,
less allowance for doubtful accounts
of $40 and $10 7,538 4,379
Accounts receivable, related party - 77
Inventories 4,030 2,473
Deferred income taxes 810 -
Prepaid expenses and deposits 402 392
------------- -------------
Total Current Assets 13,249 8,771
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PROPERTY, PLANT AND EQUIPMENT, net 32,980 20,492
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OTHER ASSETS:
Deferred income taxes 585 800
Other assets, net of amortization 5,988 4,792
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Total Other Assets 6,573 5,592
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TOTAL ASSETS $ 52,802 $ 34,855
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------------- -------------
See Accompanying Notes to the Consolidated Financial Statements
1
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and September 30, 1996
(Thousands of Dollars)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30, 1997 September 30, 1996
------------- ------------------
CURRENT LIABILITIES:
Current maturities of long term debt $ 5,631 $ 1,707
Current maturities of long term debt,
related parties 1,201 2,075
Accounts payable 3,151 2,673
Accounts payable - related parties - 61
Income taxes - payable - 107
Other current liabilities 654 551
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Total Current Liabilities 10,637 7,174
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LONG TERM DEBT:
Long term debt, less current maturities 24,503 10,067
Long term debt - related parties,
less current maturities 685 1,951
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Total Long Term Debt 25,188 12,018
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Total Liabilities 35,825 19,192
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COMMITMENTS & CONTINGENCIES:
Redeemable common stock,
$.001 par value, 364,000 shares
issued and outstanding 1,500 1,500
------------- --------------
STOCKHOLDERS' EQUITY:
Preferred stock, no par value,
10,000,000 shares authorized
Series D, convertible, 10,000,
and 0 shares issued and outstanding 500 -
Common Stock ($.001 par value),
50,000,000 shares authorized,
13,884,000 and 13,431,000 shares
issued and outstanding 14 13
Additional paid in capital 25,452 25,547
Accumulated deficit (10,489) (11,397)
------------- --------------
Total Stockholders' Equity 15,477 14,163
------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 52,802 $ 34,855
------------- --------------
------------- --------------
See Accompanying Notes to the Consolidated Financial Statements
2
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended June 30, 1997 and 1996
(Thousands of dollars except per share amounts)
June 30, 1997 June 30, 1996
------------- --------------
Net sales $ 17,056 $ 6,749
Cost of sales and operating expenses 14,634 6,993
------------- ---------------
Gross profit (loss) 2,422 (244)
Selling, general and administrative expenses 1,305 664
------------- ---------------
Operating income (loss) 1,117 (908)
------------- ---------------
Other income (expense):
Interest expense (645) (190)
Miscellaneous 23 (28)
------------- ---------------
Total other income (expense) (622) (218)
------------- ---------------
Earnings (loss) before income tax benefit 495 (1,126)
Income tax benefit 300 -
------------- ---------------
Net earnings (loss) 795 (1,126)
Preferred stock dividends 72 -
------------- ---------------
Net earnings (loss) available to common
shareholders $ 723 $ (1,126)
------------- ---------------
------------- ---------------
Earnings (loss) per common share $ 0.05 $ (0.11)
------------- ---------------
------------- ---------------
Weighted average shares outstanding 14,758,000 10,105,000
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------------- ---------------
See Accompanying Notes to the Consolidated Financial Statements
3
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine months ended June 30, 1997 and 1996
(Thousands of dollars except per share amounts)
June 30, 1997 June 30, 1996
------------- --------------
Net sales $ 40,558 $ 17,484
Cost of sales and operating expenses 34,447 16,345
------------- --------------
Gross profit 6,111 1,139
Selling, general, and administrative expenses 3,968 2,169
------------- --------------
Operating income (loss) 2,143 (1,030)
Other income (expense):
Interest expense (1,534) (435)
Miscellaneous 57 -
------------- --------------
Total other income (expense) (1,477) (435)
------------- --------------
Earnings (loss) before income tax benefit 666 (1,465)
Income tax benefit 595 437
------------- --------------
Net earnings (loss) 1,261 (1,028)
Preferred stock dividends 353 -
------------- --------------
Net earnings (loss) available to common
shareholders $ 908 $ (1,028)
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------------- -------------
Earnings (loss) per common share $ 0.06 $ (0.11)
------------- --------------
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Weighted average shares outstanding 14,209,000 9,309,000
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------------- -------------
See Accompanying Notes to the Consolidated Financial Statements
4
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Nine months ended June 30, 1997
(Thousands of Dollars)
<TABLE> Additional
Preferred Stock Common Stock Paid-in Accumulated
Shares Amount Shares Amount Capital (Deficit) Total
-------- -------- -------- ------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, September 30, 1996 - $ - 13,795,000 $ 13 $ 25,547 $ (11,397) $ 14,163
Preferred stock Series C
issued for cash 10,000 1,000 - - - - 1,000
Redemption of preferred
stock Series C (10,000) (1,000) - - - - (1,000)
Preferred stock Series D issued 10,000 500 - - - - 500
for acquisitions
Common stock issued on
exercise or conversion of
Series I warrants - - 155,000 1 24 - 25
Common stock repurchased - - (66,000) - (119) - (119)
Dividends Paid - - - - - (353) (353)
Net earnings for the period - - - - - 1,261 1,261
---------- -------- ---------- -------- ------------ ----------- ---------
Balances, June 30, 1997 10,000 $ 500 13,884,000 $ 14 $ 25,452 $ (10,489) $ 15,477
---------- -------- ---------- -------- ----------- ----------- ---------
---------- -------- ---------- -------- ----------- ----------- ---------
</TABLE>
See Accompanying Notes to the Consolidated Financial Statements
5
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended June 30, 1997 and 1996
(Thousands of Dollars)
June 30, 1997 June 30, 1996
------------- -------------
Operating Activities:
Net Earnings (loss) $ 1,261 $ (1,028)
Adjustments to reconcile net earnings
to net cash (used in) operating activities:
Depreciation and amortization 1,777 742
Deferred income taxes (595) (441)
Changes in Assets and Liabilities:
Accounts receivable (3,082) (853)
Inventories (1,357) (164)
Prepaid expenses and deposits (10) (224)
Accounts payable 417 1,392
Current liabilities, excluding debt (4) 171
------------- --------------
Net Cash (used in) Operating Activities (1,593) (405)
------------- --------------
Investing Activities:
Capital expenditures, net (2,313) (1,362)
Note receivable, related party - 28
Acquisitions (11,200) -
Other assets (1,649) (1,327)
------------- --------------
Net Cash (used in) Investing Activities (15,162) (2,661)
------------- --------------
Financing Activities:
Proceeds from borrowings 23,560 9,506
Principal payments on borrowings (7,339) (7,842)
Deferred offering costs - (678)
Dividends Paid (353) -
Net proceeds from issuance of stock 1,025 2,292
Redemption of preferred stock (1,000) -
Common stock repurchased (119) -
------------- ------------
Net Cash Provided by Financing Activities 15,774 3,278
------------- --------------
Increase (decrease) in Cash (981) 212
CASH, beginning of period 1,450 184
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CASH, end of period $ 469 $ 396
------------- --------------
------------- --------------
See Accompanying Notes to the Consolidated Financial Statements
6
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
General Information:
I. The Financial Statements included herein have been prepared by the
Company without audit except the September 30, 1996 balance sheet,
which was audited. The Statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission and
reflect all adjustments, consisting of only normal recurring accruals
which are, in the opinion of management, necessary for a fair
statement of the results of operations for the periods shown. These
Financial Statements should be read in conjunction with the Financial
Statements and notes thereto included in the Company's latest report
on Form 10-K, dated September 30, 1996.
II. The results of operations for the nine months ending June 30, 1997,
and 1996, are not necessarily indicative of the results to be expected
for the full year.
III. Inventories as of June 30, 1997, and September 30, 1996, consisted of
the following:
June 30, 1997 September 30, 1996
--------------- ------------------
Raw materials $ 2,137 $ 1,302
Finished goods 1,721 1,171
Other 172 -
---------------- ----------------
Total $ 4,030 $ 2,473
---------------- ----------------
---------------- ----------------
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and the notes thereto included elsewhere
herein. Statements included on the following discussion concerning
predictions of economic performance and management's plans and objectives
are forward looking statements. These statements involve risks and
uncertainties that could cause actual results to differ materially from
the forward looking statements. Factors which would cause or contribute
to such differences are summarized in the following discussions and include:
downturns in the Company's primary markets; disruptions to the Company's
operations from acts of God or extended maintenance; disruptions in the
availability or pricing of raw materials; transportation difficulties; and
the unavailability of financing to complete management's plans and objectives.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------------------------------------------------
June 30, September 30,
(Dollars in millions) 1997 1996
- -------------------------------------------------------------------------
Current ratio 1.25:1 1.22:1
Working capital $ 2.6 $ 1.6
- -------------------------------------------------------------------------
Cash used by operating activities for the nine months ending June 30,
1997, was $1.6 million, an increase of $1.2 million compared to the same
period one year earlier. The increase in cash used in operating activities
was primarily related to increases in accounts receivable and inventory.
The Company invested $2.3 million in property, plant and equipment
through June 30, 1997, for general modernization and efficiency upgrades.
Planned capital expenditures during the next year for the Company's
existing facilities are estimated to be $2 million. Included in
this amount are capital expenditures for the Company's shredders and
materials handling equipment designed to increase capacity and improve
operating efficiencies. Management anticipates the capital expenditures
will be paid with cash from operations and long-term debt financing.
On April 7, 1997, the Company acquired for $5.7 million substantially all
the assets of Addlestone Recycling Corporation (ARC) located in Metter,
Georgia. The purchase was financed with $5.2 million of proceeds from
the Company's existing credit facility and $.5 million or 10,000 shares
of the Company's Series D Convertible Preferred Stock (the "Series D
Shares"). The Series D Shares will automatically convert on April 1,
1999 into the number of shares of the Company's common stock whose
average market price for the ten trading days preceding the date of
conversion is equivalent to $0.5 million plus the amount of all accrued
and unpaid dividends on the Series D Shares to the date of conversion.
If a consolidation or merger of the Company with or into another company
or entity occurs and the Company is not the surviving entity, the Series
D Shares will convert immediately into the number of shares the Company's
common stock whose average market price for the ten trading days
preceding the date of consolidation or merger is equivalent to $0.5
million plus the amount of all accrued and unpaid dividends on the Series
D Shares to the date of conversion. Holders of the Series D Shares are
entitled to dividends on a cumulative basis at an annual rate of eight
percent, payable quarterly in cash. At anytime prior to April 1, 1999,
the Company shall have the right to redeem the outstanding shares of
Series D Preferred Stock, in whole or in part, at a cash redemption price
equal to the sum of $50 per share, and the amount of all accrued but
unpaid dividends on the Series D Preferred Stock. The Company has not
assumed or guaranteed any of the liabilities of ARC.
8
On June 25, 1997, the Company acquired for $6 million substantially all
the assets of Addlestone International Corporation (AIC) located in
Georgetown, South Carolina. The purchase was financed with the proceeds
from a $7 million convertible note due on July 3, 1998, and bears
interest at prime plus four percent per annum until December 20, 1997,
and thereafter will increase by one percent per annum each month. If not
paid on or before its maturity, the note is convertible into common stock
of the Registrant at 90 percent of the average closing price of the
Common Stock then listed for the ten trading days immediately prior to
the Conversion Date. The discount provision is recognized as imputed
interest in the amount of $0.8 million recognized as additional interest
expense on a pro rata basis from the date of issuance to the first
conversion date that the conversion can occur. In connection with the bridge
financing, the Company issued Warrants to purchase 990,000 shares of Common
Stock at $2.00 per share, exercisable until June 20, 2002. The Company has not
assumed or guaranteed any of the liabilities of AIC.
At September 30, 1996, the Company had $8.4 million outstanding under a
three year credit facility with a lending institution totaling $10
million. During the quarter, the Company increased the existing credit
facility to $25 million with maturity terms ranging from six months to
three years. As of June 30, 1997, the Company had $20.1 million
outstanding under the new credit facility. The Company borrowed $9.9
million against the credit facility during the quarter, the proceeds of
which were used with other borrowings to fund acquisitions and for other
general corporate purposes. Utilization of the credit facility is
limited by existing debt covenants.
On December 31, 1996, the Company completed a private placement of $1
million of Series C Convertible Preferred Stock ("Series C Preferred").
Net proceeds to the Company were $907,000. For the quarter ending June
30, 1997, the Company redeemed the Series C Preferred for $1.3 million
with a combination of existing cash and financing from the Company's
credit facility. Included in the redemption price was a dividend in the
amount of $0.3 million.
During the quarter, the Board of Directors of Recycling Industries, Inc.
authorized the repurchase of up to 700,000 shares of common stock in open
market transactions. As of June 30, 1997, the Company had acquired
66,000 shares for $0.1 million with cash from operations.
The Company is required to implement Financial Accounting Standards Board
Statement No. 128, "Earnings per Share," in fiscal year 1998.
Application of the new rules would not have a significant impact upon the
financial statements of the Company for the three and nine months ending
June 30, 1997.
Management intends to continue seeking opportunities for expansion in the
metals recycling business and believes that the Company's liquidity,
capital resources and borrowing capabilities are adequate for its current
operations. The Company may, however, need to raise additional capital
to fund the acquisition and integration of additional metals recycling
businesses which is an integral component of the Company's strategy. The
Company may raise such funds through warrant exercises, bank financing or
public or private offerings of its securities. There can be no assurance
that the Company will be able to secure such additional financing. If the
Company is not successful in securing such financing, the Company's
ability to pursue its acquisition strategy may be impaired and the
results of operations for future periods may be adversely affected.
RESULTS OF OPERATIONS
The Company's operating results depend in large part on its ability to
effectively manage the purchase, processing and sale of scrap metals.
The demand for processed ferrous and non-ferrous material is subject to
general economic, industry and market-specific conditions beyond the
Company's control which may result in periodic fluctuations in the sales
prices of
9
the Company's products. The Company seeks to maintain its
operating margins by adjusting the purchase price for raw ferrous and
non-ferrous metals in response to such fluctuations, subject to local
market conditions. Although the Company is unable to hedge against
changes in market prices, it seeks to minimize this risk by maintaining
low inventory levels of raw and processed material.
Net sales for the three months ended June 30, 1997, were $17.1 million,
an increase of $10.3 million compared to the same period one year
earlier. The increase is primarily related to the acquisition of
Weissman Iron and Metal ("Weissman") in August 1996 and ARC in April 1997.
Net sales for the nine months ended June 30, 1997, were $40.6 million, an
increase of $23.1 million compared to the same period one year ago. The
increase is primarily related to the acquisition of Anglo, Mid-America
Shredding, Weissman and ARC. The average sales price per ton of prepared
ferrous material increased by twelve percent and seven percent for the three
and nine months ending June 30, 1997, respectively, compared to the same
periods one year earlier. The increase in the average selling price is
primarily attributable to increased demand for ferrous materials.
Gross profit for the three months ended June 30, 1997, was $2.4 million,
an increase of $2.7 million compared to the same period one year earlier.
The increase was primarily related to the acquisition of Weissman and
ARC. Gross profit for the nine months ended June 30, 1997, was $6.1
million, an increase of $5 million compared to the same period one year
earlier. The increase resulted primarily from the acquisition of
Mid-America Shredding, Weissman and ARC.
Operating income for the three and nine months ending June 30, 1997,
increased by $2 million and $3.2 million, respectively, compared to the
same periods one year earlier. The increase for the three months resulted
primarily from the acquisition of Weissman and ARC. The year-to-date increase
resulted from the acquisition of Mid-America Shredding, Weissman, and ARC.
Selling, general and administrative (SG&A) expenses for the three and
nine months ended June 30, 1997, were $1.3 million and $4 million,
respectively. SG&A increased by $0.6 million and $1.8 million for the
three and nine months, respectively, compared to the same periods one
year earlier. The increase was primarily the result of acquisitions. As
a percent of sales, SG&A declined by two percent for the three and nine
months ended June 30, 1997, compared to the same periods one year
earlier. As a result of continued emphasis on productivity improvements,
the Company has managed to achieve increases in sales without
significant increases in support costs as a percentage of sales.
Interest expense increased for the three and nine months ended June 30,
1997, by $0.5 million and $1.1 million, respectively, compared to the
same periods one year earlier. The increases were primarily related to
increases in long-term debt to finance the acquisitions of Weissman,
ARC, Anglo and Mid-America Shredding.
During the quarter, the Company recorded a $0.3 million income tax
benefit as a result of utilizing a net operating loss carryforward to
offset anticipated taxable income. Remaining net operating loss carry-
overs available through the year 2011 are approximately $9 million.
Earnings (loss) per common share amounts were computed by dividing
earnings (loss) after deduction of preferred stock dividends by the
average number of common and dilutive equivalent shares outstanding.
Fully diluted per-common-share amounts assume conversion of the Preferred
Stock and the issuance of common stock for all other potentially dilutive
Common Stock equivalents outstanding.
The Company does not believe its businesses have been adversely affected
by general inflation.
10
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
On June 18, 1997, litigation was commenced against the Company for breach of
contract, quantum meruit, negligence, fraud and violation of federal and state
securities laws arising out of investments made with an individual named John
Silvia, Jr. and into Caside Associates, Recycling Associates Trust and/or
Environmental Recovery Systems of Somerset, Inc., a former subsidiary of the
Company. The litigation, filed in the Massachusetts Trial Court, Bristol
Division and captioned William C. Mitchell et al. v. Recycling Industries,
Inc., seeks damages in excess of $2,000,000. The Company believes the
plaintiff's claims to be without merit and is vigorously defending this
matter.
On May 31, 1996, litigation was commenced against the Company seeking a
temporary injunction against the Company prohibiting the Company's operations
at its Harlingen, Texas facility from throwing debris and scrap metal onto an
adjoining parcel of property and a permanent injunction enjoining the Company
from operating its scrap metal business at the Harlingen facility. The
litigation was brought in the Texas District Court for Cameron County, Texas
and is captioned Yarbroughs, Inc. v. Recycling Industries, Inc. d/b/a Anglo
Iron & Metals, Inc. The Company believes the allegations in the complaint are
without merit and is vigorously defending this action.
11
Item 2 - Changes in Securities
Recent Sales of Unregistered Securities
During the quarter ended June 30, 1997, the Company completed the following
sales of its securities pursuant to the exemption from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act")
provided by Section 4(2) of the Securities Act and Regulation D promulgated
thereunder. Based upon representations made to the Company and further
investigation by the Company, the Company believes that each purchaser in the
following transactions was an accredited investor as that term is defined
under Rule 501(a) of Regulation D:
1. In connection with the Company's acquisition of substantially all of
the assets of ARC, on April 7, 1997, the Company issued 10,000 shares of
Series D Convertible Preferred Stock (the "Series D Shares") to Addlestone
Recycling Corporation, as payment of $500,000 of the purchase price for that
acquisition.
The Series D Shares will automatically convert on April 1, 1999 into
that number of shares of the Company's common stock whose average market price
for the ten trading days preceding the date of conversion is equivalent to
$500,000 plus the amount of all accrued and unpaid dividends on the Series D
Shares to the date of conversion. Holders of the Series D Shares are entitled
to dividends on a cumulative basis at an annual rate of eight percent, payable
quarterly in cash.
2. On April 7, 1997, the Company issued warrants to acquire up to 128,000
shares of its common stock to Coast Business Credit in connection with an
increase in the Company's credit facility from $12 million to $20 million.
Each warrant is exercisable at a price of $1.5625 per share.
3. On June 23, 1997, the Company issued warrants to acquire up to 990,000
shares of its common stock to Siena Capital Partners, L.P. and BankBoston,
N.A., in connection with a $7 million short-term bridge loan. The exercise
price for 650,000 of these warrants is $2.00 per share. The exercise prices
for the remaining 340,000 warrants will be determined at various dates through
June 23, 1998.
12
Item 6 - Exhibits and Reports on Form 8-K
Exhibits
3.1 Amended Bylaws of Recycling Industries, Inc.*
4.1 Designation of Preferences, Limitations and Relative Rights of the
Series D Convertible Preferred Stock of Recycling Industries, Inc.,
incorporated by reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K reporting an event of April 7, 1997, as amended June 20, 1997 on
Form 8-K/A, Commission File No. 0-20179.
10.1 Agreements related to the acquisition of Addlestone International
Corporation:
10.1.1 Asset Purchase Agreement dated February 16, 1997 by and among
Recycling Industries of Georgia, Inc., Recycling Industries, Inc., Addlestone
Recycling Corporation, Nathan Addlestone, Keith Rosen and Susan Berlijn,
incorporated by reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K reporting an event of April 7, 1997, as amended June 20, 1997 on
Form 8-K/A, Commission File No. 0-20179.
10.2 Agreements related to the Acquisition of Addlestone International
Corporation:
10.2.1 Asset Purchase Agreement dated April 8, 1997 by and among Recycling
Industries of South Carolina, Inc., Recycling Industries, Inc., Addlestone
International Corporation and Nathan Addlestone, incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K reporting an event of
June 25, 1997, Commission File No. 0-20179.
10.2.2 First Amendment to the Asset Purchase Agreement dated June 24, 1997
by and among Recycling Industries of South Carolina, Inc., Recycling
Industries, Inc., Addlestone International Corporation and Nathan Addlestone,
incorporated by reference to Exhibit 10.2 to the Company's Current Report on
Form 8-K reporting an event of June 25, 1997, Commission File No. 0-20179.
10.2.3 Site Maintenance and Indemnification Agreement dated June 24, 1997
by and among Recycling Industries of South Carolina, Inc., Recycling
Industries, Inc., Addlestone International Corporation and Nathan Addlestone,
incorporated by reference to Exhibit 10.3 to the Company's Current Report on
Form 8-K reporting an event of June 25, 1997, Commission File No. 0-20179.
13
10.3 Second Amended and Restated Loan and Security Agreement dated April 7,
1997, by and among Recycling Industries, Inc.; Nevada Recycling, Inc.;
Recycling Industries of Texas, Inc.; Recycling Industries of Missouri, Inc.;
Recycling Industries of Georgia, Inc.; Weissman Industries, Inc.; and Coast
Business Credit, incorporated by reference to Exhibit 10.19 to the Company's
Registration Statement on Form S-1, as amended June 24, 1997, Commission File
No. 333-20289.
10.4 Agreements related to the Siena Capital Partners, L.P. short-term
bridge loan:
10.4.1 Securities Purchase Agreement dated June 20, 1997, by and among
Recycling Industries, Inc. and Siena Capital Partners, L.P.*
10.4.2 Form of $7,000,000 Promissory Note from Recycling Industries, Inc.
to Siena Capital Partners, L.P.*
10.4.3 Form of Warrant Agreement.*
27 Financial Data Schedule.*
* Filed Herewith
Reports of Form 8-K
1. Current Report on Form 8-K dated April 21, 1997, reporting the
acquisition of substantially all of the assets of Addlestone Recycling
Corporation on April 7, 1997.
2. Current Report on Form 8-K/A dated June 20, 1997, amending the Current
Report on Form 8-K dated April 21, 1997 to filed the following financial
statements:
(a) Audited Combined Financial Statements as of December 31, 1996 and
1995 and for the years ended December 31, 1996, 1995 and 1994 of Addlestone
Recycling Corporation and Addlestone International Corporation;
(b) Unaudited Pro-forma Consolidated Financial Statements for
Recycling Industries, Inc. and Subsidiaries as of March 31, 1997 and for the
12 months ended September 30, 1996.
14
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 thereunto duly authorized.
DATE: AUGUST 18, 1997
RECYCLING INDUSTRIES, INC.
By: /s/ Thomas J. Wiens
---------------------------------------------------
Thomas J. Wiens, Chairman & Chief Executive Officer
By: /s/ Brian L. Klemsz
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Brian L. Klemsz, Principal Financial Officer
15
Exhibit 3.1
Amended Bylaws
of
RECYCLING INDUSTRIES, INC.
TABLE OF CONTENTS
Article I
Shareholders 1
1. Annual Shareholders' Meeting 1
2. Special Shareholders' Meeting 1
3. Determination of Record Date 1
4. Voting List 2
5. Notice to Shareholders 2
6. Quorum 3
7. Voting Entitlement of Shares 4
8. Proxies; Acceptance of Votes and Consents 4
9. Waiver of Notice 4
10. Action by Shareholders Without a Meeting 4
11. Meetings by Telecommunications 5
Article II
Directors 5
1. Authority of the Board of Directors 5
2. Number 5
3. Qualification 5
4. Election Article VII
5. Term 5
6. Resignation 5
7. Removal 5
8. Vacancies 6
9. Meetings 6
10. Notice of Special Meeting 6
11. Quorum 7
12. Waiver of Notice 7
13. Attendance by Telephone 7
14. Deemed Assent to Action 7
15. Action by Directors Without a Meeting 8
Article III
Committees of the Board of Directors 8
1. Committees of the Board of Directors 8
Article IV
Officers 9
1. General 9
2. Term 9
3. Removal and Resignation 9
4. Chairman 10
5. President 10
6. Vice President 10
7. Secretary 10
8. Assistant Secretary 11
9. Treasurer 11
10. Assistant Treasurer 11
11. Compensation 11
Article V
Indemnification 11
1. Definitions 12
2. Authority to indemnify directors 12
3. Mandatory indemnification of directors 13
4. Advance of expenses to directors 13
5. Court-ordered indemnification of directors 14
6. Determination and authorization of indemnification of directors 14
7. Indemnification of officers, employees, fiduciaries, and agents 15
8. Insurance 16
9. Notice to shareholders of indemnification of director 16
Article VI
Shares 16
1. Certificates 16
2. Facsimile Signatures 17
3. Transfers of Shares 17
4. Shares Held for Account of Another 17
Article VII
Miscellaneous 18
1. Corporate Seal 18
2. Fiscal Year 18
3. Receipt of Notices by the Corporation 18
4. Amendment of Bylaws 19
5. Adoption 19
Amended Bylaws
of
RECYCLING INDUSTRIES, INC.
Article I
Shareholders
1. The annual shareholders' meeting shall be held on the date and at the time
and place fixed from time to time by the board of directors.
2. Special Shareholders' Meeting. A special shareholders' meeting for any
purpose or purposes, may be called by the board of directors or the chairman of
the board of directors. The Corporation shall also hold a special
shareholders' meeting in the event it receives, in the manner specified in
Section _____, one or more written demands for the meeting, stating the purpose
or purposes for which it is to be held, signed and dated by the holders of
shares representing not less than one-tenth of all of the votes entitled to be
cast on any issue at the meeting. Special meetings shall be held at the
principal office of the Corporation or at such other place as the board of
directors or the chairman may determine.
3. Determination of Record Date.
(a) In order to make a determination of shareholders (1) entitled to
notice of or to vote at any shareholders' meeting or at any adjournment of a
shareholders' meeting, (2) entitled to demand a special shareholders' meeting,
(3) entitled to take any other action, (4) entitled to receive payment of a
share dividend or a distribution, or (5) for any other purpose, the board of
directors may fix a future date as the record date for such determination of
shareholders. The record date may be fixed not more than seventy days before
the date of the proposed action.
(b) Unless otherwise specified when the record date is fixed, the time of
day for determination of shareholders shall be as of the Corporation's close of
business on the record date.
(c) A determination of shareholders entitled to be given notice of or to
vote at a shareholders' meeting is effective for any adjournment of the meeting
unless the board of directors fixes a new record date, which the board shall do
if the meeting is adjourned to a date more than one hundred twenty days after
the date fixed for the original meeting.
(d) If no record date is otherwise fixed, the record date for determining
shareholders entitled to be given notice of and to vote at an annual or special
shareholders' meeting is the day before the first notice is given to
shareholders.
(e) The record date for determining shareholders entitled to take action
without a meeting pursuant to Section Error! Reference source not found. is the
date a writing upon which the action is taken is first received by the
Corporation.
4. Voting List.
(a) After a record date is fixed for a shareholders' meeting, the
secretary shall prepare a list of the names of all its shareholders who are
entitled to be given notice of the meeting. The list shall be arranged by
voting groups and within each voting group by class or series of shares, shall
be alphabetical within each class or series, and shall show the address of, and
the number of shares of each such class and series that are held by, each
shareholder.
(b) The shareholders' list shall be available for inspection by any
shareholder, beginning the earlier of ten days before the meeting for which
the list was prepared or two business days after notice of the meeting is given
and continuing through the meeting, and any adjournment thereof, at the
Corporation's principal office or at a place identified in the notice of the
meeting in the city where the meeting will be held.
(c) The secretary shall make the shareholders' list available at the
meeting, and any shareholder or agent or attorney of a shareholder is entitled
to inspect the list at any time during the meeting or any adjournment.
5. Notice to Shareholders
(a) The secretary shall give notice to shareholders of the date, time, and
place of each annual and special shareholders' meeting no fewer than ten nor
more than sixty days before the date of the meeting; except that, if the
articles of incorporation are to be amended to increase the number of
authorized shares, at least thirty days' notice shall be given. Except as
otherwise required by the Colorado Business Corporation Act, the secretary
shall be required to give such notice only to shareholders entitled to vote at
the meeting.
(b) Notice of an annual shareholders' meeting need not include a
description of the purpose or purposes for which the meeting is called unless
a purpose of the meeting is to consider an amendment to the articles of
incorporation, a restatement of the articles of incorporation, a plan of
merger or share exchange, disposition of substantially all of the property of
the Corporation, consent by the Corporation to the disposition of property by
another entity, shares or other interests of which are held by the Corporation
and constitute all or substantially all of the Corporation's assets, or
dissolution of the Corporation.
(c) Notice of a special shareholders' meeting shall include a description
of the purpose or purposes for which the meeting is called.
(d) Notice of a shareholders' meeting shall be in writing unless oral
notice is reasonable under the circumstances and shall be given:
(1) by deposit in the United States mail, properly addressed to the
shareholder's address shown in the Corporation's current record of
shareholders, first class postage prepaid, and, if so given, shall be effective
when mailed; or
(2) by telephone telegraph, teletype, electronically transmitted
facsimile, electronic mail, mail, or private carrier or by personal delivery
to the shareholder, and, if so given, shall be effective when actually received
by the shareholder or in the case of telephone or oral notices, when
communicated to the shareholder.
(e) If an annual or special shareholders' meeting is adjourned to a
different date, time, or place, notice need not be given of the new date, time,
or place if the new date, time, or place is announced at the meeting before
adjournment; provided, however, that, if a new record date for the adjourned
meeting is fixed pursuant to Section 0, notice of the adjourned meeting shall
be given to persons who are shareholders as of the new record date.
(f) If three successive notices are given by the Corporation, whether
with respect to a shareholders' meeting or otherwise, to a shareholder and are
returned as undeliverable, no further notices to such shareholder shall be
necessary until another address for the shareholder is made known to the
Corporation.
6. Quorum. Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of those shares exists with
respect to that matter. One-third of the votes entitled to be cast on the
matter by the voting group shall constitute a quorum of that voting group for
action on the matter. If a quorum does not exist with respect to any voting
group, the chairman or president or any shareholder or proxy that is present
at the meeting that is a member of that voting group, may adjourn the meeting
to a different date, time, or place, and (subject to the next sentence) notice
need not be given of the new date, time, or place if the new date, time, or
place is announced at the meeting before adjournment. If a new record date
for the adjourned meeting is or must be fixed pursuant to Section 0, notice of
the adjourned meeting shall be given pursuant to Section to persons
who are shareholders as of the new record date. At any adjourned meeting at
which a quorum exists, any matter may be acted upon that could have been acted
upon at the meeting originally called; provided, however, that, if new notice
is given of the adjourned meeting, then such notice shall state the purpose or
purposes of the adjourned meeting sufficiently to permit action on such
matters. Once a share is represented for any purpose at a meeting, including
the purpose of determining that a quorum exists, it is deemed present for
quorum purposes for the remainder of the meeting and for any adjournment of
that meeting unless a new record date is or shall be set for that adjourned
meeting.
7. Voting Entitlement of Shares. Except as stated in the articles of
incorporation, each outstanding share, regardless of class, is entitled to one
vote, and each fractional share is entitled to a corresponding fractional vote,
on each matter voted on at a shareholders' meeting.
8. Proxies; Acceptance of Votes and Consents.
(a) A shareholder may vote either in person or by proxy.
(b) An appointment of a proxy is not effective against the Corporation
until the appointment is received by the Corporation. An appointment is valid
for eleven months unless a different period is expressly provided in the
appointment form.
(c) The Corporation may accept or reject any appointment of a proxy,
revocation of appointment of a proxy, vote, consent, waiver, or other writing
purportedly signed by or for a shareholder, if such acceptance or rejection is
in accordance with the provisions of Sections 7-107-203 and 7-107-205 of the
Colorado Business Corporation Act.
9. Waiver of Notice.
(a) A shareholder may waive any notice required by the Colorado Business
Corporation Act, the articles of incorporation or these bylaws, whether before
or after the date or time stated in the notice as the date or time when any
action will occur or has occurred. The waiver shall be in writing, be signed
by the shareholder entitled to the notice, and be delivered to the Corporation
for inclusion in the minutes or filing with the corporate records, but such
delivery and filing shall not be conditions of the effectiveness of the waiver.
(b) A shareholder's attendance at a meeting waives objection to lack of
notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting because of lack of notice or defective notice, and waives
objection to consideration of a particular matter at the meeting that is not
within the purpose or purposes described in the meeting notice, unless the
shareholder objects to considering the matter when it is presented.
10. Action by Shareholders Without a Meeting. Any action required or
permitted to be taken at a shareholders' meeting may be taken without a meeting
if all of the shareholders entitled to vote thereon consent to such action in
writing. Action taken pursuant to this section shall be effective when the
Corporation has received writings that describe and consent to the action,
signed by all of the shareholders entitled to vote thereon. Action taken
pursuant to this section shall be effective as of the date the last writing
necessary to effect the action is received by the Corporation, unless all of
the writings necessary to effect the action specify another date, which may be
before or after the date the writings are received by the Corporation. Such
action shall have the same effect as action taken at a meeting of shareholders
and may be described as such in any document. Any shareholder who has signed a
writing describing and consenting to action taken pursuant to this section may
revoke such consent by a writing signed by the shareholder describing the
action and stating that the shareholder's prior consent thereto is revoked, if
such writing is received by the Corporation before the effectiveness of the
action.
11. Meetings by Telecommunications. To the extent provided by resolution of
the Board of Directors or in the notice of the meeting, any or all of the
shareholders may participate in an annual or special shareholders' meeting by,
or the meeting may be conducted through the use of, any means of communication
by which all persons participating in the meeting may hear each other during
the meeting. A shareholder participating in a meeting by this means is deemed
to be present in person at the meeting.
Article II
Directors
1. Authority of the Board of Directors. The corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed under the direction of, a board of directors.
2. Number. The number of directors shall be at least two and not more than
nine. Within that range, the number of directors shall be as stated by
resolution adopted by the board of directors from time to time, but no decrease
in the number of directors shall have the effect of shortening the term of any
incumbent director.
3. Qualification. Directors shall be natural persons at least eighteen years
old but need not be residents of the State of Colorado or shareholders of the
Corporation.
4. Election. The board of directors shall be elected at the annual meeting of
the shareholders or at a special meeting called for that purpose.
5. Term. Each director shall be elected to hold office until the next annual
meeting of shareholders and until the director's successor is elected and
qualified.
6. Resignation. A director may resign at any time by giving written notice
of his or her resignation to any other director or (if the director is not
also the secretary) to the secretary. The resignation shall be effective when
it is received by the other director or secretary, as the case may be, unless
the notice of resignation specifies a later effective date. Acceptance of such
resignation shall not be necessary to make it effective unless the notice so
provides.
7. Removal. Any director may be removed by the shareholders, with or without
cause, at a meeting called for that purpose. The notice of the meeting shall
state that the purpose, or one of the purposes, of the meeting is removal
of the director. A director may be removed only if the number of votes cast
in favor of removal exceeds the number of votes cast against removal.
8. Vacancies
(a) If a vacancy occurs on the board of directors, including a vacancy
resulting from an increase in the number of directors:
(1) The shareholders may fill the vacancy at the next annual meeting
or at a special meeting called for that purpose; or
(2) The board of directors may fill the vacancy; or
(3) If the directors remaining in office constitute fewer than a quorum
of the board, they may fill the vacancy by the affirmative vote of a majority
of all the directors remaining in office.
(b) Notwithstanding Section 0, if the vacant office was held by a director
elected by a voting group of shareholders, then, if one or more of the
remaining directors were elected by the same voting group, only such directors
are entitled to vote to fill the vacancy if it is filled by directors, and they
may do so by the affirmative vote of a majority of such directors remaining in
office; and only the holders of shares of that voting group are entitled to
vote to fill the vacancy if it is filled by the shareholders.
(c) A vacancy that will occur at a specific later date, by reason of a
resignation that will become effective at a later date under Section ____. or
otherwise, may be filled before the vacancy occurs, but the new director may
not take office until the vacancy occurs.
9. Meetings. The board of directors may hold regular or special meetings in
or out of Colorado. The board of directors may, by resolution, establish the
dates, times and places for regular meetings, which may thereafter be held
without further notice. Special meetings may be called by the chairman or by
any two directors and shall be held at the principal office of the Corporation
unless another place stated on the notice is consented to by every director.
At any time when the board consists of a single director, that director may
act at any time, date, or place without notice.
10. Notice of Special Meeting. Notice of a special meeting shall be given to
every director at least twenty four hours before the time of the meeting,
stating the date, time, and place of the meeting. The notice need not describe
the purpose of the meeting. Notice may be given orally to the director,
personally or by telephone or other wire or wireless communication. Notice
may also be given in writing by telegraph, teletype, electronically transmitted
facsimile, electronic mail, mail, or private carrier. Notice shall be
effective at the earliest of the time it is received; five days after it is
deposited in the United States mail, properly addressed to the last address for
the director shown on the records of the Corporation, first class postage
prepaid; or the date shown on the return receipt if mailed by registered or
certified mail, return receipt requested, postage prepaid, in the United States
mail and if the return receipt is signed by the director to which the notice
is addressed.
11. Quorum. Except as provided in Section Error! Reference source not found.,
a majority of the number of directors fixed in accordance with these Bylaws
shall constitute a quorum for the transaction of business at all meetings of
the board of directors. The act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the board of
directors, except as otherwise specifically required by law.
12. Waiver of Notice
(a) A director may waive any notice of a meeting before or after the time
and date of the meeting stated in the notice. Except as provided by Section 0,
the waiver shall be in writing and shall be signed by the director. Such
waiver shall be delivered to the secretary for filing with the corporate
records, but such delivery and filing shall not be conditions of the
effectiveness of the waiver.
(b) A director's attendance at or participation in a meeting waives any
required notice to him or her of the meeting unless, at the beginning of the
meeting or promptly upon his or her later arrival, the director objects to
holding the meeting or transacting business at the meeting because of lack of
notice or defective notice and does not thereafter vote for or assent to action
taken at the meeting.
13. Attendance by Telephone. One or more directors may participate in a
regular or special meeting by, or conduct the meeting through the use of, any
means of communication by which all directors participating may hear each other
during the meeting. A director participating in a meeting by this means is
deemed to be present in person at the meeting.
14. Deemed Assent to Action. A director who is present at a meeting of the
board of directors when corporate action is taken shall be deemed to have
assented to all action taken at the meeting unless:
(1) The director objects at the beginning of the meeting, or promptly
upon his or her arrival, to holding the meeting or transacting business at the
meeting and does not thereafter vote for or assent to any action taken at the
meeting;
(2) The director contemporaneously requests that his or her dissent or
abstention as to any specific action taken be entered in the minutes of the
meeting; or
(3) The director causes written notice of his or her dissent or
abstention as to any specific action to be received by the presiding officer of
the meeting before adjournment of the meeting or by the secretary (or, if the
director is the secretary, by another director) promptly after adjournment of
the meeting.
The right of dissent or abstention pursuant to this Section as to a
specific action is not available to a director who votes in favor of the
action taken.
15. Action by Directors Without a Meeting. Any action required or permitted
by law to be taken at a board of directors' meeting may be taken without a
meeting if all members of the board consent to such action in writing. Action
shall be deemed to have been so taken by the board at the time the last
director signs a writing describing the action taken, unless, before such time,
any director has revoked his or her consent by a writing signed by the director
and received by the secretary or any other person authorized by the bylaws or
the board of directors to receive such a revocation. Such action shall be
effective at the time and date it is so taken unless the directors establish a
different effective time or date. Such action has the same effect as action
taken at a
meeting of directors and may be described as such in any document.
Article III
Committees of the Board of Directors
1. Committees of the Board of Directors
(a) Subject to the provisions of section 7-109-106, the board of directors
may create one or more committees and appoint one or more members of the board
of directors to serve on them. The creation of a committee and appointment of
members to it shall require the approval of a majority of all the directors in
office when the action is taken, whether or not those directors constitute a
quorum of the board.
(b) The provisions of these bylaws governing meetings, action without
meeting, notice, waiver of notice, and quorum and voting requirements of the
board of directors apply to committees and their members as well.
(c) To the extent specified by resolution adopted from time to time by a
majority of all the directors in office when the resolution is adopted, whether
or not those directors constitute a quorum of the board, each committee shall
exercise the authority of the board of directors with respect to the corporate
powers and the management of the business and affairs of the Corporation;
except that a committee shall not:
(1) Authorize distributions;
(2) Approve or propose to shareholders action that the Colorado Business
Corporation Act requires to be approved by shareholders;
(3) Fill vacancies on the board of directors or on any of its
committees;
(4) Amend the articles of incorporation pursuant to section 7-110-102
of the Colorado Business Corporation Act;
(5) Adopt, amend, or repeal bylaws;
(6) Approve a plan of merger not requiring shareholder approval;
(7) Authorize or approve reacquisition of shares, except according to a
formula or method prescribed by the board of directors; or
(8) Authorize or approve the issuance or sale of shares, or a contract
for the sale of shares, or determine the designation and relative rights,
preferences, and limitations of a class or series of shares; except that the
board of directors may authorize a committee or an officer to do so within
limits specifically prescribed by the board of directors.
(d) The creation of, delegation of authority to, or action by, a committee
does not alone constitute compliance by a director with applicable standards of
conduct.
Article IV
Officers
1. General. The Corporation shall have as officers a chairman, a president, a
secretary, and a treasurer, who shall be appointed by the board of directors.
The board of directors may appoint as additional officers a vice chairman and
other officers of the board. The board of directors, the chairman, president,
and such other subordinate officers as the board of directors may authorize
from time to time, acting singly, may appoint as additional officers one or
more vice presidents, assistant secretaries, assistant treasurers, and such
other subordinate officers as the board of directors, the chairman or such
other appointing officers deem necessary or appropriate. The officers of the
Corporation shall hold their offices for such terms and shall exercise such
authority and perform such duties as shall be determined from time to time
by these Bylaws, the board of directors, or (with respect to officers whom are
appointed by the chairman or other appointing officers) the persons appointing
them; provided, however, that the board of directors may change the term of
offices and the authority of any officer appointed by the chairman or other
appointing officers. Any two or more offices may be held by the same person.
The officers of the Corporation shall be natural persons at least eighteen
years old.
2. Term. Each officer shall hold office from the time of appointment until
the time of removal or resignation pursuant to Section or until the
officer's death.
3. Removal and Resignation. Any officer appointed by the board of directors
may be removed at any time by the board of directors. Any officer appointed
by the chairman or other appointing officer may be removed at any time by the
board of directors or by the person appointing the officer. Any officer may
resign at any time by giving written notice of resignation to any director (or
to any director other than the resigning officer if the officer is also a
director), to the chairman, to the president, to the secretary, or to the
officer who appointed the officer. Acceptance of such resignation shall not
be necessary to make it effective, unless the notice so provides.
4. Chairman. The chairman shall preside at all meetings of shareholders, and
the chairman shall also preside at all meetings of the board of directors.
Subject to the direction and control of the board of directors, the chairman
shall be the chief executive officer of the Corporation and as such shall have
general and active management of the business of the Corporation and shall see
that all orders and resolutions of the board of directors are carried into
effect. The chairman may negotiate, enter into, and execute contracts, deeds,
and other instruments on behalf of the Corporation as are necessary and
appropriate to the conduct to the business and affairs of the Corporation or
as are approved by the board of directors. The chairman shall have such
additional authority and duties as are appropriate and customary for the office
of chairman and chief executive officer, except as the same may be expanded or
limited by the board of directors from time to time.
5. President. Subject to the direction and control of the chairman and the
board of directors, the president shall be the chief operating officer of the
corporation and as such shall have general and active management of the
business operations of the Corporation and shall see that all orders and
resolutions of the board of directors are carried into effect. The president
may negotiate, enter into and execute contracts, deeds and other instruments on
behalf of the Corporation as are necessary and appropriate to the business and
affairs of the Corporation or as are approved by the board of directors. In
the absence of the chairman, the president shall preside at meetings of
shareholders and at meetings of the board of directors. Upon the death or
disability of the chairman, the president shall have the authority and duties
of the chairman. The president shall have such additional authority and duties
as are prescribed by the board of directors.
6. Vice President. The vice president, if any, or, if there are more than
one, the vice presidents in the order determined by the board of directors or
the chairman (or, if no such determination is made, in the order of their
appointment), shall be the officer or officers next in seniority after the
president. Each vice president shall have such authority and duties as are
prescribed by the board of directors or chairman. Upon the death or disability
of the president, the vice president, if any, or, if there are more than one,
the vice presidents in the order determined by the board of directors or the
chairman, shall have the authority and duties of the president.
7. Secretary. The secretary shall be responsible for the preparation and
maintenance of minutes of the meetings of the board of directors and of the
shareholders and of the other records and information required to be kept by
the Corporation under section 7-116-101 of the Colorado Business Corporation
Act and for authenticating records of the corporation. The secretary shall
also give, or cause to be given, notice of all meetings of the shareholders
and special meetings of the board of directors, keep the minutes of such
meetings, have charge of the corporate seal and have authority to affix the
corporate seal to any instrument requiring it (and, when so affixed, it may be
attested by the secretary's signature), be responsible for the maintenance of
all other corporate records and files and for the preparation and filing of
reports to governmental agencies (other than tax returns), and have such other
authority and duties as are appropriate and customary for the office of
secretary, except as the same may be expanded or limited by the board of
directors from time to time.
8. Assistant Secretary. The assistant secretary, if any, or, if there are
more than one, the assistant secretaries in the order determined by the board
of directors or the secretary (or, if no such determination is made, in the
order of their appointment) shall, under the supervision of the secretary,
perform such duties and have such authority as may be prescribed from time to
time by the board of directors or the secretary. Upon the death, absence, or
disability of the secretary, the assistant secretary, if any, or, if there are
more than one, the assistant secretaries in the order designated by the board
of directors or the secretary (or, if no such determination is made, in the
order of their appointment), shall have the authority and duties of the
secretary.
9. Treasurer. The treasurer shall have control of the funds and the care and
custody of all stocks, bonds, and other securities owned by the Corporation,
and shall be responsible for the preparation and filing of tax returns. The
treasurer shall receive all moneys paid to the Corporation and, subject to any
limits imposed by the board of directors, shall have authority to give receipts
and vouchers, to sign and endorse checks and warrants in the Corporation's name
and on the Corporation's behalf, and give full discharge for the same. The
treasurer shall also have charge of disbursement of funds of the Corporation,
shall keep full and accurate records of the receipts and disbursements, and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as shall be designated by the
board of directors. The treasurer shall have such additional authority and
duties as are appropriate and customary for the office of treasurer, except
as the same may be expanded or limited by the board of directors from time to
time.
10. Assistant Treasurer. The assistant treasurer, if any, or, if there are
more than one, the assistant treasurers in the order determined by the board of
directors or the treasurer (or, if no such determination is made, in the
order of their appointment) shall, under the supervision of the treasurer, have
such authority and duties as may be prescribed from time to time by the board
of directors or the treasurer. Upon the death, absence, or disability of the
treasurer, the assistant treasurer, if any, or if there are more than one, the
assistant treasurers in the order determined by the board of directors or the
treasurer (or, if no such determination is made, in the order of their
appointment), shall have the authority and duties of the treasurer.
11. Compensation. Officers shall receive such compensation for their
services as may be authorized or ratified by the board of directors.
Election or appointment of an officer shall not of itself create a contractual
right to compensation for services performed as such officer.
Article V
Indemnification
1. Definitions. As used in this article:
(a) "Corporation" includes any domestic or foreign entity that is a
predecessor of the Corporation by reason of a merger or other transaction in
which the predecessor's existence ceased upon consummation of the transaction.
(b) "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation, is or
was serving at the Corporation's request as a director, officer, partner,
trustee, employee, fiduciary, or agent of another domestic or foreign
corporation or other person or of an employee benefit plan. A director is
considered to be serving an employee benefit plan at the Corporation's request
if his or her duties to the Corporation also impose duties on, or otherwise
involve services by, the director to the plan or to participants in or
beneficiaries of the plan. "Director" includes, unless the context requires
otherwise, the estate or personal representative of a director.
(c) "Expenses" includes counsel fees.
(d) "Liability" means the obligation incurred with respect to a proceeding
to pay a judgment, settlement, penalty, fine, including an excise tax assessed
with respect to an employee benefit plan, or reasonable expenses.
(e) "Official capacity" means, when used with respect to a director, the
office of director of the Corporation and, when used with respect to a person
other than a director as contemplated in Section V.1.(a), the office in the
Corporation held by the officer or the employment, fiduciary, or agency
relationship undertaken by the employee, fiduciary, or agent on behalf of the
Corporation. "Official capacity" does not include service for any other
domestic or foreign corporation or other person or employee benefit plan.
(f) "Party" includes a person who was, is, or is threatened to be made a
named defendant or respondent in a Proceeding.
(g) "Proceeding" means any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, or investigative and
whether formal or informal.
2. Authority to indemnify.
(a) Except as provided in Section V.2.(d), the Corporation may indemnify
a person made a party to a Proceeding because the person is or was a director
against Liability incurred in the Proceeding if:
(1) The person conducted himself or herself in good faith; and
(2) The person reasonably believed:
(A) In the case of conduct in an official capacity with the
Corporation, that his or her conduct was in the Corporation's best interests;
and
(B) In all other cases, that his or her conduct was at least not
opposed to the Corporation's best interests; and
(3) In the case of any criminal proceeding, the person had no reasonable
cause to believe his or her conduct was unlawful.
(b) A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies the
requirement of Section V.2.(a)(2)(B). A director's conduct with respect to an
employee benefit plan for a purpose that the director did not reasonably
believe to be in the interests of the participants in or beneficiaries of the
plan shall be deemed not to satisfy the requirements of Section V.2.(a)(1).
(c) The termination of a Proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this Section V.2.
(d) The Corporation may not indemnify a director under this Section V.2.
(1) connection with a proceeding by or in the right of the Corporation
in which the director was adjudged liable to the Corporation; or
(2) In connection with any other Proceeding charging that the director
derived an improper personal benefit, whether or not involving action in an
official capacity, in which Proceeding the director was adjudged liable on the
basis that he or she derived an improper personal benefit.
(e) Indemnification permitted under this Section V.2 in connection with
a Proceeding by or in the right of the Corporation is limited to reasonable
expenses incurred in connection with the Proceeding.
3. Mandatory indemnification of directors. The Corporation shall indemnify
a person who was wholly successful, on the merits or otherwise, in the defense
of any Proceeding to which the person was a party because the person is or was
a director, against reasonable expenses incurred by him or her in connection
with the proceeding.
4. Advance of expenses to.
(a) The Corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a Proceeding in advance of final
disposition of the Proceeding if:
(1) The director furnishes to the Corporation a written affirmation of
the director's good faith belief that he or she has met the standard of conduct
described in Section V.2.
(2) The director furnishes to the Corporation a written undertaking,
executed personally or on the director's behalf, to repay the advance if it is
ultimately determined that he or she did not meet the standard of conduct; and
(3) A determination is made that the facts then known to those making
the determination would not preclude indemnification under this article.
(b) The undertaking required by Section V.4.(a)(2) shall be an unlimited
general obligation of the director but need not be secured and may be accepted
without reference to financial ability to make repayment.
(c) Determinations and authorizations of payments under this Section V.4
shall be made in the manner specified in Section V.6.
5. Court-ordered indemnification of directors. A director who is or was a
party to a Proceeding may apply for indemnification to the court conducting
the proceeding or to another court of competent jurisdiction. On receipt of
an application, the court, after giving any notice the court considers
necessary, may order indemnification in the following manner:
(a) If it determines that the director is entitled to mandatory
indemnification under Section V.3., the court shall order indemnification, in
which case the court shall also order the Corporation to pay the director's
reasonable expenses incurred to obtain court-ordered indemnification.
(b) If it determines that the director is fairly and reasonably entitled
to indemnification in view of all the relevant circumstances, whether or not
the director met the standard of conduct set forth in Section V.2.(a) or was
adjudged liable in the circumstances described in Section V.2.(d), the court
may order such indemnification as the court deems proper; except that the
indemnification with respect to any Proceeding in which Liability shall have
been adjudged in the circumstances described in Section V.2.(d) is limited to
reasonable expenses incurred in connection with the Proceeding and reasonable
expenses incurred to obtain court-ordered indemnification.
6. Determination and authorization of indemnification of directors.
(a) The Corporation may not indemnify a director under Section V.2 unless
authorized in the specific case after a determination has been made that
indemnification of the director is permissible in the circumstances because the
director has met the standard of conduct set forth in Section V.2. The
Corporation shall not advance expenses to a director under Section V.4 unless
authorized in the specific case after the written affirmation and undertaking
required by Section V.4(a)(1) and V.4.(a)(2) are received and the determination
required by Section V.4.(a)(3) has been made.
(b) The determinations required by Section V.6.(a) shall be made:
(1) By the board of directors by a majority vote of those present at a
meeting at which a quorum is present, and only those directors not parties to
the Proceeding shall be counted in satisfying the quorum; or
(2) If a quorum cannot be obtained, by a majority vote of a committee
of the board of directors designated by the board of directors, which committee
shall consist of two or more directors not parties to the Proceeding; except
that directors who are parties to the Proceeding may participate in the
designation of directors for the committee.
(c) If a quorum cannot be obtained as contemplated in Section V.6.(b)(1),
and a committee cannot be established under Section V.6.(b)(2) if a quorum is
obtained or a committee is designated, if a majority of the directors
constituting such quorum or such committee so directs, the determination
required to be made by Section V.6.(a) shall be made:
(1) By independent legal counsel selected by a vote of the board of
directors or the committee in the manner specified in Section V.6.(b)(1) or
V.6.(b)(2), or, if a quorum of the full board cannot be obtained and a
committee cannot be established, by independent legal counsel selected by a
majority vote of the full board of directors; or
(2) By the shareholders.
(d) Authorization of indemnification and advance of expenses shall be
made in the same manner as the determination that indemnification or advance
of expenses is permissible; except that, if the determination that
indemnification or advance of expenses is permissible is made by independent
legal counsel, authorization of indemnification and advance of expenses shall
be made by the body that selected such counsel.
7. Indemnification of officers, employees, fiduciaries, and agents.
(a) An officer is entitled to mandatory indemnification under Section
V.3. and is entitled to apply for court-ordered indemnification under
Section V.5., in each case to the same extent as a director;
(b) The Corporation may indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the Corporation to the same extent as to a
director; and
(c) The Corporation may also indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director to a greater
extent than is provided in these bylaws, if not inconsistent with public
policy, and if provided for by general or specific action of its board of
directors or shareholders or by contract.
8. Insurance. The Corporation may purchase and maintain insurance on behalf
of a person who is or was a director, officer, employee, fiduciary, or agent
of the Corporation, or who, while a director, officer, employee, fiduciary, or
agent of the Corporation, is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee, fiduciary, or agent of
another domestic or foreign corporation or other person or of an employee
benefit plan, against Liability asserted against or incurred by the person in
that capacity or arising from his or her status as a director, officer,
employee, fiduciary, or agent, whether or not the Corporation would have power
to indemnify the person against the same liability under Section V.2., V.3.,
or V.7. Any such insurance may be procured from any insurance company
designated by the board of directors, whether such insurance company is formed
under the laws of this state or any other jurisdiction of the United States or
elsewhere, including any insurance company in which the Corporation has an
equity or any other interest through stock ownership or otherwise.
9. Notice to shareholders of indemnification of director. If the Corporation
indemnifies or advances expenses to a director under this article in connection
with a Proceeding by or in the right of the Corporation, the Corporation shall
give written notice of the indemnification or advance to the shareholders with
or before the notice of the next shareholders' meeting. If the next
shareholder action is taken without a meeting at the instigation of the board
of directors, such notice shall be given to the shareholders at or before the
time the first shareholder signs a writing consenting to such action.
Article VI
Shares
1. Certificates. Certificates representing shares of the capital stock of
the Corporation shall be in such form as is approved by the board of directors
and shall be signed by the chairman or vice chairman of the board of directors
(if any), or the president or any vice president, and by the secretary or an
assistant secretary or the treasurer or an assistant treasurer. All
certificates shall be consecutively numbered, and the names of the owners, the
number of shares, and the date of issue shall be entered on the books of the
Corporation. Each certificate representing shares shall state upon its face
(a) The name of the Corporation;
(b) That the Corporation is organized under the laws of the State of
Colorado;
(c) The name of the person to whom issued;
(d) The number and class of the shares and the designation of the series,
if any, that the certificate represents;
(e) A conspicuous statement, on the front or the back, that the
Corporation will furnish to the shareholder, on request in writing and without
charge, information concerning the designations, preferences, limitations, and
relative rights applicable to each class, the variations in preferences,
limitations, and rights determined for each series, and the authority of the
board of directors to determine variations for future classes or series; and
(f) Any restrictions imposed by the Corporation upon the transfer of the
shares represented by the certificate.
2. Facsimile Signatures. Where a certificate is signed
(a) By a transfer agent other than the Corporation or its employee, or
(b) By a registrar other than the Corporation or its employee, any or
all of the officers' signatures on the certificate required by Section may
be facsimile. If any officer, transfer agent or registrar who has signed, or
hose facsimile signature or signatures have been placed upon, any certificate,
shall cease to be such officer, transfer agent, or registrar, whether because
of death, resignation, or otherwise, before the certificate is issued by the
Corporation, it may nevertheless be issued by the Corporation with the same
effect as if he or she were such officer, transfer agent or registrar at the
date of issue.
3. Transfers of Shares. Transfers of shares shall be made on the books of
the Corporation only upon presentation of the certificate or certificates
representing such shares properly endorsed by the person or persons appearing
on the face of such certificate to be the owner, or accompanied by a proper
transfer or assignment separate from the certificate, except as may otherwise
be expressly provided by the statutes of the State of Colorado or by order of
a court of competent jurisdiction. The officers or transfer agents of the
Corporation may, in their discretion, require a signature guaranty before
making any transfer. The Corporation shall be entitled to treat the person
in whose name any shares are registered on its books as the owner of those
shares for all purposes and shall not be bound to recognize any equitable or
other claim or interest in the shares on the part of any other person, whether
or not the Corporation shall have notice of such claim or interest.
4. Shares Held for Account of Another. The board of directors may adopt by
resolution a procedure whereby a shareholder of the Corporation may certify in
writing to the Corporation that all or a portion of the shares registered in
the name of such shareholder are held for the account of a specified person or
persons. The resolution shall set forth:
(a) The classification of shareholders who may certify;
(b) The purpose or purposes for which the certification may be made;
(c) The form of certification and information to be contained herein;
(d) If the certification is with respect to a record date or closing of
the stock transfer books, the time after the record date or the closing of the
stock transfer books within which the certification must be received by the
Corporation; and
(e) Such other provisions with respect to the procedure as are deemed
necessary or desirable. Upon receipt by the Corporation of a certification
complying with the procedure, the persons specified in the certification shall
be deemed, for the purpose or purposes set forth in the certification, to be
the holders of record of the number of shares specified in place of the
shareholder making the certification.
Article VII
Miscellaneous
1. Corporate Seal. The board of directors may adopt a seal, circular in form
and bearing the name of the Corporation and the words "SEAL" and "COLORADO,"
which, when adopted, shall constitute the seal of the Corporation. The seal
may be used by causing it or a facsimile of it to be impressed, affixed,
manually reproduced, or rubber stamped with indelible ink. Even if the
Corporation has adopted a corporate seal, properly authorized actions of the
Corporation are effective whether or not any writing evidencing such action
is sealed.
2. Fiscal Year. The board of directors may, by resolution, adopt a fiscal
year for the Corporation.
3. Receipt of Notices by the Corporation. Notices, shareholder writings
consenting to action, and other documents or writings shall be deemed to have
been received by the Corporation when they are received
(a) At the registered office of the Corporation in the State of Colorado;
(b) At the principal office of the Corporation (as that office is
designated in the most recent document filed by the Corporation with the
Secretary of State for the State of Colorado designating a principal office)
addressed to the attention of the secretary of the Corporation;
(c) By the secretary of the corporation wherever the secretary may be
found; or
(d) By any other person authorized from time to time by the board of
directors, the president, or the secretary to receive such writings, wherever
such person is found.
4. Amendment of Bylaws. These Bylaws may at any time and from time to time
be amended, supplemented, or repealed by the board of directors.
5. Adoption. These Bylaws were adopted by the Board of Directors of Recycling
Industries, Inc. on , 19 .
- -------------------------------------------
Secretary
Exhibit 10.4.2
THIS NOTE HAS BEEN ISSUED PURSUANT TO THAT CERTAIN SECURITIES PURCHASE
AGREEMENT, DATED AS OF JUNE 23, 1997, BY AND BETWEEN THE COMPANY (AS DEFINED
BELOW) AND SIENA (AS DEFINED BELOW) (THE "SECURITIES PURCHASE AGREEMENT").
THIS NOTE IS SUBJECT TO ALL OF THE TERMS AND CONDITIONS OF THE SECURITIES
PURCHASE AGREEMENT AND IS ENTITLED TO THE BENEFITS THEREOF. ALL TERMS NOT
OTHERWISE DEFINED HEREIN, SHALL HAVE THE MEANING GIVEN TO SUCH TERMS IN THE
SECURITIES PURCHASE AGREEMENT.
THE SECURITY REPRESENTED BY THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES
LAWS. THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, IN THE ABSENCE OF (1) AN
EFFECTIVE REGISTRATION STATEMENT AND QUALIFICATION IN EFFECT WITH RESPECT TO
THIS NOTE UNDER THE SECURITIES ACT AND UNDER ANY APPLICABLE STATE SECURITIES
LAWS OR (2) AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION.
INCREASING RATE PROMISSORY NOTE
US $7,000,000.00
Beverly Hills, California
June 23, 1997
FOR VALUE RECEIVED, the undersigned, RECYCLING INDUSTRIES, INC., a Colorado
corporation (the "Company"), hereby promises to pay to SIENA CAPITAL PARTNERS,
L.P. ("Siena"), a California limited partnership or its assigns (the "Holder"),
the principal sum of SEVEN MILLION AND NO ONE HUNDREDTHS UNITED STATES DOLLARS
US $7,000,000.00) (or so much thereof as shall remain outstanding) on June 23,
1998 (the "Maturity Date"). Subject to modification, this Note shall bear
interest from the Closing Date through and including December 23, 1997, on the
unpaid principal amount of this Note from time to time outstanding at a rate
per annum equal to the Prime Rate (as hereinafter defined) plus four percent
(4.0%) (the "Interest Rate"). From and after December 24, 1997, the Interest
Rate shall increase to a rate per annum equal to the Prime Rate plus five
percent (5.0%) (the "Applicable Margin"). The Applicable Margin shall increase
an additional one percent (1%) on the 24th day of each month thereafter. The
"Prime Rate" shall mean the prime rate as published from time to time in the
Wall Street Journal (or, in the event such rate is not published, the "Prime
Rate" shall mean the rate of interest announced from time to time by Imperial
Bank as its prime rate).
Interest shall be calculated in arrears through the last day of each month and
shall be due and payable in full in monthly installments on the 23rd day of
each month (or the next Business Day, if such day is not a Business Day),
commencing with July 23, 1997, and ending on the Maturity Date, or such later
date when all outstanding amounts due and payable under this Note shall have
been paid in full or converted.
Interest shall be computed on this Note on the basis of a 360-day year
consisting of twelve (12) 30-day months and on the actual number of days
elapsed in any period including the date hereof but excluding the date by which
the Holder is deemed pursuant to the Securities Purchase Agreement to have
received payment. Any principal or interest payment due on this Note which is
not paid when due, whether at stated maturity, by notice of acceleration or
otherwise, shall bear interest (calculated in the manner set forth above) at a
rate equal to the then-current Interest Rate plus an additional five percent
(5%) per annum.
Commencing on December 23, 1997, and on the 23rd Business Day of each month
thereafter until the Maturity Date, the Company shall make a principal payment
to the Holder on account of the outstanding principal balance of this Note in
an amount equal to fifty percent (50%) of Monthly ECF.
The Company may, from time to time, prepay this Note, in whole or in part, so
long as each partial prepayment of principal on this Note is equal to or
greater than $50,000 and the Company has given the Holder one (1) or more
Business Day's written notice of such optional prepayment. Any such optional
prepayment of principal shall be without premium or penalty. Each prepayment
of principal under this Note shall be accompanied by all interest then accrued
and unpaid on the principal so prepaid. Any principal prepaid shall be in
addition to, and not in lieu of, all payments otherwise required to be paid
hereunder and under the Securities Purchase Agreement at the time of such
prepayment.
The Company shall prepay this Note to the extent of the net financing proceeds
actually received by the Company in the event that the Company completes any
financing transaction (other than the purchase of the Securities under the
Securities Purchase Agreement and Permitted Indebtedness up to $32,000,000.00
in the aggregate) whatsoever from and after the Closing Date, including without
limitation any public or private placements of debt or equity, or any
refinancing of the Senior Debt. Notwithstanding the foregoing, the Company
shall not be required to prepay this Note in connection with any refinancing,
extension or incurrence of Senior Debt, except to the extent such refinancing,
extension or incurrence of Senior Debt results in the Company having
outstanding Permitted Indebtedness in excess of $32,000,000.00.
In the event that all amounts owing under this Note have not been paid in full
Exhibit 10.4.3
WARRANT AGREEMENT
Between
SIENA CAPITAL PARTNERS, L.P.
And
RECYCLING INDUSTRIES, INC.
Dated as of June 23, 1997
THIS WARRANT AGREEMENT HAS BEEN ISSUED PURSUANT TO THAT CERTAIN SECURITIES
PURCHASE AGREEMENT, DATED AS OF JUNE 23, 1997, BY AND BETWEEN THE COMPANY (AS
DEFINED HEREIN) AND SIENA (AS DEFINED HEREIN) (THE "SECURITIES PURCHASE
AGREEMENT"). THIS WARRANT AGREEMENT IS SUBJECT TO ALL OF THE TERMS AND
CONDITIONS OF THE SECURITIES PURCHASE AGREEMENT AND IS ENTITLED TO THE BENEFITS
THEREOF.
THE WARRANTS AND WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THE WARRANTS
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE WARRANTS
AND WARRANT SECURITIES, AS THE CASE MAY BE, MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, IN THE
ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT AND QUALIFICATION IN EFFECT
WITH RESPECT TO THE WARRANTS AND WARRANT SECURITIES, AS THE CASE MAY BE, UNDER
THE SECURITIES ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS OR (2) AN
EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION.
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is dated as of the 23rd day of June,
1997, and executed by and between SIENA CAPITAL PARTNERS, L.P., a California
limited partnership ("Siena"), and RECYCLING INDUSTRIES, INC., a Colorado
corporation (the "Company").
WHEREAS, pursuant to that certain Securities Purchase Agreement between Siena
and the Company dated as of even date herewith (the "Securities Purchase
Agreement"), the Company has agreed to grant to Siena or its assigns common
stock warrants in the form attached hereto as Exhibits A-1 through A-4 hereto
(the "Warrants") to acquire shares of the Company's Common Stock, US $.001par
value per share. This Agreement sets forth certain rights and obligations of
the Company and Siena with respect to the Warrants.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
representations, warranties and agreements contained in this Agreement, the
parties hereto agree as follows:
I. DEFINITIONS
Section 1.01 Defined Terms. As used in this Agreement, the following
capitalized terms shall have the meanings respectively assigned to them below,
which meanings shall be applicable equally to the singular and plural forms of
the terms so defined. Terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Securities Purchase Agreement.
"Common Stock Equivalents" shall mean all options, warrants (including the
Warrants), convertible securities, securities and other rights (in each case
whether now existing or hereafter issued or arising) to acquire from the
Company shares of Common Stock (without regard to whether such options,
warrants, convertible securities, securities and other rights are then
exchangeable, exercisable or convertible in full, in part or at all).
"Dividend" means, as to any Person (as hereinafter defined), any declaration
or payment of any dividend (other than a stock dividend) on, or the making of
any pro rata distribution, loan, advance, or investment to, any shares of
capital stock of such Person.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, and any successor
provisions thereto.
"Exercise Price" shall have the meaning given in each Warrant. The Exercise
Price and the number of shares of Common Stock purchasable pursuant to the
Warrants shall be subject to adjustment from time to time as hereinafter set
forth in Article V hereof; provided, however, that no adjustment shall be made
unless by reason of the happening of any one or more of the events hereinafter
specified, the Exercise Price then in effect shall be changed by one percent
or more, but any adjustment that would otherwise be required to be made but
for this provision shall be carried forward and shall be made at the time of
and together with any subsequent adjustment which, together with any adjustment
or adjustments so carried forward, amounts to one percent or more.
"Expiration Period" means, with respect to each Warrant, the period commencing
on each Warrant's respective Warrant Effective Date through and including the
fifth anniversary of such Warrant Effective Date or, in the event the fifth
anniversary is not a Business Day (as hereinafter defined), the next succeeding
Business Day.
"Exercise Quantity" shall mean the number of shares of Common Stock, determined
from time to time, taking into account all shares of Common Stock theretofore
issued upon exercise of the Warrants, required to be issued by the Company to
the Holders of the Warrants. Exercise Quantity shall initially have the
meaning given in each Warrant, and may be adjusted from time to time, pursuant
to the provisions of the Warrants and this Agreement.
"Fair Value" as of a particular date shall mean the last sale price of the
Common Stock as reported on a national securities exchange or on the NASDAQ
SmallCap or National Market System or, if a last sale reporting quotation is
not available for the Common Stock, the average of the bid and asked prices of
the Common Stock as reported by NASDAQ or on the NASD's OTC Bulletin Board
Service, or if not so reported, as listed in the National Quotation Bureau,
Inc.'s "Pink Sheets." If such quotations are unavailable, or with respect
to other appropriate security, property, assets, business or entity, "Fair
Value" shall mean the fair value of such item as determined by mutual agreement
reached by the Holder and the Company or, in the event the parties are unable
to agree, an opinion of an independent investment banking firm or firms in
accordance with the following procedure. In the case of any event which gives
rise to a requirement to determine "Fair Value" pursuant to this Agreement,
the Company shall be responsible for initiating the process by which Fair Value
shall be determined as promptly as practicable, but in any event within sixty
(60) days following such event and if the procedures contemplated herein in
connection with determining Fair Value have not been complied with fully, then
any such determination of Fair Value for any purpose of this Agreement shall
be deemed to be preliminary and subject to adjustment pending full compliance
with such procedures. Upon the occurrence of an event requiring the
determination of Fair Value, the Company shall give the Holder(s) of the
Warrants notice of such event, and the Company and the Holders shall engage
in direct good faith discussions to arrive at a mutually agreeable
determination of Fair Value.
In the event the Company and the Holder(s) (as hereinafter defined) are unable
to arrive at a mutually agreeable determination within thirty (30) days of the
notice, the Company and the Holder(s) of the Warrants (who, if more than one,
shall agree among themselves by a majority) shall each retain a separate
independent investment banking firm of national reputation (which firm, in
either case, may be the independent investment banking firm regularly retained
by the Company or any such Holder). Such firms shall jointly determine the Fair
Value of the security, property, assets, business or entity, as the case may
be, in question and deliver their opinion in writing to the Company and to such
Holder within thirty (30) days of their retention. In no event shall the
marketability, or lack thereof, or lack of registration of a security be a
factor in determining the "Fair Value" of such security.
If such firms cannot jointly make such determination within such 30-day period,
then, unless otherwise directed by agreement of the Company and the Holder(s)
of a majority or more of the Warrants, such firms, in their sole discretion,
shall choose another independent investment banking firm of the Company or
such Holder(s), which firm shall make such determination and render such an
opinion. In either case, the determination so made shall be conclusive and
binding on the Company and such Holder(s). The fees and expenses of the
investment banking firm retained by Holder(s) pursuant to this provision shall
be borne by Holder(s). The fees and expenses of all other investment banking
firms retained pursuant to this provision shall be borne by the Company.
"Holder" or "Holders" shall mean the Person(s) then registered as the owner(s)
of the Warrants or Warrant Securities, as the case may be, on the books and
records of the Company.
"Person" shall mean any individual, corporation, partnership, limited
liability company, association, joint-stock company, trust, estate,
unincorporated organization, joint venture, court or governmental or
political subdivision or agency thereof.
"Registrable Securities" shall have the meaning assigned to it in Section 6.01
hereof.
"Subsidiary" shall mean any corporation as to which an aggregate of more than
50% of the outstanding voting stock is at any time directly or indirectly
owned by the Company, or by one or more of its Subsidiaries or by the Company
and one or more of its Subsidiaries.
"Warrant Securities" shall mean the shares of Common Stock (or other
securities representing Common Stock) purchasable or purchased from time to
time under the Warrants or acquired upon any transfer of any such shares,
together with all additional securities received in payment of dividends or
distributions on or splits of those securities or received as a result of the
adjustments provided for in Article V hereof.
II. WARRANTS
On the Closing Date, the Company will grant to Siena, for good and valuable
consideration as more particularly described in the Securities Purchase
Agreement and herein, the Initial Warrant in the form attached as Exhibit A-1
hereto, the Second Warrant in the form attached as Exhibit A-2 hereto, the
Third Warrant in the form attached as Exhibit A-3 hereto and the Fourth Warrant
in the form attached as Exhibit A-4 hereto. Siena and any subsequent Holder
of the Warrants and of Warrant Securities shall have the rights and obligations
provided for in the Warrants and in this Agreement and in the Securities
Purchase Agreement .
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants as follows:
(a) The execution and delivery of this Agreement and the Warrants have
been duly and properly authorized by all requisite corporate action of the
Company and its board of directors, and, except as disclosed in the Disclosure
Schedule, no consent of any other Person is required as a prerequisite to the
validity and enforceability of this Agreement and the Warrants that has not
been obtained. The Company has the full legal right, power and authority to
execute and deliver this Agreement and the Warrants and to perform its
obligations hereunder and thereunder. When issued and delivered pursuant to
this Agreement, the Warrants will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of the
Company entitled to the benefits provided herein and therein.
(b) The Company is not a party to or otherwise subject to any contract or
agreement which restricts or otherwise affects its right or ability to execute
and deliver this Agreement or the Warrants or to perform any obligation
hereunder or thereunder (including, without limitation, issuance of the
Warrant Securities). Neither the execution or delivery of this Agreement or
the Warrants, nor compliance therewith (including, without limitation,
issuance of the Warrant Securities), will conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, or result in any violation of, or result in the creation of any
material lien upon any properties of the Company under, or require any
consent, approval, or other action by, notice to or filing with any court
or Governmental Person pursuant to the Certificate of Incorporation or By-laws
of the Company, as currently in effect, any award of any arbitrator, or any
material agreement, instrument or law to which the Company is subject or by
which it is bound.
(c) On the date hereof, the authorized capital stock of the Company will
consist of (i) 50,000,000 shares of Common Stock and (ii) 10,000,000 shares
of Preferred Stock. As of June 13, 1997, the Company had issued and
outstanding (A) 13,919,429 shares of Common Stock and (B) 10,000 shares each
of Series C Convertible Preferred Stock, Series D Convertible Preferred Stock
and Series E Convertible Preferred Stock. From June 13, 1997 through the
Closing Date, the Company issued no additional shares of capital stock. All
such outstanding shares are validly issued, fully paid and nonassessable.
Except as disclosed in the Disclosure Schedule, there are no rights, options
or warrants of any kind outstanding to purchase or acquire Common Stock or any
other ownership interest in the Company, nor are there other securities,
obligations, agreements or rights of any kind outstanding which are exercisable
for, convertible into or exchangeable for any Common Stock or any other
ownership interests in the Company or under the terms of which the parties
thereto have the right to purchase or acquire Common Stock or Common Stock
Equivalents. Except as disclosed in the Disclosure Schedule, the issuance by
the Company of the Warrants and the Warrant Securities is not subject to any
preemptive or similar right of any Person pursuant to statute, contract or
understanding.
(d) Except as disclosed in the Disclosure Schedule and as provided in
this Agreement, the Company is not subject to any obligation to repurchase or
otherwise acquire or retire any shares of capital stock. Except as disclosed
in the Disclosure Schedule, there is no commitment of the Company to issue any
shares, warrants, options, or other such rights, or to distribute to holders
of any class of its capital stock any evidences of indebtedness or assets, or
to pay any Dividend or make any other distribution in respect thereof.
(e) The Warrants are, and the Warrant Securities will be, issued by the
Company to Siena in a transaction exempt from registration and qualification
under the applicable federal and state securities laws.
(f) Except as disclosed in the Disclosure Schedule, there is not in effect
on the date of this Agreement any agreement by the Company (other than this
Agreement) pursuant to which any holders of securities of the Company have a
right to cause the Company to register such securities under the Securities
Act.
(g) The representations and warranties made or deemed made by the Company
in the Securities Purchase Agreement are incorporated herein by reference and
are true and correct on the date of this Agreement and the Holder shall be
entitled to rely thereon as if the same were originally addressed to the
Holder. The representations and warranties incorporated by reference in
this Section shall survive any termination of the Securities Purchase
Agreement, the maturity of the Note or any expiration of such representations
or warranties by the terms of the Securities Purchase Agreement or the Note.
IV. COVENANTS
Section 4.01 Covenants of the Company. The Company hereby covenants and
agrees that, during the term of this Agreement, unless Holders of outstanding
Warrants evidencing a majority of the Warrants agree otherwise in writing.
(a) Each of the Warrant Securities issued and delivered upon the exercise
of the Warrants and payment of the Exercise Price will be duly and validly
authorized and issued, will be fully paid and nonassessable, and will not be
subject to any unpaid tax or any lien, whether respecting their issuance to
and purchase by the Holder of the Warrants or otherwise. The Company will take
all such actions as may be necessary to assure that all such shares of Common
Stock may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
shares of Common Stock may be listed.
(b) The Company shall reserve and at all times keep available for issuance
an authorized number of shares of Common Stock sufficient to permit the full
and immediate exercise of the Warrants and the full and immediate exercise,
exchange and conversion of all other securities, options, warrants and other
rights issued or granted by the Company.
(c) The Company shall not permit the par value of its Common Stock to
exceed, at any time, the Exercise Price and shall take all such actions as may
be necessary or appropriate to ensure that it does not do so.
(d) The Company shall not create or permit the existence of any class of
common stock, preferred stock, or any class or series of securities having
voting rights other than as may be required by statute, or any other class
or series of securities having any liquidation, Dividend or other preference,
other than the Common Stock and the Preferred Stock.
(e) As soon as available, and in no event later than the dates filed with
the SEC or any other Governmental Person or other regulatory authority, if
such documents are so filed, the Company shall deliver to the Holder(s) of the
Warrants and the Warrant Securities copies of (i) all annual, quarterly and
monthly financial statements made available by the Company to its
stockholders,(ii) all reports, notices and proxy or information statements
sent or made available generally by the Company to its stockholders, and (iii)
all regular and periodic reports and all registration statements, prospectuses
and other information filed by the Company with the Commission, relevant
state authorities or any securities exchange, securities quotation system or
other self-regulatory organization.
(f) The Company shall cooperate with the Holder(s) of the Warrants and the
Warrant Securities in supplying such information (excluding legal opinions) as
may be reasonably necessary for the Holder(s) to complete and file any
information or other reporting forms from time to time required by the
Commission, relevant state authorities or any securities exchange, securities
quotation system or other self-regulatory organization, including, without
limitation, information pertaining to or required for the availability of any
exemption from the securities laws for the sale, transfer or other disposition
of the Warrants or any of the Warrant Securities, provided, that in connection
with such cooperation the Company shall not be required to incur actual
expenses in excess of $10,000.00 .
Section 4.02 Indemnification.
(a) The Company agrees to defend, indemnify and hold harmless, to the full
extent permitted by law, Siena and each other Holder of the Warrants, this
Agreement, or any Warrant Security purchased hereunder, any underwriter(s),
and their respective directors, officers, employees, attorneys and agents, as
well as each other Person (if any) controlling any of the foregoing Persons
within the meaning of Section 15 of the Securities Act, or Section 20 of the
Exchange Act, from and against any and all claims, liabilities, losses and
expenses (including, without limitation, the reasonable disbursements, expenses
and fees of their respective attorneys) that may be imposed upon,
incurred by,or asserted against any of them, any of their respective
directors, officers, employees, attorneys and agents, or any such control
Person, under the Securities Act, the Exchange Act or any other statute or
at common law, insofar as such losses, claims, damages or liabilities (or
actions in respect hereof), arise out of or are related directly or indirectly
to any alleged untrue statement of any material fact contained, on the
effective date thereof, in any registration statement under which such
securities were registered under the Securities Act or the Exchange Act, or
in any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or any alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse such Persons for any
legal or any other expenses reasonably incurred by such Persons in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out
of or is based upon any alleged untrue statement or alleged omission made in
such registration statement, preliminary prospectus, prospectus or amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company specifically for use therein or the failure of any
such Person to deliver a copy of any final prospectus as then amended or
supplemented if delivery of same is required by law and would have cured the
defect giving rise to such loss, claim, damage or liability. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of any such indemnified Person, and shall survive the transfer of
such securities by such Person. Promptly after receipt of notice of the
commencement of any action in respect of which indemnity may be sought against
the Company, the Company shall assume the defense of such action (including
the employment of counsel, who shall be counsel reasonably satisfactory to the
party seeking indemnity hereunder) and the payment of expenses insofar as such
action shall relate to any alleged liability in respect of which indemnity may
be sought against the Company. The Company shall not, except with the approval
of each party being indemnified under this Section 4.02, consent to entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
parties being so indemnified of a release from all liability in respect to
such claim or litigation.
(c) In connection with any registration statement relating to the
registration of the Warrant Securities, each Holder of Warrant Securities will
furnish to the Company in writing such information and affidavits with respect
to such Holder as the Company reasonably requests for use in connection with
any such registration statement (or prospectus contained therein) and will
indemnify, to the extent permitted by law, the Company, its directors, its
officers who sign the registration statement and each Person who controls the
Company (within the meaning of the Securities Act) against any losses, claims,
damages, liabilities and reasonable expenses resulting from any untrue
statement of material fact or any omission of a material fact required to be
stated in such registration statement or prospectus or any amendment thereof
or supplement thereto necessary to make the statements therein (in the case of
a prospectus, in the light of the circumstances under which they were made)
not misleading, in each case to the extent, but only to the extent, that any
such loss, liability, claim, damage or expense arises out of or is based upon
any such untrue statement or omission made therein in reliance upon and in
conformity with such written information or affidavits relating to such Holder
furnished to the Company by such Holder expressly for use therein.
Section 4.03 Listing on the Securities Exchange. The Company shall, at
its expense, list on any securities exchange where it lists its Common Stock,
and maintain and increase when necessary such listing of all outstanding
Warrant Securities so long as any shares of Common Stock shall be so listed.
The Company shall also so list on each securities exchange, and will maintain
such listing of, any other securities which the holder of the Warrants shall
be entitled to receive upon the exercise thereof if at the time any securities
of the same class shall be listed on such securities exchange by the Company.
Section 4.04 Repurchases and Redemptions. The Company shall not
repurchase or redeem any of its equity securities or any securities
convertible into or exchangeable for such equity securities or any warrants
or other rights to purchase such equity securities unless it concurrently
makes a cash payment to the Holder(s) of the Warrants equal to the product of:
(1) the quotient obtained by dividing (x) the aggregate amount of cash and the
aggregate Fair Value of any property paid out by the Company in connection
with any such repurchase or redemption by (y) the number of shares of Common
Stock and Common Stock Equivalents outstanding immediately after such
repurchase or redemption (excluding Warrant Securities) and (2) the number
of shares of Common Stock issuable upon the exercise of the Warrants.
V. ANTIDILUTION
Section 5.01 No Dilution or Impairment; Adjustments. The Company
hereby acknowledges that the initial number of shares issuable upon exercise
of the Warrants was calculated based upon 4.144% of the number of shares of
Common Stock and Common Stock Equivalents outstanding and the representation
of the Company that the number of shares of Common Stock and Common Stock
Equivalents outstanding as of the Closing Date (including the Warrant
Securities) was 23,890,547 shares. If for any reason it shall hereafter be
determined by the Company that the actual number of shares of Common Stock
and Common Stock Equivalents outstanding as of the Closing Date was different
from the foregoing, the Company will notify the Holder(s) of such
determination and if the Holder(s) does not dispute the same, the Company
shall forthwith reissue the Warrants with an appropriate proportional increase
in the Exercise Quantity to be effective from the Closing Date. If a Holder
shall dispute such determination and the parties cannot otherwise resolve the
dispute promptly and in good faith, then the dispute shall be resolved in
accordance with Section 5.01(j). It is the intent of the parties hereto that,
after giving effect to any exercise of the Warrants, the Holder(s) of the
warrants or Warrant Securities would collectively be the owner of 4.144% of
the Common Stock and Common Stock Equivalents (or have the right to acquire
4.144% of the Common Stock and Common Stock Equivalents outstanding as such
amount may be adjusted in the event of a cashless exercise of the Warrants
according to Section 2(a)(ii) or (iii) thereof or other adjustments
contemplated herein), except such percentage may be reduced as a consequence
of an issuance of Common Stock not requiring any adjustment in the Exercise
rice under this Article V.
(a) Prohibited Actions. So long as any Warrants are outstanding,
then, without the prior written consent of the Holders of outstanding Warrants
evidencing a majority in number of the total number of Warrant Securities at
the time purchasable upon the exercise of all then outstanding Warrants, the
Company will not: (i) except as disclosed in the Disclosure Schedule, make
any payment (in cash or property including without limitation any payments in
excess of earnings and profits of the Company) to or enter into any other
transaction with, any party to this Agreement or any stockholder or
securityholder of the Company or any Affiliate thereof other than payments
made, or transactions expressly contemplated by this Agreement, the Securities
Purchase Agreement or the Senior Debt Agreement; or (ii) take any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Agreement or the Warrants or impair the ability of the
Holder(s) to realize the full intended economic value thereof, but will at all
times in good faith assist in the carrying out of all such terms, and of the
taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder(s) of the Warrants against dilution or other
impairment.
(b) Adjustment of Exercise Price in the Event of Certain Issuances of
Common Stock or Common Stock Equivalents. In case the Company shall at any
time issue or sell Common Stock or Common Stock Equivalents for less than
Fair Value or at a price per share less than the current Exercise Price of the
Warrants (other than (i) delivery of shares of Common Stock upon exercise of
the Warrants, (ii) any Common Stock Equivalents issued and outstanding on the
date hereof and disclosed on the Disclosure Schedule, (iii) Common Stock
Equivalents issued to Dabney/Resnick/Imperial, LLC pursuant to the Engagement
Letter in the form of Exhibit D to the Securities Purchase Agreement, and (iv)
any Common Stock Equivalents granted, but not issued and outstanding, pursuant
to the Company's 1997 Executive Stock Option Plan (the "Plan"), as of the date
hereof, exercisable for the purchase of up to 2,950,000 shares of Common
Stock, and disclosed on the Disclosure Schedule, which may be subsequently
returned to the Plan and reissued or granted or otherwise transferred,
provided, however, that upon such reissuance, grant or transfer the exercise
price of any such Common Stock Equivalent shall not be less than the exercise
price of such Common Stock Equivalent on its original date of grant), in
addition to the number of shares outstanding as of the date hereof, the
Exercise Price then in effect shall be proportionately decreased in the case
of such issuance or sale (on the day following the date of such issuance or
sale) and the Exercise Quantity purchasable upon exercise of the Warrants
immediately prior thereto shall be adjusted. Upon any adjustment of the
Exercise Price as provided in this Section 5.02(b), the Exercise Quantity
shall be adjusted so that the New Exercise Quantity shall be equal to the
product of (x) the former Exercise Quantity and (y) the following fraction:
The Exercise Price in effect immediately prior to such adjustment
The Exercise Price resulting from such adjustment
Exhibit B hereto sets forth the formula and an illustrative example of
the manner in which the adjustments contemplated herein should be applied.
(c) Adjustment of Exercise Price in the Event of Dividends, Stock
Splits and Reverse Stock Splits. In case the Company shall at any time issue
Common Stock or Common Stock Equivalents by way of a Dividend or other
distribution on any stock of the Company or effect a stock split or reverse
stock split of the outstanding shares of Common Stock, the Exercise Price then
in effect shall be proportionately decreased in the case of such issuance (on
the day following the date fixed for determining shareholders entitled to
receive such dividend or other distribution) or decreased in the case of such
stock split or increased in the case of such reverse stock split (on the date
that such stock split or reverse stock split shall become effective), by
multiplying the Exercise Price in effect immediately prior to the stock
dividend, stock split or reverse stock split by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately prior to
such stock dividend, stock split or reverse stock split, and the denominator
of which is the number of shares of Common Stock outstanding immediately after
such stock dividend, stock split or reverse stock split.
(d) Company to Prevent Dilution. In any case at any time or from time
to time conditions arise by reason of action taken by the Company which are
not adequately covered by the provisions of this Article V, and which might
materially and adversely affect the exercise rights of the Holders under any
provision of this Agreement, unless the adjustment necessary shall be agreed
upon by the Company and the Holders, the Board of Directors of the Company
shall appoint a firm of independent certified public accountants of recognized
national standing, acceptable to the Holders, who at the Company's expense
shall give their opinion upon the adjustment, if any, on a basis consistent
with the standards established in the other provisions of this Article V,
necessary with respect to the Exercise Price and the Exercise Quantity, so as
to preserve, without dilution, the exercise rights of the Holders. Upon the
receipt of such opinion, the Company's Board of Directors shall forthwith make
the adjustments described therein.
(e) Right to Reduce Exercise Price. The Company shall have the right
to reduce the Exercise Price at any time and from time to time that such
appears in the Company's best interests to do so.
(f) Subdivision or Combinations. In case the Company shall at any
time change as a whole, by subdivision or combination in any manner or by the
making of a stock dividend, the number of outstanding shares of Common Stock
into a different number of shares, with or without par value, (i) the Exercise
Quantity immediately prior to such change shall be increased or decreased, as
the case may be, in direct proportion to the increase or decrease,
respectively, in the number of shares outstanding immediately prior to such
change, and (ii) the Exercise Price in effect immediately prior to such change
shall be increased or decreased, as the case may be, in inverse proportion to
such increase or decrease in the number of such shares outstanding immediately
prior to such change.
(g) Reorganization; Asset Sales; Etc. In case of (i) any capital
reorganization or any reclassification of the capital stock of the Company,
(ii) any consolidation or merger of the Company or any Subsidiary with or into
another corporation or entity, (iii) the disposition or transfer of the assets
of the Company other than in the ordinary course of the Company's business, or
(iv) the dissolution, liquidation or winding up of the Company, the Holders
shall thereafter be entitled to purchase (and it shall be a condition to the
consummation of any such transaction or event that appropriate provision shall
be made so that such Holders shall thereafter be entitled to purchase) the kind
and amount of shares of stock and other securities and property
receivable in such transaction by a holder of the number of shares of Common
Stock of the Company into which this Agreement entitled the holder to purchase
immediately prior to such capital reorganization, reclassification of capital
stock, non-surviving combination or disposition; and in any such case
appropriate adjustments shall be made in the application of the provisions of
this Article V with respect to rights and interests thereafter purchasable
upon the exercise of a Warrant.
(h) Adjustment Statement. Whenever the Exercise Price or Exercise
Quantity is adjusted as herein provided, the Company shall forthwith deliver
to the Holders a statement signed by the President of the Company and by its
Treasurer or Secretary stating the adjusted Exercise Price or Exercise
Quantity for which the Warrants are exercisable, determined as specified
herein. The statement shall show in detail the facts requiring such
adjustment, including a statement of the consideration received by the Company
for any additional stock issued.
(i) Prior Notice to the Holders. If at any time:
(i) The Company shall pay any Dividend payable in Common
Stock or Common Stock Equivalents upon its capital stock or make any
distribution (other than cash dividends) to the holders of its capital stock;
or
(ii) The Company shall offer for subscription pro rata to
the holders of its capital stock any additional shares of stock of any class
or any other rights; or
(iii) The Company shall effect any capital reorganization
or any reclassification of or change in the outstanding capital stock of the
Company (other than a change in par value, or a change from par value to no
par value, or a change from no par value to par value, or a change resulting
solely from a subdivision or combination of outstanding shares), or any
consolidation or merger, or any sale, transfer or other disposition of all or
substantially all of its property, assets, business and goodwill as an
entirety, or the liquidation, dissolution or winding up of the Company; or
(iv) The Company shall declare a Dividend upon its capital
stock payable otherwise than out of earnings or earned surplus or otherwise
than in shares or any stock or obligations directly or indirectly convertible
into or exchangeable for shares;
then, in any such event, the Company shall cause at least thirty (30) days'
prior written notice to be mailed to the Holders at the address of each such
holder shown on the books of the Company. The notice shall also specify the
date on which the books of the Company shall close or a record be taken for
such stock dividend, distribution or subscription rights, or the date on which
such reclassification, reorganization, consolidation, merger, sale, transfer,
disposition, liquidation, dissolution, winding up, or dividend, as the case
may be, shall take place, and the date of participation therein by the holders
of shares of capital stock if any such date is to be fixed, and shall also set
forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the rights of the holder.
(j) Disputes. If there is any dispute as to the computation of the
Exercise Price or the Exercise Quantity, the Company will retain, at its
expense, an independent and nationally recognized accounting firm to conduct
an audit of the computations pursuant to the terms hereof involved in such
dispute, including the financial statements or other information upon which
such computations were based. The determination of such nationally recognized
accounting firm shall, in the absence of manifest error, be binding. If there
shall be a dispute as to the selection of such nationally recognized
accounting firm, such firm shall be appointed by the American Institute of
Certified Public Accountants ("AICPA") if willing, otherwise the American
Arbitration Association ("AAA").
VI. REGISTRATION RIGHTS
Section 6.01 "Piggyback" Registration Rights. If at any time the
Company shall determine to register under the Securities Act (including
pursuant to a demand of any security holder of the Company exercising
registration rights) any of its Common Stock (except securities to be issued
solely in connection with any acquisition of any entity or business, shares
issuable solely pursuant to employee benefit plans eligible for registration
on SEC Form S-8 or shares to be registered on any registration form that does
not permit secondary sales), it shall send to Siena and to each of the
Holder(s) written notice of such determination at least thirty (30) days
prior to each such filing and, if within twenty (20) days after receipt of
such notice, any Holder shall so request in writing, the Company shall use
its best efforts to include in such registration statement (to the extent
permitted by applicable regulation) all or any part of the Warrant Securities
(collectively referred to in this Article VI as "Registrable Securities") that
such Holder requests to be registered, provided, however, that if, in
connection with any offering involving an underwriting of Common Stock to be
issued by the Company, the managing underwriter shall impose a limitation on
the amount of Registrable Securities included in any such registration
statement, then, to the extent that any Registrable Securities remain
available for registration after the underwriter's cutback, the Company shall
be obligated to include in such registration statement with respect to each
Holder requesting inclusion only the product of : (i) the number of
Registrable Securities with respect to which such Holder has requested
inclusion hereunder and (ii) such Holder's pro rata share of the sum of all
Registrable Securities permitted to be registered and all other securities of
the Company, the holders of which Registrable Securities and other securities
have requested that such securities be registered. Any Registrable Securities
which are included in any underwritten offering under this Section 6.01 shall
be sold upon such terms as the managing underwriters shall reasonably request
but in any event shall be upon terms not less favorable than those upon which
any other selling security holder shall sell any of its securities. If any
Holder disapproves of the terms of such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter. The
Company shall use its best efforts to cause the managing underwriter or
underwriters of a proposed underwritten offering (the "Company Underwriter")
to permit the Holders who have requested to participate in the registration
for such offering to include such Registrable Securities in such offering on
the same terms and conditions as the securities of the Company included
therein. Notwithstanding the foregoing, if the Company Underwriter delivers
a written opinion to the Holders that the total amount or kind of securities
which they, the Company and any other Persons intend to include in such
offering (the "Total Securities") is sufficiently large so as to
prevent the Company from affecting a successful offering of the Total
Securities, then the amount or kind of securities to be offered for the
account of any members of management shall be reduced pro rata to the extent
necessary to reduce the Total Securities to the amount recommended by the
Company Underwriter, and if the amount or kind of Total Securities is still
sufficiently large so as to prevent the Company from affecting a successful
offering of the Total Securities, then the amount or kind of securities to be
offered for the account of the Holders and any other Persons shall be reduced
pro rata to the extent necessary to reduce the Total Securities to the amount
recommended by the Company Underwriter. Notwithstanding the provisions of
this Section 6.01, the Company shall have the right, at any time after it
shall have given written notice pursuant to this Section 6.01 (irrespective of
whether a written request for inclusion of Registrable Securities shall have
been made), to elect not to file any such proposed registration statement or
to withdraw the same after the filing and prior to the effective date thereof.
Section 6.02 Effectiveness. If necessary to permit distribution of the
Registrable Securities, the Company shall use its best efforts to maintain the
effectiveness for up to one (1) year of the registration pursuant to which any
of the Registrable Securities are being offered, and from time to time will
amend or supplement such registration statement and the prospectus contained
therein as and to the extent necessary to comply with the Securities Act and
any applicable state securities statute or regulation. Notwithstanding the
foregoing, if the registration by the Company of the resale of Registrable
Securities is eligible for SEC Form S-3 or any successor to such form, the
Company shall use its best efforts to maintain the effectiveness of the
registration until all registered Registrable Securities are sold. The Holder
shall notify the Company promptly of the completion of the offering of its
Registrable Securities under any such effective registration statement.
Section 6.03 Further Obligations of the Company. Whenever, under the
preceding Sections of this Article VI, the Company is required hereunder to
register Registrable Securities, it agrees that it shall also do the following:
(a) Furnish to each selling Holder such copies of each preliminary and
final prospectus and any other documents as such Holder may reasonably request
to facilitate the public offering of its Registrable Securities;
(b) Use its best efforts to register or qualify the Registrable
Securities to be registered pursuant to this Article VI under the applicable
securities or blue sky laws of such jurisdictions as any selling Holder may
reasonably request;
(c) Furnish to each selling Holder: (i) a signed counterpart of an
opinion of counsel for the Company, dated the effective date of the
registration statement; and (ii) a copy of any "comfort" letters signed by the
Company's independent public accountants who have examined and reported on the
Company's financial statements included in the registration statement,
covering substantially the same matters as are customarily covered in opinions
of issuer's counsel and in accountants' "comfort" letters delivered to the
underwriters in underwritten public offerings of securities;
(d) Permit each selling Holder or such Holder's counsel or other
representatives to inspect and copy such corporate documents and records as
may reasonably be requested by them in connection with such registration; and
(e) Furnish to each selling Holder, upon request, a copy of all
documents filed and all correspondence from or to the Commission in connection
with any such offering.
Section 6.04 Expenses. Except for underwriters' discounts and
brokerage commissions allocable to the Registrable Securities and for the
costs, fees and expenses of the Holders' independent legal and financial
advisers, the Company shall bear all costs and expenses of each registration
contemplated in Sections 6.01 and 6.02 including, but not limited to,
printing, legal and accounting fees and expenses, SEC and NASD filing fees and
blue sky fees and expenses in any jurisdiction in which the securities to be
offered are to be registered or qualified.
Section 6.05 Transfer of Registration Rights. The registration rights
of the Holders of Registrable Securities under this Article VI shall inure to
the benefit of and be exercisable by any transferee of Registrable Securities.
Section 6.06 Participation Rights.
The Company will not grant to any Person (other than Siena, the Holders,
any Affiliate thereof or any transferee of Registrable Securities under this
Article VI) at any time on or after the date of this Agreement the right (a
"Participation Right") to request the Company to register any securities of
the Company under the Securities Act by reason of the exercise by any holder
of its rights under this Article VI unless such Participation Right provides
that such securities shall not be registered and sold at the same time if the
managing underwriter for the offering, including the Registrable Securities,
believes that sale of such securities would adversely affect the amount of, or
price at which, the respective Registrable Securities being registered under
this Article VI can be sold.
Notwithstanding anything in this Article VI to the contrary, in no event
shall this Article VI be construed as prohibiting, restricting or impairing
the Company's ability to comply with the registration rights agreements or the
registration rights in any Common Stock Equivalents it has: (i) entered into
prior to the Closing Date and (ii) disclosed on the Disclosure Schedule.
VII. TRANSFER OF WARRANTS AND WARRANT SECURITIES
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
third quarter 10-Q filing and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000769879
<NAME> RECYCLING INDUSTRIES, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
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<SECURITIES> 0
<RECEIVABLES> 7538
<ALLOWANCES> 40
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0
500
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<INCOME-TAX> (595)
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<CHANGES> 0
<NET-INCOME> 1261
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
