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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): April 21, 1997
(April 7, 1997)
RECYCLING INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
COLORADO 0-20179 84-1103445
(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)
384 Inverness Drive South, Suite 211
Englewood, Colorado 80112
--------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
Registrant's telephone number, including area code: (303) 790-7372
NOT APPLICABLE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 7, 1997, Recycling Industries of Georgia, Inc., a wholly-owned
subsidiary of the Registrant ("RIGI"), acquired substantially all of the assets
and the business of Addlestone Recycling, Corp., ("ARC"), a privately held
metals recycler with operations in Metter, Georgia. ARC's markets are steel
mills and foundries in the Southeast.
The assets acquired from ARC consist of heavy equipment, tools and rolling
stock used in the business of recycling ferrous and non-ferrous metals. The
Registrant also purchased from ARC certain real property, buildings and
leasehold improvements used in the metals recycling business.
The total purchase price for ARC was $5,500,000 including $500,000 paid in
the form of 10,000 shares of Registrant's Series D Convertible Preferred Stock.
The $5 million cash portion of the purchase price was funded from long term debt
obtained from Coast Business Credit, a division of Southern Pacific Thrift and
Loan. The purchase price was determined through arms' length negotiations and
based upon an independent appraisal.
The Registrant will continue the metals recycling operations of ARC.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
1. The Registrant will amend this Form 8-K to provide the financial
statements required by and within the time permitted by this item.
(b) PRO-FORMA FINANCIAL INFORMATION .
1. The Registrant will amend this Form 8-K to provide the financial
statements required by and within the time permitted by this item.
(c) Exhibit
Number Description
-------- -----------
4.1 Designation of Preferences, Limitations and Relative Rights of
the Series D Convertible Preferred Stock of Recycling
Industries, Inc.
10.1 Asset Purchase Agreement dated February 16, 1996 by and among
Recycling Industries of Georgia, Inc., Recycling Industries, Inc.,
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Addlestone Recycling Corporation, Nathan Addlestone, Keith Rosen and Susan
Berlijn.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RECYCLING INDUSTRIES, INC.
Date: April 21, 1997 By /s/ THOMAS J. WIENS
--------------------------------
Thomas J. Wiens, Chairman and
CEO
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DESIGNATION OF PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF THE
SERIES D CONVERTIBLE PREFERRED STOCK
OF
RECYCLING INDUSTRIES, INC.
1. DESIGNATION AND AMOUNT. The distinctive designation of such series is
"Convertible Preferred Stock, Series D," without par value (the "Series D
Preferred Stock") of Recycling Industries, Inc., a Colorado corporation (the
"Company") and the number of shares constituting this series shall be 10,000.
2. DIVIDEND RIGHTS. The holders of the Series D Preferred Stock shall be
entitled to dividends on a cumulative basis at a per annum rate of eight
percent, payable quarterly in cash. No dividends may be paid on any series of
preferred stock junior to the Series D Preferred Stock unless the dividends then
owing on the Series D Preferred Stock have been paid in full.
3. LIQUIDATION PREFERENCE. The Series D Preferred Stock shall have no
liquidation preferences with respect to any other class or series of the
Company's Common Stock or preferred stock.
4. VOTING RIGHTS. The holders of outstanding shares of Series D
Preferred Stock shall not be entitled to vote on any matters submitted to the
stockholders of the Company except as otherwise required by law, in which case
every holder of Series D Preferred stock shall be entitled to one vote for each
such share.
5. CONVERSION OF THE SERIES D PREFERRED STOCK. All outstanding shares
of Series D Preferred Stock shall automatically and without any further action
on the part of the owner and holder thereof, convert on the second anniversary
of the date of original issuance thereof upon the following terms:
(a) MANDATORY CONVERSION. All outstanding shares of Series D
Preferred Stock, valued at $500,000, shall be convertible at the office the
Company or any transfer agent for the Series D Preferred Stock into that number
of shares of 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 Preferred Stock to the date of
conversion. For purposes of this Section 5, "Market Price" means the closing
price for the Common Stock if it is listed on a national securities exchange or
the NASDAQ National Market System or the average of the last reported bid and
asked price for Common Stock as reported
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on the NASDAQ system or on the electronic bulletin board or, if none, the
National Quotation Bureau, Inc.'s "Pink Sheets."
Upon surrender of the certificates representing the Series D Preferred
Stock being converted, the Company shall, as soon as practicable thereafter, but
in any event within three business days of receipt of the original certificates
or certificates representing the shares of Series D Preferred Stock to be
converted, issue and deliver or cause to be issued and delivered to such holder
of Series D Preferred Stock, or to its nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled.
The Company shall make no cash payment of any dividends declared and unpaid
on the shares of the Series D Preferred Stock surrendered for conversion. All
declared and unpaid dividends on such shares up to the date of conversion shall
constitute a debt of the Company payable to the converting shareholder.
(b) AUTOMATIC CONVERSION. Notwithstanding any other provisions found
in this designation, 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 Preferred Shares will immediately and automatically convert into
that number of shares of Common Stock whose average Market Price for the ten
trading days preceding the date of consolidation or merger is equivalent to
$500,000 plus the amount of all accrued and unpaid dividends on the Series D
Preferred Stock to the date of conversion.
(c) FRACTIONAL SHARES. Any fractional shares resulting from a
conversion shall be rounded to the next highest whole share of Common Stock.
(d) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of the
Series D Preferred Stock, a number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding shares of
the Series D Preferred Stock.
6. REDEMPTION RIGHTS. At any time prior to the mandatory conversion set
forth in Paragraph 5(a), 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 (i) $50 per share, and (ii) the amount of
all accrued but unpaid dividends on the Series D Preferred Stock to the date of
redemption with respect to the shares being redeemed (collectively the "Cash
Redemption Price"); provided, however, that the Company shall not be entitled to
redeem any shares of Series D Preferred Stock unless it has given the holder of
such shares written notice of such redemption (the "Redemption Notice"). If the
Company delivers a timely Redemption Notice, the Cash Redemption Price shall be
paid to the holder of the shares to be redeemed within five business days of the
surrender of the certificates representing the Series D Preferred Stock being
redeemed.
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7. NOTICES. Any notice required by the provisions of this Certificate to
be given to the holder of shares of the Series D Preferred Stock shall be deemed
given when personally delivered to such holder or five business days after the
same has been deposited in the United States mail, certified or registered mail,
return receipt requested, postage prepaid, and addressed to each holder of
record at such holders address appearing on the books of the Company. All
notices shall state the date of conversion or redemption, as the case may be.
8. PAYMENT OF TAXES. The holder of the Series D Preferred Stock will pay
all taxes and other governmental charges that may be imposed in respect of the
issue or delivery of shares of Common Stock upon conversion of shares of Series
D Preferred Stock.
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ASSET PURCHASE AGREEMENT
BY AND AMONG
RECYCLING INDUSTRIES OF GEORGIA, INC.
a Colorado corporation
("RIGI")
AND
RECYCLING INDUSTRIES, INC.
a Colorado corporation
(THE "PARENT")
AND
ADDLESTONE RECYCLING CORPORATION
a Delaware corporation
("ARC")
AND
NATHAN ADDLESTONE
President and Stockholder of ARC
("ADDLESTONE")
AND
KEITH ROSEN
Stockholder of ARC
("ROSEN")
AND
SUSAN BERLIJN
Stockholder of ARC
("BERLIJN")
FEBRUARY 26, 1997
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TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS................................................................ -1-
ARTICLE 2
ACQUISITION OF ARC ASSETS.................................................. -5-
2.1 PURCHASE AND SALE OF THE ARC ASSETS......................... -5-
2.2 EXCLUDED ASSETS-7-
2.3 ASSUMED CONTRACTS........................................... -7-
2.4 ASSUMPTION OF LIABILITIES................................... -7-
2.5 COLLECTION OF ACCOUNTS RECEIVABLE........................... -7-
ARTICLE 3
PURCHASE PRICE AND CLOSING................................................ -7-
3.1 PURCHASE PRICE FOR ARC ASSETS............................... -8-
3.2 DETERMINATION OF UNPROCESSED INVENTORY VALUE................ -8-
3.3 ALLOCATION OF THE PURCHASE PRICE............................ -8-
3.4 CLOSING OF THE PURCHASE..................................... -9-
ARTICLE 4
REPRESENTATIONS OF ARC AND THE STOCKHOLDERS............................... -9-
4.1 DUE ORGANIZATION AND QUALIFICATION.......................... -9-
4.2 TITLE TO PROPERTY........................................... -9-
4.3 AUTHORITY OF ARC; CONSENTS.................................. -10-
4.4 DISCLOSED ARC INFORMATION; ABSENCE OF CHANGES............... -11-
4.5 NO TAX LIENS; NO WAIVER..................................... -12-
4.6 COMPLIANCE WITH LAWS........................................ -12-
4.7 PERMITS..................................................... -12-
4.8 LITIGATION.................................................. -12-
4.9 CONTRACTS AND OTHER AGREEMENTS.............................. -13-
4.10 TANGIBLE PROPERTY........................................... -13-
4.11 INVENTORY................................................... -13-
4.12 INTELLECTUAL PROPERTY....................................... -14-
4.13 REAL PROPERTY............................................... -14-
4.14 LIABILITIES................................................. -14-
4.15 SUPPLIERS AND CUSTOMERS..................................... -15-
4.16 EMPLOYEE BENEFIT PLANS...................................... -15-
4.17 CURTAILMENT OF OPERATIONS................................... -15-
4.18 EMPLOYEE RELATIONS.......................................... -15-
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4.19 INSURANCE................................................... -15-
4.20 RELATIONSHIPS............................................... -15-
4.21 NO MATERIAL CHANGES PRIOR TO CLOSING DATE................... -16-
4.22 BROKER'S OR FINDER'S FEES................................... -16-
4.23 EMPLOYEE TRANSITION......................................... -16-
4.24 ENVIRONMENTAL MATTERS....................................... -16-
4.25 OSHA........................................................ -16-
4.26 DISCLOSURE.................................................. -16-
4.27 BEST EFFORTS................................................ -17-
ARTICLE 5
REPRESENTATIONS OF RIGI AND THE PARENT.................................... -17-
5.1 DUE INCORPORATION AND QUALIFICATION OF RIGI................. -17-
5.2 DUE INCORPORATION AND QUALIFICATION OF THE PARENT........... -17-
5.3 ARTICLES OF INCORPORATION AND BYLAWS........................ -17-
5.4 AUTHORITY OF RIGI AND THE PARENT............................ -17-
5.5 CONSIDERATION STOCK......................................... -18-
5.6 BROKER'S OR FINDER'S FEES................................... -18-
5.7 DISCLOSURE.................................................. -18-
5.8 BEST EFFORTS................................................ -19-
ARTICLE 6
REGULATORY COMPLIANCE..................................................... -19-
6.1 BULK SALES COMPLIANCE....................................... -19-
6.2 HART-SCOTT-RODINO ACT....................................... -19-
6.3 THE WARN ACT................................................ -19-
6.4 COBRA....................................................... -19-
ARTICLE 7
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING............................ -19-
7.1 ENVIRONMENTAL STUDIES....................................... -19-
7.2 TITLE INSURANCE............................................. -20-
7.3 SURVEY...................................................... -20-
7.4 ASSUMED CONTRACTS........................................... -20-
7.5 CONDUCT OF BUSINESS......................................... -20-
7.6 PRESERVATION OF BUSINESS.................................... -20-
7.7 NOTICE OF EVENTS............................................ -21-
7.8 EXAMINATIONS AND INVESTIGATIONS............................. -21-
7.9 REVIEW OF REVISED SCHEDULES AND INFORMATION................. -21-
7.10 RETAINED EMPLOYEES.......................................... -22-
7.11 NO NEGOTIATION BY ARC....................................... -22-
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ARTICLE 8
CONDITIONS PRECEDENT TO THE OBLIGATION
OF RIGI AND THE PARENT TO CLOSE........................................... -22-
8.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS............ -22-
8.2 GOVERNMENTAL PERMITS AND APPROVALS.......................... -23-
8.3 THIRD PARTY CONSENTS........................................ -23-
8.4 LITIGATION.................................................. -23-
8.5 REAL PROPERTY............................................... -23-
8.6 NO MATERIAL ADVERSE CHANGE.................................. -24-
8.7 REMOVAL OF SHREDDER RESIDUE................................. -24-
8.8 TRANSFER DOCUMENTS.......................................... -24-
8.9 ASSIGNMENT OF CONTRACTS..................................... -24-
8.10 RELEASE OF SECURITY INTEREST................................ -24-
8.11 SUBSCRIPTION AGREEMENT...................................... -24-
8.13 BOOKS AND RECORDS........................................... -24-
8.14 COPIES OF BUSINESS RECORDS.................................. -25-
8.15 RESOLUTIONS................................................. -25-
8.16 CERTIFICATES, ETC. OF THE STOCKHOLDERS AND ARC.............. -25-
8.17 FINANCING................................................... -25-
8.18 NO SALES OR USE TAX DUE..................................... -25-
8.19 PAYMENT OF ACCOUNTS PAYABLE................................. -25-
8.20 APPROVAL OF COUNSEL TO RIGI AND THE PARENT.................. -25-
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATION OF ARC
AND THE STOCKHOLDERS TO CLOSE............................................. -26-
9.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS............ -26-
9.2 GOVERNMENTAL PERMITS AND APPROVALS.......................... -26-
9.3 LITIGATION.................................................. -26-
9.4 FINANCING................................................... -26-
9.5 RESOLUTIONS................................................. -26-
9.6 RELEASE FROM ASSUMED CONTRACTS.............................. -26-
9.7 APPROVAL OF COUNSEL TO ARC.................................. -27-
9.8 THE PURCHASE PRICE.......................................... -27-
ARTICLE 10
ACTIONS TO BE TAKEN AT THE CLOSING........................................ -27-
10.1 TRANSFER DOCUMENTS.......................................... -27-
10.2 THE PURCHASE PRICE.......................................... -27-
10.3 SUBSCRIPTION AGREEMENT...................................... -27-
10.4 NON-COMPETITION AGREEMENTS.................................. -27-
10.5 SPECIAL WARRANTY DEED....................................... -27-
10.6 CONTRACT ASSUMPTIONS........................................ -27-
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10.7 CLOSING CERTIFICATE OF ARC.................................. -27-
10.8 CLOSING CERTIFICATE OF RIGI................................. -28-
10.9 CERTIFICATE REGARDING RESOLUTIONS OF ARC.................... -28-
10.10 CERTIFICATE REGARDING RESOLUTIONS OF PARENT AND RIGI........ -28-
10.11 REAL PROPERTY CLOSING....................................... -28-
10.12 TITLES TO VEHICLES, MACHINERY AND EQUIPMENT................. -29-
ARTICLE 11
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION............... -29-
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................. -29-
11.2 INDEMNITY AGREEMENTS OF ARC AND THE STOCKHOLDERS............ -29-
11.3 INDEMNITY AGREEMENT OF RIGI AND THE PARENT.................. -30-
11.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS............ -31-
11.5 GOOD FAITH EFFORTS TO SETTLE DISPUTES....................... -32-
11.6 FEES AND EXPENSES........................................... -32-
11.7 NOTICE OF CLAIMS............................................ -32-
11.8 LITIGATION SUPPORT.......................................... -32-
ARTICLE 12
TERMINATION OF AGREEMENT.................................................. -33-
12.1 TERMINATION................................................. -33-
12.2 SURVIVAL.................................................... -34-
12.3 EFFECT OF FAILURE TO CLOSE.................................. -34-
ARTICLE 13
CERTAIN ADDITIONAL AGREEMENTS............................................. -34-
13.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION........... -34-
13.2 EXPENSES.................................................... -35-
13.3 WAIVERS AND CONSENTS........................................ -35-
13.4 NOTICES..................................................... -35-
13.5 FURTHER ASSURANCES.......................................... -36-
13.6 RETENTION OF/ACCESS TO BUSINESS RECORDS..................... -36-
13.7 AUDIT BY RIGI AND PARENT.................................... -37-
13.8 ENTIRE AGREEMENT............................................ -37-
13.9 CONSTRUCTION................................................ -37-
13.10 RIGHTS OF THIRD PARTIES..................................... -37-
13.11 HEADINGS.................................................... -38-
13.12 GOVERNING LAW............................................... -38-
13.13 SUBMISSION TO JURISDICTION; WAIVERS......................... -38-
13.14 PARTIES IN INTEREST......................................... -38-
13.15 COUNTERPARTS AND FACSIMILE SIGNATURES....................... -38-
13.16 SEVERABILITY................................................ -38-
13.17 CORPORATE AUTHORITY......................................... -38-
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13.18 TIME OF ESSENCE............................................. -38-
13.19 RIGHT TO STORE.............................................. -39-
LIST OF EXHIBITS.......................................................... -42-
LIST OF SCHEDULES......................................................... -43-
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 26th day of February, 1997, by and between
RECYCLING INDUSTRIES OF GEORGIA, INC., a Colorado corporation ("RIGI"),
RECYCLING INDUSTRIES, INC., a Colorado corporation (the "Parent"), ADDLESTONE
RECYCLING CORPORATION, a Delaware corporation ("ARC"), Nathan Addlestone,
President and Stockholder of ARC ("Addlestone"), Keith Rosen, Stockholder of ARC
("Rosen") and Susan Berlijn, Stockholder of ARC ("Berlijn") (collectively
Addlestone, Rosen and Berlijn are referred to as "Stockholders" or individually
as a "Stockholder"). There are numerous other defined terms which are
capitalized in this Agreement, all of which are defined in the substantive
provisions of this Agreement or in Article 1, below.
WITNESSETH:
WHEREAS, RIGI is a wholly-owned subsidiary of the Parent; and
WHEREAS, RIGI desires to acquire substantially all of the assets, excluding
the Excluded Assets (as such term is hereafter defined), used in the ferrous and
nonferrous metal recycling business conducted by ARC at its facility located in
Metter, Georgia (the "ARC Assets"); and
WHEREAS, ARC desires to sell the ARC Assets; and
WHEREAS, the Parent has a vested interest in the transactions referred to
herein and is a Party to this Agreement, amongst other things, in order to
tender the Consideration Stock referred to herein;
WHEREAS, the Stockholders have a vested interest in the transactions
referred to herein and are Parties to this Agreement in order to make certain
representations and warranties and to accept certain obligations set forth
herein.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto covenant and agree as follows:
DEFINITIONS
Unless otherwise defined in the substantive provisions of this Agreement,
the following terms will have the meanings ascribed to them in this Article 1.
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1.1 "Acquisition" means the acquisition of the ARC Assets from ARC.
1.2 "ARC Payables" has the meaning set forth in Section 8.19, below.
1.3 "ARC Receivables" means receivables owing to ARC by any person or
entity whomsoever, including but not limited to accounts receivable and notes
receivable.
1.4 "Assumed Contracts" means those contracts, leases and agreements
related to the Business and specifically assumed by RIGI on the Closing Date,
copies of which are listed and attached hereto as Schedule 2.3.
1.5 "Business" means the business and business operations as
conducted by ARC on November 1, 1996, and subsequent thereto, as a going
concern.
1.6 "Closing" has the meaning set forth in Section 3.4, below.
1.7 "Closing Date" has the meaning set forth in Section 3.4, below.
1.8 "Closing Documents" means the other agreements required to be
executed and delivered under this Agreement.
1.9 "Closing Notification" has the meaning set forth in Section 3.4,
below.
1.10 "Environmental Law or Laws" means any and all federal, state,
local or municipal laws, rules, orders, regulations, statutes, treaties,
ordinances, codes, decrees, or requirements of any governmental authority
regulating, relating to or imposing liability or standards of conduct concerning
environmental protection, health or safety matters, including all requirements
pertaining to reporting, licensing, permitting, investigation, removal or
remediation of emissions, discharges, releases, or threatened releases of
Hazardous Materials, chemical substances, pollutants or contaminants or relating
to the manufacture, generation, processing, distribution, use, treatment,
storage, disposal, transport, or handling of Hazardous Materials, chemical
substances, pollutants or contaminants, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Toxic Substance Control Act ("TSCA"), the Resource Conservation
and Recovery Act ("RCRA"), the Clean Air Act ("CAA"), and the Clean Water Act
("CWA"), all as may have been amended.
1.11 "Environmental Liabilities" means any and all liabilities for the
violation of, or remediation under, any Environmental Laws.
1.12 "GAAP" means generally accepted accounting principles
consistently applied in the United States.
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1.13 "Hazardous Materials" means any substance (a) the presence of
which is at, on, over, beneath, in or upon any real or personal property,
building, structure, container of any nature or description, subsurface strata,
ambient air or ambient water (including surface and groundwater) or requires
investigation, removal or remediation under any Environmental Law or common
law, (b) which is or becomes defined as a "hazardous substance," "hazardous
material," "hazardous waste", "pollutant" or "contaminant" under any
Environmental Law, and/or (c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous and is
or becomes regulated by any governmental authority under any Environmental Law,
(d) the presence of which causes or threatens to cause a nuisance or trespass
upon real property or to adjacent properties or poses or threatens to pose a
hazard to the environment, and/or to the health or safety of persons on or about
any real property, and/or (e) which contains urea-formaldehyde, polychlorinated
biphenyls, asbestos or asbestos containing materials, radon, petroleum and
petroleum products.
1.14 "Intellectual Property" has the meaning set forth in Section
2.1(c).
1.15 "Inventory Date" shall have the meaning set forth in Section
3.2(a), below.
1.16 "IRC" means the Internal Revenue Code of 1986, as amended.
1,17 "Knowledge" means actual knowledge without independent
investigation.
1.18 "Lender" means RIGI's and the Parent's primary lender or equity
participant relating to the Transaction.
1.19 "Liability or Liabilities" means direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility, known
or unknown, asserted or unasserted, fixed or unfixed, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise
which affects or could affect the ARC Assets or the Business, including any
liability for Taxes.
1.20 "Ordinary Course of Business" or "Ordinary Course" means the
ordinary course of business consistent with past custom and practice of ARC
(including with respect to quantity and frequency).
1.21 "Owned Facilities" means the real property and associated
fixtures owned by ARC as specifically described on Schedule 2.1(a).
1.22 "Parent Common Stock" means the common stock, $.001 par value per
share, of Recycling Industries, Inc., a Colorado corporation.
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1.23 "Parent Series D Convertible Preferred Stock" means the
Convertible Preferred Stock of Parent described in the Designation of Series "D"
Convertible Preferred Stock attached hereto as Exhibit A.
1.24 "Permits" means all licenses, permits, orders and approvals of
any federal, state or local governmental or regulatory bodies that are material
to or necessary for the conduct of the Business.
1.25 "Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, association, unincorporated
organization, agency, other entity or groups of entities, or governmental body.
1.26 "Processed Inventory" means all ferrous and non-ferrous Inventory
that has been processed by ARC as of the Closing Date and is ready for shipment
to ARC's customers.
1.27 "Review Period" means the 30 business days after execution of
this Agreement by all of the Parties. During the Review Period, RIGI and Parent
shall have the right to review such schedules, documents and/or exhibits and
request additional documentation as needed to clarify, investigate or determine
the nature of any item disclosed which, in the opinion of the RIGI, the Parent
or their counsel or accountants could have a material adverse affect on the
operations of RIGI, the Parent, or ARC ("Adverse Items").
1.28 "Security Interest" means any mortgage, pledge, security
interest, encumbrance, charge, claim, or other lien, other than: (a) mechanic's,
materialman's and similar liens; (b) liens for Taxes not yet due and payable or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings; (c) liens arising under worker's compensation, unemployment
insurance, social security, retirement and similar legislation; (d) liens
arising in connection with sales of foreign receivables; (e) liens on goods in
transit incurred pursuant to documentary letters of credit; (f) purchase money
liens and liens securing rental payments under capital lease arrangements; and
(g) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
1.29 "Shredder Residue" means the by-product generated from the
operation of a shredder which may or may not contain Hazardous Materials.
1.30 "Tangible Property" shall include the property described in
Sections 2.1(a), 2.1(b), 2.1(d), and 2.1(e), below.
1.31 "Tax" means any federal, state, local or foreign income, gross
receipts, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, stamp, excise,
occupation, sales, use, transfer, value added, alternative minimum, estimated,
net worth, self-employment, Medicaid, or other tax, including any interest,
penalty or addition thereto, whether disputed or not.
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1.32 "Transaction" means the transactions contemplated by this
Agreement and the Closing Documents.
1.33 "Unprocessed Inventory" means: (i) all scrap ferrous metal
comprised of obsolete, discarded or abandoned machinery, appliances, equipment,
automobiles or other by-products to be processed by ARC for resale; and (ii)
scrap non-ferrous metal comprised of non-magnetic alloys of copper, brass,
aluminum and other related metals to be processed by ARC for resale.
Unprocessed Inventory does not include any ferrous or non-ferrous materials
contained in Shredder Residue or the other residual materials resulting from
ARC's operations or contained within dirt or other non-processable medium within
the Owned Facility.
1.34 "1934 Act" means the Securities Exchange Act of 1934, as amended.
ARTICLE 2
ACQUISITION OF ARC ASSETS
2.1 PURCHASE AND SALE OF THE ARC ASSETS. At the Closing and subject
to the terms and conditions stated herein, ARC agrees to sell, assign, convey
and transfer to RIGI, and RIGI agrees to purchase from ARC, the ARC Assets
together with all of the properties, rights and goodwill associated therewith of
every kind and description, tangible and intangible, personal or mixed, as
hereinafter more particularly described, with the exception of the Excluded
Assets, as hereinafter defined. Without limitation, the ARC Assets shall
include all of the items enumerated in subparagraphs (a) through (l) below, but
excepting the Excluded Assets:
(a) The Owned Facilities, including all buildings situated
thereon and all improvements and including all rights in easements, driveways
and signs, as legally described on Schedule 2.1(a).
(b) All vehicles, machinery and equipment, tools, furniture,
leasehold improvements, fixtures, vehicles, dies, jigs, and supplies, or any
related capitalized items and other tangible property which are both (i) owned
by ARC and (ii) either (x) located at the Owned Facilities or (y) used by the
Business as of the date of this Agreement, whether at the Owned Facilities, over
the road or at any other location, all as described on Schedule 2.1(b), provided
that digs, jigs, supplies, tools and spare parts are not listed on Schedule
2.1(b).
(c) Schedule 2.1(c) sets forth all of the intellectual
property, proprietary and business information of ARC relating to the Business,
including, all of ARC's right, title and interest in and to (collectively the
"Intellectual Property"):
(1) the non-exclusive use of the name "Addlestone
Recycling Corporation" and any variations thereof, but only for a period of six
months after the Closing;
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(2) all transferrable Permits and telephone numbers
used by ARC to the extent the same are transferrable by ARC;
(3) the non-exclusive right to all inventions,
discoveries, trade secrets, designs, prototypes, formulas and know-how relating
to the Business, it being understood that a similar business is now owned and
operated and will continue to be owned and operated by Addlestone International
Corporation;
(4) all patents (whether issued or pending),
copyrights, trademarks, tradenames (but excluding rights to the name "Addlestone
Recycling Corporation" except as provided in Section 2.1(c)(1); and
(5) copies of all business, financial and tax records
relating to the Business, including copies of all sales data, pricing and cost
information, customer and supplier lists, credit records, sales literature and
business and marketing plans relating to the Business, provided that ARC will
not be required to make copies except as provided in Section 8.14.
(d) Copies of all computer documentation, computer files,
computer disks, computer tapes and all information stored on computer media
(whether written, optical, or magnetic) used in connection with the operation of
the Business and stored at the Owned Facilities.
(e) All accounting and other computer software relating to
the Business owned by ARC, including information interfaced with those systems,
as maintained by ARC at the Owned Facilities, all of which are listed on
Schedule 2.1(e), provided, however, that ARC shall not warrant title to the
operating system software;
(f) All rights to customer and supplier lists, signs,
advertising, catalogues and brochures relating to the Business.
(g) All rights of ARC under the contracts relating to the
Business to which ARC is a party, which are listed on Schedule 2.1(g), except
for contracts for the sale of Processed Inventory.
(h) All rights of ARC under open orders to purchase raw
materials or services in accordance with the Business' normal operating
procedures.
(i) All rights of ARC as lessee under leases of personal
property relating to the Business, all of which are listed on Schedule 2.1(i).
(j) All purchase orders, back orders, open orders or
contracts from customers, including the backlog and parts manufactured for or
assigned to ARC but not including any contracts for the sale of Processed
Inventory.
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(k) All goodwill and other general intangibles related to the
ARC Assets.
(l) All other assets of any nature useful and/or beneficial
to the Business whether owned or leased by ARC unless specifically described in
Section 2.2 or on Schedule 2.2 as an Excluded Asset.
ARC's sale, conveyance, assignment and transfer of the ARC Assets shall be
free and clear of all liens, encumbrances, liabilities or obligations, except
for any statutory liens for ad valorem taxes for the current year.
2.2 EXCLUDED ASSETS. On the Closing Date, RIGI shall not purchase
the cash, cash equivalents, Processed Inventory, ARC Receivables, prepaid items,
books and records, or the other assets of ARC on the Closing Date as set forth
on Schedule 2.2 (the "Excluded Assets").
2.3 ASSUMED CONTRACTS. RIGI shall assumes the obligations of ARC
only for those contracts set forth on Schedule 2.3.
2.4 ASSUMPTION OF LIABILITIES. RIGI shall not assume any Liabilities
or Environmental Liabilities of ARC arising on or before the Closing or with
respect to any action, event or occurrence of any party on or prior to the
Closing, provided, however, that ad-valorem taxes on the ARC Assets not yet due
and payable shall be pro-rated at Closing based on the preceding year's actual
ad-valorem taxes paid and RIGI shall assume its pro-rata share of such taxes.
2.5 COLLECTION OF ACCOUNTS RECEIVABLE.
(a) ARC will continue to collect ARC Receivables. If RIGI
receives payment on any of the ARC Receivable, RIGI shall forthwith forward the
same to ARC.
(b) ARC shall have the right, during the normal business
hours of RIGI, to review records of RIGI solely to determine compliance with the
provisions of Section 2.5(a).
(c) If ARC receives payment of any receivables relating to
the Business for materials which are the property of RIGI and which are shipped
after the Closing, then ARC shall forthwith forward the same to RIGI.
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ARTICLE 3
PURCHASE PRICE AND CLOSING
3.1 PURCHASE PRICE FOR ARC ASSETS.
(a) Subject to Section 10.11 below, RIGI shall pay the total
amount of $5,500,000 plus an amount equal to the value of ARC's Unprocessed
Inventory, as determined in accordance with Section 3.2, below (the "Purchase
Price") to ARC for the purchase of the ARC Assets. The Purchase Price shall be
payable as follows:
(1) $5,000,000, plus an amount equal to the value of
ARC's Unprocessed Inventory, as determined in accordance with Section 3.2,
below, in immediately available funds at Closing (the "Cash Consideration");
(2) $500,000 of Parent Series D Convertible Preferred
Stock delivered on the Closing Date (as defined in Section 3.4 hereof) pursuant
to the terms of a customary subscription agreement (the "Subscription
Agreement") containing mandatory registration rights for the Parent Common Stock
issuable upon conversion of the Parent Series D Convertible Preferred Stock to
be registered (the "Consideration Stock"). The form of Subscription Agreement
is attached hereto as Exhibit B.
3.2 DETERMINATION OF UNPROCESSED INVENTORY VALUE.
(a) The quantities of all Unprocessed Inventory shall be
determined as of the close of business of ARC on a day not more than three
business days prior to the scheduled Closing Date (the "Inventory Date"). In
conjunction with the determination of the quantities of Unprocessed Inventory,
RIGI and its representatives shall be entitled to participate in determining the
physical inventory thereof as well as to inspect all work papers, schedules and
other supporting materials.
(b) The Purchase Price of the Unprocessed Inventory shall be
based on ARC's average cost for the ten business days preceding the Inventory
Date, exclusive of any purchases from related or affiliated persons or entities.
3.3 ALLOCATION OF THE PURCHASE PRICE.
(a) The Purchase Price, exclusive of the value of the
Unprocessed Inventory as determined in accordance with Section 3.2, above,
shall be allocated among the ARC Assets and the Non-Compete provision as set
forth on Schedule 3.3.
(b) The parties agree that they will not take any tax or
other position inconsistent with any allocation of the Purchase Price set forth
on Schedule 3.3.
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(c) RIGI and ARC each covenant with the other that it will
promptly give written notice to the other of any inquiry or challenge of such
allocation by any federal, state or local tax authority.
3.4 CLOSING OF THE PURCHASE. The closing of the Transaction (the
"Closing") shall take place at the offices of Nation's Bank, Charleston, South
Carolina, or at such other place in Charleston, South Carolina as selected by
the Lender, in its sole and absolute discretion, on the date and at the time set
forth in the Closing Notification, which shall be a Monday, given by RIGI in
accordance with this section (the "Closing Date"). The Closing Date shall be no
later than April 28, 1997, PROVIDED, HOWEVER, the Closing Date shall be
automatically extended to provide for RIGI and Parent's review pursuant to
Sections 7.1(b), 7.1(c) and 7.9. RIGI shall give written notice to ARC that
RIGI intends to consummate the Transaction on a date which is at least 15 days
following the date of such notice (the "Closing Notification"); PROVIDED,
HOWEVER, that ARC, in its sole discretion, may waive the requirement of the
Closing Notification.
ARTICLE 4
REPRESENTATIONS OF ARC AND THE STOCKHOLDERS
As an inducement to RIGI and the Parent to enter into this Agreement and to
complete the Transaction, and with the knowledge that RIGI and the Parent will
rely thereon, ARC and the Stockholders, jointly and severally, represent and
warrant to RIGI and the Parent that all of the representations and warranties in
this Article 4 are true, correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this Article 4), except as set forth in the Schedules attached to
this Agreement which may be revised by ARC at any time or times prior to Closing
and which Schedules, as the same may be so revised, will be initialed by the
Parties at the Closing.
4.1 DUE ORGANIZATION AND QUALIFICATION. (a) ARC is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has the corporate power and lawful authority to carry on
its business as now being conducted.
(b) ARC is duly qualified or otherwise authorized to transact
business in Georgia, being the only jurisdiction in which the nature of the
business conducted or the character or location of the properties owned makes
such qualification necessary.
4.2 TITLE TO PROPERTY. ARC has good, valid and marketable title to
all real and personal property included in the ARC Assets (tangible and
intangible), in each case subject to no Security Interest, option, right of
first refusal, or other restriction of any kind or character, subject, however,
to (i) the title exceptions disclosed by the title commitment and the survey as
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described in Sections 7.2 and 7.3; and (ii) a security interest in favor of
Addlestone International Corporation as described in Schedule 4.2.
4.3 AUTHORITY OF ARC; CONSENTS. (a) ARC has full power and
authority to execute and deliver this Agreement and the Closing Documents and to
carry out the Transaction; and ARC has taken all requisite corporate,
partnership, or other action to authorize the execution, delivery and
performance of the Closing Documents.
(b) This Agreement and the Closing Documents are valid and
binding agreements of ARC enforceable in accordance with their terms.
(c) Except as set forth in the Schedules to this Agreement or
any document supplied by ARC and the Stockholders to RIGI and Parent, no
consent, authorization or approval of, or declaration, filing or registration
with, any governmental or regulatory authority or any consent, authorization or
approval of any other third party is required to enable ARC to enter into and
perform its obligations under this Agreement and the Closing Documents, and
neither the execution and delivery of this Agreement and the Closing Documents
nor the consummation of the Transaction thereby will:
(1) Be in violation of the Certificate of
Incorporation, Bylaws or other organizational document of ARC, or constitute a
breach of any evidence of indebtedness or agreement to which ARC is a party;
(2) Cause a default under any mortgage or deed of
trust or other lien, charge or encumbrance to which any of the ARC Assets is
subject or under any contract to which it is a party, or permit the termination
of any such contract by another person;
(3) Result in the creation or imposition of any
Security Interest upon any of the ARC Assets under any agreement or commitment
to which ARC or the ARC Assets are bound;
(4) Conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality;
(5) To the Knowledge of ARC and the Stockholders,
violate any statute, law or regulation of any jurisdiction as such statute, law
or regulation relates to the ARC Assets; or
(6) To the Knowledge of ARC and the Stockholders,
violate or cause any revocation of, or limitation on, any Permit.
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4.4 DISCLOSED ARC INFORMATION; ABSENCE OF CHANGES. (a) ARC has
furnished, or will prior to March 1, 1997 (or such later date as hereafter set
forth) furnish, RIGI and the Parent the following financial information,
Schedules, and other disclosures:
(1) A copy of the unaudited financial statements for
ARC for its fiscal years ended December 31, 1994, 1995 and 1996, and a
description of its material assets (including any real property, equipment, and
other assets owned as of the end of each fiscal year). Further, ARC will
promptly furnish to RIGI any interim financial statements for any months in 1997
after the same become available;
(2) Copies of ARC's tax returns for its tax years
ended in 1993, 1994, and 1995;
(3) Copies of all of ARC's Permits;
(4) All schedules referred to in this Agreement.
ARC will update such information to the Closing Date (such information
being collectively referred to in this Section 4.4 as the "Disclosed ARC
Information").
(b) The Disclosed ARC Information, including the footnotes
thereto, present fairly, in all material respects, the financial and operational
condition of the Business, the ARC Assets, and ARC at the dates thereof and
reflect all material claims against, and all material debts and liabilities of
ARC, fixed or contingent, as at the dates thereof, and the statements of income
and retained earnings which are a part of the Disclosed ARC Information present
fairly, in all material respects, the results of the operations of ARC and the
changes in its financial position for the periods indicated except as otherwise
disclosed in this Agreement and the Exhibits and Schedules hereto. The
financial statements which are included within the Disclosed ARC Information
have been prepared substantially in accordance with GAAP, except that as to any
interim financial statements, the customary year-end adjusting entries may not
have been made.
(c) Since December 31, 1996, there has been (1) no material
adverse change in the assets or liabilities, or in the business or condition,
financial or otherwise, or in the results of operations of the Business, whether
as a result of any legislative or regulatory change, revocation of any Permits,
fire, explosion, accident, casualty, labor trouble, flood, drought, riot, storm,
condemnation or act of God or other public force or otherwise; and (2) no change
in the assets or liabilities, or in the Business or condition, financial or
otherwise, or in the results of operations, or any loss of customers or
prospects of ARC, except in the Ordinary Course of Business which have not, in
the aggregate or individually, been materially adverse.
(d) ARC, during the pendency of this Agreement will operate
the Business only in the Ordinary Course.
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(e) ARC will provide prompt notice to RIGI of any material
change (including but not limited to the institution of legal proceedings by or
against ARC.
4.5 NO TAX LIENS; NO WAIVER. Except as set forth on Schedule 4.5,
(a) None of the ARC Assets are subject to any lien in favor of the United
States pursuant to the IRC for nonpayment of federal taxes, or any lien in favor
of any state under any comparable provision of state law, under which transferee
liability might be imposed upon RIGI as purchaser under the IRC or any
comparable provision of state or local law, except for ad-valorem taxes which
are not yet due and payable.
(b) ARC has not waived any statute of limitations with
respect to the assertion of any liability under any federal, state, or local tax
law.
(c) ARC is not in default under, nor has it failed to pay,
any Tax liability to any federal, state, or local authority, and no audit or
other review by any such authority is pending, or, to the Knowledge of ARC and
the Stockholders, contemplated.
4.6 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.6, (a)
neither ARC nor any of the Stockholders is in violation or has violated any
applicable order, judgment, injunction, award or decree relating to the ARC
Assets. To the Knowledge of ARC and the Stockholders, except as otherwise
disclosed in the Environmental Studies, neither ARC nor the Stockholders have
violated or are in violation any federal, state, local or foreign law, ordinance
or regulation or any other requirement of any governmental or regulatory body,
court or arbitrator applicable to the ARC Assets.
(b) Without limiting the generality of the foregoing (1) the
buildings included in the Owned Facilities do not encroach on the property of
others, (2) except as otherwise disclosed in the Environmental Studies, to the
Knowledge of ARC and the Stockholders there is not pending or threatened any
notification of any governmental authority that ARC is not in compliance with
applicable laws and regulations respecting employment and employment practices,
occupational safety and health laws and regulations, and Environmental Laws, and
neither ARC nor any Stockholder knows of any basis therefor, and (3) neither ARC
nor any Stockholder has received any such notification of past violations of
such laws or regulations.
4.7 PERMITS. To the Knowledge of ARC and the Stockholders, Schedule
4.7 lists all Permits required by any governmental entity related to the
Business or operations of ARC. Except as described on Schedule 4.7, ARC validly
holds all Permits and all Permits are in full force and effect and no proceeding
to revoke or limit any of such Permits is pending or, to the Knowledge of ARC or
the Stockholders, threatened.
4.8 LITIGATION. Except as set forth on Schedule 4.8, there are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
governmental or regulatory body
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or arbitration tribunal against or involving the ARC Assets or the Business.
Except as set forth on Schedule 4.8, there are no actions, suits or claims
against ARC or the Stockholders, or, to the Knowledge of ARC or the
Stockholders, investigations (whether or not the defense thereof or liabilities
in respect thereof are covered by insurance) pending or, to the Knowledge of ARC
or the Stockholders, threatened against or involving the ARC Assets or the
Business, nor to the Knowledge of ARC or the Stockholders, is there any basis
therefor. Responsibility for any litigation involving the ARC Assets or the
Business pending or arising from acts that occurred prior to the Closing and the
satisfaction of judgments (including related costs and fees) shall remain with
ARC and the Stockholders.
4.9 CONTRACTS AND OTHER AGREEMENTS. Except as set forth on Schedule
4.9, (a) Except for the Assumed Contracts or the contracts, leases, and other
agreements which will be repaid or cancelled at or prior to the Closing, ARC is
not a party to any (1) contract for the employment of any officer or individual
employee, (2) contract with any union, (3) bank loan or other credit agreement,
(4) bonus, deferred compensation, profit sharing, pension or retirement
arrangement, (5) lease for real or personal property, (6) partnership or joint
venture agreement, or (7) other material contract, agreement or commitment
except for contracts to sell Processed Inventory.
(b) All of the contracts, leases and other agreements which
constitute a part of the Assumed Contracts are valid and binding upon ARC in
accordance with their terms, and ARC is not in default nor has it received any
notice of default under, or with respect to, any such contracts, leases, or
other agreements.
(c) No approval or consent of any Person is needed in order
that the contracts, leases, and other agreements which constitute a part of the
Assumed Contracts will continue in full force and effect following the
completion of the Transaction. ARC is not in the process of negotiating or
entering into any contracts, leases, or other agreements described in this
Section 4.9.
4.10 TANGIBLE PROPERTY. Except as set forth on Schedule 4.10, all
Tangible Property is reflected in the Disclosed ARC Information and to the
extent such Tangible Property was being used in the Business at November 1,
1996, or thereafter, is in good operating condition and repair, subject only to
normal wear and tear. Except as set forth on Schedule 4.10, neither ARC nor the
Stockholders has received notice that any of the Tangible Property is in
violation of any existing law or any building, zoning, health, safety or other
ordinance, code or regulation.
4.11 INVENTORY. The piles of Unprocessed Inventory observed and
measured on the Inventory Date are located on level ground and are comprised
solely, throughout the pile, of the quality and grade of material visible on the
outer surface of the pile.
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4.12 INTELLECTUAL PROPERTY. Except as set forth on Schedule 4.12, (a)
All Intellectual Property is owned outright by ARC, free and clear of any
Security Interest and there exist no obligations with respect to any
Intellectual Property requiring ARC to make any payment in respect of its use or
otherwise. ARC has never agreed to indemnify any Person for or against any
interference, infringement, misappropriation or other conflict with respect to
the Intellectual Property.
(b) ARC and the Stockholders are not aware of any patent,
invention, trade secret, trademark, service mark, trade name or copyright of any
other Person that is infringed by ARC, nor do they have notice of any
infringement claim of any other Person relating to any of the Intellectual
Property or any process or confidential information of ARC, and ARC and the
Stockholders know of no basis for any such charge or claim.
4.13 REAL PROPERTY. To the best of ARC's and the Stockholder's
Knowledge, except as set forth on Schedule 4.13, the Owned Facilities include
all real property included in the ARC Assets. To the best of ARC's and the
Stockholder's Knowledge, with respect to each parcel of owned real property
included within the Owned Facilities:
(a) Except as otherwise disclosed herein or in the
Environmental Studies, the Owned Facilities have received all approvals of
governmental authorities (including licenses and permits) required in connection
with the ownership or operation thereof and have been operated and maintained in
accordance with applicable laws, rules and regulations.
(b) There are no leases, subleases, licenses, concessions, or
other agreements, written or oral, granting to any party or parties the right of
use or occupancy of any portion of the Owned Facilities.
(c) There are no outstanding options or rights of first
refusal to purchase the Owned Facilities or any portion thereof or interest
therein.
(d) There are no parties other than ARC in possession of the
Owned Facilities or any portion thereof.
(e) The Owned Facilities are supplied with utilities and
other services necessary for their operation, including electricity, water,
telephone, and septic tank for sewage disposal, all of which services are, to
the Knowledge of ARC, adequate in accordance with all applicable laws,
ordinances, rules, and regulations and are provided ingress and egress via
public roads or via permanent, irrevocable, appurtenant easements benefitting
the Owned Facilities.
4.14 LIABILITIES. Except as otherwise set forth in this Agreement or
any Schedule hereto, to the best of the Knowledge of ARC and the Stockholders,
the Business has no Liabilities other than (a) Liabilities fully and adequately
reflected or reserved against in the
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Disclosed ARC Information and (b) Liabilities incurred since December 31, 1996,
in the Ordinary Course of Business.
4.15 SUPPLIERS AND CUSTOMERS. Schedule 4.15 sets forth a list of (1)
any supplier from whom ARC annually purchases $5,000 or more, and (2) any
customer whose annual purchases from the Business are $25,000 or more. All
purchase orders and customer contracts were issued by ARC in the Ordinary Course
of Business. Except as set forth on Schedule 4.15, there are no agreements or
understandings with any customers or the vendors to ARC as to adjustments in
pricing or cost which would reduce the profit margin of any existing or
contemplated contract or other relationship.
4.16 EMPLOYEE BENEFIT PLANS. ARC does not now maintain or contribute
to, and has never maintained or contributed to, any employee pension benefit
plan relating to or including the employees of the Business subject to the
Employee Retirement Income Security Act of 1974.
4.17 CURTAILMENT OF OPERATIONS. Except as set forth on Schedule 4.17,
no labor disputes or work stoppages involving the Business are pending or
threatened which, either singly or in the aggregate, might have an adverse
effect on the Business. Except as set forth on Schedule 4.17, to the Knowledge
of ARC and the Stockholders, no material customer of or supplier to the Business
is involved in, or affected by, any dispute, arbitration, lawsuit, or
administrative proceedings which might materially adversely affect the Business,
operations, properties, assets or condition, financial or otherwise, of the
Business.
4.18 EMPLOYEE RELATIONS. ARC is not a party to a collective
bargaining agreement and, to its and the Stockholder's Knowledge, except as set
forth on Schedule 4.18, ARC is in compliance with all federal, state or other
applicable laws, domestic or foreign, respecting employment and employment
practices, terms and conditions of employment (including issues related to
independent contractor status of personnel) and wages and hours, and ARC has not
and is not engaged in any unfair labor practice. Except as set forth on
Schedule 4.18, there have been no organization efforts by any trade unions
within the last five years.
4.19 INSURANCE. Schedule 4.19 lists all insurance policies maintained
by ARC relating to the Business or the Owned Facilities, copies of which have
been provided to RIGI, which cover the ARC Assets or the Business, the nature of
such policies, the amount and types of coverage, and the name of the insurers
and expiration dates. ARC has paid all premiums and other amounts due on such
policies and will not cancel any insurance or permit any insurance to lapse or
terminate prior to the Closing, PROVIDED, HOWEVER, ARC shall not be responsible
for the termination of any insurance by the insurer unless the cancellation was
caused by the failure of ARC to pay any premiums or other amounts when due.
4.20 RELATIONSHIPS. Except as described on Schedule 4.20, no officer
or director of ARC possesses, directly or indirectly, any financial interest in,
or is a director, officer,
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stockholder or employee of, any corporation, firm, association or business
organization which is a manufacturer for, or client, supplier, customer, lessor,
lessee, or competitor or potential competitor of, the Business. Except as
described on Schedule 4.20, the Business is not indebted to any officer,
director, partner, or employee of ARC or to any entity in which any such Person
has a financial interest.
4.21 NO MATERIAL CHANGES PRIOR TO CLOSING DATE. Except for (i) the
sale of Processed Inventory and (ii) the occurrence of an event of force
majeure, up until the Closing Date, the Business will be operated without
incurring any additional material liabilities or making any material disposition
of assets.
4.22 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm
acting on behalf of ARC or the Stockholders is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any Person controlling, controlled by or under common control with any of the
parties hereto, in connection with the Transaction.
4.23 EMPLOYEE TRANSITION. Schedule 4.23 lists all employee of ARC,
their term of employment, compensation history (including bonus, if any),
benefits and accrued vacation and other amounts payable to each employee. As of
the expiration of the day immediately preceding Closing Date, ARC will terminate
all employees of the Business who will not be hired by RIGI as indicated by the
list delivered to ARC by RIGI in accordance with Section 7.10 hereof (the
"Terminated Employees"), and will pay all compensation due the Terminated
Employees on or before the seventh day subsequent to the Closing. RIGI will not
be responsible for any salaried or hourly health and life insurance obligations
incurred prior to the Closing for any Terminated Employee, nor for payment of
claims to insureds, or payment of any premiums for coverage prior to the Closing
Date. All liabilities of the Business to the Terminated Employees will be
retained by ARC, including those accruing by reason of termination by ARC. RIGI
shall have the right, in its sole discretion, to determine which of ARC's
employees it will hire following the Closing.
4.24 ENVIRONMENTAL MATTERS. Except as may be provided in the
Environmental Studies to be performed as contemplated by Section 7.1 of this
Agreement, copies of which will be delivered to RIGI prior to the Closing as
provided in Section 7.1, or disclosed on Schedule 4.24, ARC and the Stockholders
have no Knowledge of any environmental problems or Environmental Liabilities,
contingent or otherwise, relating to the Business, the Owned Facilities or any
contiguous realty.
4.25 OSHA. Except as set forth on Schedule 4.25, ARC and the
Stockholders have no Knowledge that ARC is in violation of the Occupational
Safety and Health Act of 1970, as amended.
4.26 DISCLOSURE. To the Knowledge of ARC and the Stockholders,
neither this Agreement nor any Schedule, Exhibit or certificate delivered in
accordance with the terms hereof
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or any document or statement in writing which has been supplied by or on behalf
of ARC in connection with the Transaction, contains any untrue statement of a
material fact or omits any statement of a material fact necessary in order to
make the statements contained herein or therein not misleading.
4.27 BEST EFFORTS. ARC and the Stockholders will use their best
efforts to obtain all permits, consents and approvals and take such other
actions in order to complete the Transaction by the Closing Date. ARC and the
Stockholders will execute and deliver such instruments and take such other
action as may be reasonable or appropriate to carry out the Acquisition and the
intentions of this Agreement.
ARTICLE 5
REPRESENTATIONS OF RIGI AND THE PARENT
As an inducement to ARC and the Stockholders to enter into this Agreement
and to complete the Transaction and with the knowledge that ARC and the
Stockholders will rely thereon, RIGI and the Parent jointly and severally
represent and warrant to ARC and the Stockholders the following (both as of the
date hereof and as of the Closing Date):
5.1 DUE INCORPORATION AND QUALIFICATION OF RIGI. RIGI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado, and has the corporate power and lawful authority to
carry on its business as now being conducted. On or before the Closing Date,
RIGI will be duly qualified or otherwise authorized as a foreign corporation to
transact business and will be in good standing in Georgia.
5.2 DUE INCORPORATION AND QUALIFICATION OF THE PARENT. The Parent is
a corporation duly organized, validly existing, and in good standing under the
Laws of the State of Colorado, and has the corporate power and lawful authority
to carry on its business as now being conducted.
5.3 ARTICLES OF INCORPORATION AND BYLAWS. Not less than three
business days prior to the Closing Date, RIGI and the Parent will deliver to ARC
true and complete copies of their respective Articles of Incorporation
(certified by the Secretary of State of Colorado) and Bylaws (certified by its
corporate secretary) as then in effect.
5.4 AUTHORITY OF RIGI AND THE PARENT. RIGI and the Parent have full
power and authority to execute and deliver this Agreement and the Closing
Documents and to carry out the Transaction. The Closing Documents are valid
and binding agreements of RIGI and the Parent, enforceable in accordance with
their terms. No consent, authorization or approval of, or declaration, filing
or registration with, any governmental or regulatory authority or any consent,
authorization or approval of any other third party is necessary in order to
enable RIGI and the Parent to enter into and perform its obligations under the
Closing Documents, and neither the
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execution and delivery of the Closing Documents nor the completion of the
Transaction will, with respect to RIGI and the Parent individually:
(a) Be in violation of its Certificate of Incorporation or
Bylaws or constitute a breach of any evidence of indebtedness or agreement to
which it is a party;
(b) Cause a default under any mortgage or deed of trust or
other lien, charge or encumbrance to which any of its property is subject or
under any contract to which it is a party, or permit the termination of any such
contract by another Person;
(c) Result in the creation or imposition of any Security
Interest upon any of its property or assets under any agreement or commitment to
which it is bound;
(d) Accelerate, or constitute an event entitling, or which
would upon notice or lapse of time or both, entitle the holder of any
indebtedness to accelerate the maturity of any such indebtedness;
(e) Conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality;
(f) Violate any statute, law or regulation of any
jurisdiction as such statute, law or regulation relates to it; or
(g) Violate or cause any revocation of or limitation on any
Permit.
5.5 CONSIDERATION STOCK. (a) The Consideration Stock upon issuance
and the Parent Common Stock issuable upon conversion of the Consideration Stock,
will be duly authorized, fully paid and non-assessable and not subject to any
preemptive rights; (b) except for the Parent's currently outstanding Series C
Convertible Preferred Stock, the Parent does not have outstanding any shares of
preferred stock that have liquidation, dividend or other preference senior to
the Consideration Stock; and (c) until the Consideration Stock is converted into
shares of Parent Common Stock or redeemed by the Parent, the Parent will not
issue as consideration for the acquisition of any business or for the
acquisition of an entity or the stock of an entity owning any business, a series
of preferred stock that has a liquidation, dividend or other preference or
restriction senior to the Consideration Stock.
5.6 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm
acting on behalf of RIGI or the Parent is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any Person controlling, controlled by or under common control with any of the
parties hereto, in connection with the Transaction.
5.7 DISCLOSURE. Neither this Agreement nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereof or any document or
statement in writing which
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has been supplied by or on behalf of RIGI or the Parent in connection with the
Transaction, contains any untrue statement of a material fact, or omits any
statement of a material fact necessary in order to make the statements contained
herein or therein not misleading.
5.8 BEST EFFORTS. RIGI and the Parent will use their best efforts to
timely apply for and obtain all permits, consents and approvals and to complete
any due diligence deemed necessary by RIGI and the Parent in order to complete
the Transaction by the Closing Date. RIGI and the Parent will execute and
deliver such instruments and take such other action as may be reasonable or
appropriate to carry out the Acquisition and the intentions of this Agreement.
ARTICLE 6
REGULATORY COMPLIANCE
6.1 BULK SALES COMPLIANCE. RIGI and the Parent hereby waive
compliance by ARC with the provisions of the bulk sales law of the State of
Georgia, if applicable to the transfer of the ARC Assets, and ARC agrees to
indemnify and hold RIGI and the Parent harmless from any liability, other than
Liabilities which comprise part of the Assumed Contracts, incurred as a result
of the failure to so comply.
6.2 HART-SCOTT-RODINO ACT. The provisions of the Hart-Scott-Rodino
Act, 15 U.S.C. Sections 18a, relating to antitrust review by the federal
government, and any similar state statute, are inapplicable to the Transaction
based upon information furnished by RIGI to ARC and by ARC to RIGI.
6.3 THE WARN ACT. ARC will comply with the provisions of the WARN
Act, 29 U.S.C. Sections 2101, ET SEQ., and any similar state statute, relating
to notice to employees, if such provisions apply to the transaction contemplated
hereunder.
6.4 COBRA. ARC will comply with the provisions of COBRA, Pub. L. No.
99-272, 99th Cong., 2d Sess. (1987), and any similar state statute, relating to
continuation of health benefits to employees as they apply to the Transaction.
ARTICLE 7
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING
The parties hereto covenant and agree that between the date hereof and the
Closing Date:
7.1 ENVIRONMENTAL STUDIES. (a) ARC has delivered to the Parent and
RIGI updated and current ASTM Phase I Environmental Site Assessments and agrees
to provide to Parent and RIGI prior to Closing a completed ASTM Phase II
Environmental Site Assessment of the Owned Facilities and the Business (the
"Phase II Study") prepared by Law Engineering and
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Environmental Services, Inc. which are and shall be attached hereto as Schedule
7.1 (the "Environmental Studies"). The cost of the Environmental Studies has
been, is being and will be borne solely by ARC.
(b) Upon receipt, the Parent and RIGI shall have ten business
days to review the Phase II Study.
(c) If the Environmental Studies indicate that remediation is
required to ensure that the business, real property, facilities and operations
of ARC meet and comply with all environmental laws and regulations, Parent and
RIGI shall have 30 business days after the delivery of the Phase II Study to
assess the nature and extent of such contamination and to retain an
environmental engineering firm acceptable to Parent and RIGI to determine the
cost of remediation. On or before 30 business days after delivery of the Phase
II Study, Parent and RIGI may either (i) terminate this Agreement without
liability to any party; or (ii) elect to proceed with the Acquisition and assume
responsibility for and the cost of remediation without reduction in the Purchase
Price.
7.2 TITLE INSURANCE. Prior to the Closing, ARC will obtain a title
insurance commitment, which will be similar to that heretofore furnished to
attorneys for RIGI, copy of which is attached as Schedule 7.2, ARC representing
that Addco Recycling Corp. of Georgia is now known as Addlestone Recycling
Corporation. At the Closing, the costs and premium for the Title Insurance
obtained shall be paid by ARC out of assets other than the ARC Assets.
7.3 SURVEY. ARC has heretofore furnished to RIGI a survey prepared
by Nevil Land Surveying, Inc. Prior to Closing, ARC will have such survey
updated and re-certified to RIGI, at the cost and expense of ARC.
7.4 ASSUMED CONTRACTS. ARC will use its best efforts obtain the
written consent to the assumption by RIGI of each of the Assumed Contracts.
7.5 CONDUCT OF BUSINESS. ARC shall conduct the Business in the
Ordinary Course and in such a manner so that the representations and warranties
contained herein shall continue to be true and correct on and as of the Closing
Date as if made on and as of the Closing Date.
7.6 PRESERVATION OF BUSINESS. ARC shall exert reasonable efforts
consistent with its past business practices to preserve the Business, keep
available the services of its present employees, consultants and agents,
maintain its present suppliers and customers and preserve its goodwill. ARC
will provide to RIGI a mailing list of all customers and a listing of their
accounts within ten business days prior to the Closing Date, or at the earliest
possible date prior to the Closing Date, to permit RIGI to send announcements to
the customers on or after the Closing Date. Notwithstanding the foregoing, in
no event shall RIGI have the right to send any announcements to customers prior
to consummation of Closing.
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7.7 NOTICE OF EVENTS. ARC and the Stockholders shall promptly notify
RIGI and Parent with reasonable specificity of: (1) any event, condition or
circumstance occurring from the date hereof through the Closing Date that would
constitute a violation or breach of this Agreement; or (2) any event,
occurrence, transaction or other item which would have been required to have
been disclosed on any Schedule, Exhibit or statement delivered hereunder, had
such event, occurrence, transaction or item existed on the date hereof, other
than items arising in the Ordinary Course of Business which would not render any
of the representations, warranties or other agreements of ARC or the
Stockholders materially misleading.
7.8 EXAMINATIONS AND INVESTIGATIONS. (a) Prior to the Closing Date,
during normal business hours between 8:00 a.m. and 5:00 p.m., Eastern Time,
Monday through Friday, or such other hours as to which the parties mutually
agree, RIGI and the Parent shall be entitled, through their employees and
representatives, including counsel, lenders, appraisers and accountants, to make
such investigation of the assets, properties, business and operations of the
Business, and such examination and copies of the books, records and financial
condition of the Business as RIGI and the Parent wish. RIGI and the Parent
shall cause all such employees, representatives, counsel, lenders, appraisers
and accountants to execute on behalf of themselves and their respective
representatives agreements to keep all information so obtained confidential to
the same extent as RIGI so agrees herein. No review, examination or
investigation by RIGI or the Parent shall diminish or obviate any of the
representations, warranties, covenants or agreements of ARC and the Stockholders
under this Agreement.
(b) If this Agreement terminates: (1) RIGI shall keep
confidential and shall not use in any manner any information or documents
obtained from ARC concerning the Business or the ARC Assets, unless readily
ascertainable from public or published information, or trade sources, or
subsequently developed by RIGI independent of any investigation of the Business,
or received from a third party not under an obligation to ARC to keep such
information confidential, and (2) any documents obtained from ARC shall be
promptly returned to it.
7.9 REVIEW OF REVISED SCHEDULES AND INFORMATION. At any time prior
to Closing, ARC and the Stockholders shall have the right to revise any
schedule or make further disclosure, as well as to make any disclosure as herein
provided or referenced and the Parent and RIGI shall have a period of ten
business days to review any revised Schedule or further disclosure made by ARC
or any Stockholder solely with respect to the Schedule so revised or the new
information so disclosed, PROVIDED, HOWEVER, such ten day review period shall
not apply to extend the Closing Date if the new information disclosed on any
schedule or the further disclosure is not of a material nature adverse to RIGI
in its reasonable determination and further provided that in any event the
Closing Date will not be extended beyond May 19, 1997, unless the Parties agree
otherwise.
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7.10 RETAINED EMPLOYEES. No later than two business days prior to the
Closing, RIGI shall deliver a list of the ARC employees that it shall retain and
hire subsequent to Closing.
7.11 NO NEGOTIATION BY ARC. Between the date hereof and the earlier
of (1) the Closing Date; and (2) the date of termination of this Agreement,
neither the Stockholders nor ARC shall, directly or indirectly:
(a) Solicit, initiate or encourage the submission of
inquiries, proposals or offers from any Person (other than RIGI and the Parent)
relating to any acquisition or purchase of assets (other than Processed
Inventory) of, or any equity interest in, the ARC Assets or any exchange offer,
merger, consolidation, purchase of assets, liquidation, dissolution or similar
transaction involving the ARC Assets (each, an "Acquisition Proposal");
(b) Enter into or participate in any discussions or
negotiations regarding any of the foregoing, or furnish to any Person (other
than RIGI or the Parent and their representatives) any information with respect
to the ARC Assets, other than in the Ordinary Course of Business; or
(c) Otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any Person
(other than RIGI and the Parent) to do or seek any of the foregoing.
ARC and the Stockholders will notify RIGI immediately if any such
Acquisition Proposal is received or if any such discussions, negotiations or
other events occur or are sought to be initiated, and such notice will set forth
in detail the terms or other particulars thereof.
ARTICLE 8
CONDITIONS PRECEDENT TO THE OBLIGATION
OF RIGI AND THE PARENT TO CLOSE
The obligation of RIGI and the Parent to enter into and to complete the
Transaction is subject to the fulfillment on or prior to the Closing Date of the
following conditions, any one or more of which may be waived by RIGI and the
Parent only in writing:
8.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of ARC and the Stockholders
contained in this Agreement shall be true on and as of the Closing Date, with
the same force and effect as though made on and as of the Closing Date. ARC and
the Stockholders shall have performed and complied with all covenants and
agreements required by this Agreement to be performed or complied with by them
on or prior to the Closing Date. ARC and the Stockholders shall have delivered
to RIGI and the Parent certificates, dated the Closing Date, to such effect.
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8.2 GOVERNMENTAL PERMITS AND APPROVALS. All permits and approvals
from any governmental or regulatory body required for the lawful completion of
the Transaction shall have been obtained and all transferrable Permits shall be
transferred to the name of RIGI.
8.3 THIRD PARTY CONSENTS. All consents, permits and approvals from
parties to any contracts or other agreements that may be required in connection
with the performance by ARC of its obligations under this Agreement or the
continuance of such contracts or other agreements without material modification
after the Closing Date shall have been obtained.
8.4 LITIGATION. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted or
threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the Transaction or to seek damages or a discovery
order in connection with such transactions, or that has or could reasonably be
expected to have, in the opinion of RIGI or the Parent a materially adverse
effect on the ARC Assets or the Business.
8.5 REAL PROPERTY. With respect to the Owned Facilities:
(a) RIGI shall receive good and marketable title (subject,
however, to Easement in favor of Georgia Power Company dated November 23, 1993
and recorded in Deed Book 114, pages 127 and 128, Candler County, Georgia
records, and to taxes which may be due but not payable) by special warranty
deeds for the Owned Facilities in proper form for recording in the State of
Georgia for the Owned Facilities;
(b) The Owned Facilities shall be free and clear of any
Security Interest, easement (except for Easement in favor of Georgia Power
Company dated November 23, 193 and recorded in Deed Book 114, pages 127 and 128,
Candler County, Georgia records), covenant, or other restriction, except for
installments of special assessments not yet delinquent and recorded easements,
covenants, and other restrictions which do not impair the current use or
occupancy, or the marketability of title, of the property subject thereto;
(c) There shall not be pending or threatened condemnation
proceedings, lawsuits, or administrative actions of any type relating to the
Owned Facilities, or other matters affecting adversely the current use, or
occupancy thereof, including unpaid tap fees, contemplated special assessments
or zoning changes;
(d) The legal description for the Owned Facilities contained
in the deed thereof shall describe the real property forming a part of the Owned
Facilities fully and adequately. The building and improvements located within
the boundary lines of the described parcel of land (1) shall not be in violation
of applicable setback requirements, zoning laws, and ordinances, (2) shall not
encroach on any easement which may burden the land, and described parcel of land
not serve any adjoining property for any purpose inconsistent with the use of
the land, and (3) shall not be located within any flood plain or be included in
any wetlands or be
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subject to any similar type restriction for which any permits or licenses
necessary to the use thereof shall have not been obtained; and
(e) The Owned Facilities shall abut and have direct vehicular
access to a public road, direct access to an operational railroad spur, or have
vehicular access to a public road via a permanent, irrevocable, appurtenant
easement benefitting the Owned Facility.
8.6 NO MATERIAL ADVERSE CHANGE. There shall be no material adverse
change in the Business or the ARC Assets taken as a whole, financial or
otherwise, or, to either ARC's or the Stockholders's Knowledge, ARC's customers,
regardless of reason, including those changes that are as a result of any
legislative or regulatory change, revocation of any Permits, licenses or rights
to do business, failure to obtain any Permit at the normal time or in the manner
applied for by ARC, fire, explosion, accident, casualty, labor trouble, flood,
riot, storm, condemnation or act of God or otherwise, and ARC shall have
delivered to RIGI and the Parent a certificate, dated the Closing Date, to such
effect.
8.7 REMOVAL OF SHREDDER RESIDUE. ARC shall have removed all Shredder
Residue and other waste materials from the Owned Facilities.
8.8 TRANSFER DOCUMENTS. RIGI shall have received assignments and
such other instruments of sale, transfer, conveyance and assignment transferring
all of the ARC Assets from ARC to RIGI, each substantially in correct and proper
legal form to transfer assets under applicable law.
8.9 ASSIGNMENT OF CONTRACTS. ARC shall have delivered to RIGI
written consents to the assignment or assumption of each of the Assumed
Contracts as provided by Section 7.4.
8.10 RELEASE OF SECURITY INTEREST. ARC shall have satisfied all
amounts due to Addlestone International Corporation such that the security
interest described on Schedule 4.2 shall be fully released.
8.11 SUBSCRIPTION AGREEMENT. The Parent shall have received from ARC
the Subscription Agreement for the Consideration Stock in the form attached
hereto as Exhibit B.
8.12 NON-COMPETITION AGREEMENT. RIGI and the Parent shall have
received from Addlestone, Rosen and Berlijn an executed Covenant Not to Compete
in the form attached hereto as Exhibit C.
8.13 BOOKS AND RECORDS. RIGI shall have received the books, books of
account, papers, records, correspondence and instruments of, or relating to, the
ARC Assets and/or Business and stored or maintained at the Owned facilities,
including, but not limited to, the information set forth in Section 4.4 above.
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8.14 COPIES OF BUSINESS RECORDS. RIGI shall have received copies of
the books of account, papers, records, correspondence and instruments of, or
relating to, the ARC Assets and/or Business not stored or maintained at the
Owned facilities and reasonably requested by RIGI or its accountants prior to
Closing. The receipt of such information shall not, in any manner, limit RIGI's
right to access set forth in Section 13.6, below.
8.15 RESOLUTIONS. There shall have been delivered to RIGI and the
Parent a copy of the resolutions duly adopted by the board of directors and
shareholders of ARC, authorizing and approving the execution and delivery by ARC
of this Agreement, and the completion by ARC of the Transaction, certified by
the secretary of ARC, dated as of the Closing Date.
8.16 CERTIFICATES, ETC. OF THE STOCKHOLDERS AND ARC. the Stockholders
and ARC shall have delivered all certified resolutions, certificates, documents
or instruments with respect to ARC's authority and such other matters as RIGI's
and the Parent's counsel may have reasonably requested prior to the Closing
Date.
8.17 FINANCING. On or before March 15, 1997, RIGI and the Parent
shall have obtained a commitment for financing from the Lender to effect the
purchase of the ARC Assets contemplated hereunder. If RIGI and the Parent shall
not have obtained a commitment by March 15, 1997, then they shall give notice
thereof to ARC no later than three business days subsequent to March 15, 1997;
otherwise, they shall be deemed to have waived the provisions of this Section.
Further, if such notice shall be given, ARC shall have the right to elect to
terminate this Agreement and, in such event, the same shall be deemed terminated
and such termination shall be in accordance with the provisions of Section 12.2.
8.18 NO SALES OR USE TAX DUE. There shall be no sales, use or
personal property tax or other similar tax payable by RIGI or the Parent as a
result of the completion of the Acquisition.
8.19 PAYMENT OF ACCOUNTS PAYABLE. Within 60 days of the Closing Date,
ARC shall have paid in full all of its outstanding accounts payable as of the
Closing Date, other than amounts which are the subject of a bona fide dispute
(the "ARC Payables").
8.20 APPROVAL OF COUNSEL TO RIGI AND THE PARENT. All actions and
proceedings hereunder and all documents or other papers required to be delivered
by ARC hereunder or in connection with the completion of the Transaction, and
all other related matters shall have been approved by Friedlob Sanderson Raskin
Paulson & Tourtillott, LLC, counsel to RIGI and the Parent, as to their form,
which approval shall not be unreasonably withheld or delayed.
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ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATION OF ARC
AND THE STOCKHOLDERS TO CLOSE
The obligation of ARC and the Stockholders to enter into and to complete
the Transaction is subject to the fulfillment on or prior to the Closing Date
(except for a sooner date, if so provided) of the following conditions, any one
or more of which may be waived by ARC and the Stockholders only in writing:
9.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of RIGI and the Parent
contained in this Agreement shall be true on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date. RIGI and
the Parent shall have performed and complied with all covenants and agreements
required by this Agreement to be performed or complied with by it on or prior to
the Closing Date. RIGI and the Parent shall have delivered to ARC certificates,
dated the Closing Date, to such effect.
9.2 GOVERNMENTAL PERMITS AND APPROVALS. All permits and approvals
from any governmental or regulatory body required for the lawful completion of
the Transaction shall have been obtained.
9.3 LITIGATION. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted or
threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the Transaction, or to seek damages or a discovery
order in connection with such Transactions, or that has or could reasonably be
expected to have, in the opinion of ARC, a materially adverse effect on the
assets, properties, businesses, operations or financial condition of RIGI or the
Parent.
9.4 FINANCING. Within three business days following March 15, 1997,
RIGI and the Parent shall have delivered to ARC a copy of a written commitment
for financing from the Lender to effect the purchase of the ARC Assets
contemplated hereunder.
9.5 RESOLUTIONS. There shall have been delivered to ARC and the
Stockholders a copy of the resolutions duly adopted by the boards of directors
of Parent and RIGI, authorizing and approving the execution and delivery by RIGI
and Parent of this Agreement, and the completion by RIGI and Parent of the
Transaction, certified by the secretaries of RIGI and Parent, dated as of the
Closing Date.
9.6 RELEASE FROM ASSUMED CONTRACTS. ARC shall be released from
liability under the Assumed Contracts pursuant to the assignments delivered
under Section 8.9.
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9.7 APPROVAL OF COUNSEL TO ARC. All actions and proceedings
hereunder and all documents or other papers required to be delivered by RIGI and
the Parent hereunder or in connection with the completion of the Transaction,
and all other related matters shall have been approved by Ansbacher and
Schneider, P.A., counsel to ARC and the Stockholders, as to their form, which
approval shall not be unreasonably withheld or delayed.
9.8 THE PURCHASE PRICE. RIGI and the Parent shall have paid to ARC
the full Purchase Price for the ARC Assets and executed and delivered all
documents related thereto.
ARTICLE 10
ACTIONS TO BE TAKEN AT THE CLOSING
The following actions shall be taken at the Closing, each of which shall be
conditioned on completion of all the others and all of which shall be deemed to
have taken place simultaneously:
10.1 TRANSFER DOCUMENTS. ARC shall deliver duly executed transfer
documents and/or instruments of assignment.
10.2 THE PURCHASE PRICE. RIGI shall deliver to ARC:
(a) the Cash Consideration; and
(b) the Consideration Stock.
10.3 SUBSCRIPTION AGREEMENT. ARC shall deliver to the Parent the
Subscription Agreement.
10.4 NON-COMPETITION AGREEMENTS. Each of the Stockholders shall
deliver to RIGI and the Parent a Non-Competition Agreement, duly executed by the
parties thereto.
10.5 SPECIAL WARRANTY DEED. ARC shall deliver a special warranty deed
for the Owned Facilities in proper form for recording in the State of Georgia.
10.6 CONTRACT ASSUMPTIONS. ARC shall deliver the written consents to
the assumption by RIGI of the Assumed Contracts.
10.7 CLOSING CERTIFICATE OF ARC. ARC shall deliver to RIGI a closing
certificate dated the Closing Date, in a form reasonably satisfactory to RIGI.
Such certificate shall be signed on behalf of ARC by an executive officer of
ARC.
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10.8 CLOSING CERTIFICATE OF RIGI. RIGI shall deliver to ARC a closing
certificate dated the Closing Date, in a form satisfactory to ARC. Said
certificate shall be signed on behalf of RIGI by an executive officer of RIGI.
10.9 CERTIFICATE REGARDING RESOLUTIONS OF ARC. ARC shall deliver to
RIGI and the Parent copies of resolutions certified as required by Section 8.15.
10.10 CERTIFICATE REGARDING RESOLUTIONS OF PARENT AND RIGI. The Parent
and RIGI shall deliver to ARC and the Stockholders copies of resolutions
certified as required by Section 9.5, 9.6.
10.11 REAL PROPERTY CLOSING. As part of the Closing it is acknowledged
that a settlement statement shall be separately prepared relating to the Owned
Facilities, which settlement statement shall be prepared by the attorney for ARC
at least one business day prior to the Closing. Normal closing adjustments
shall be charged to the parties as follows:
(a) ADJUSTMENTS CHARGED TO ARC. ARC shall be charged with
the following expenses, which shall be reflected on the closing statement and
shall be withheld from the Cash Consideration and be disbursed to the Person to
which each such expense is payable:
(1) Any amount necessary to satisfy and discharge of
record any lien or encumbrance that is not an Assumed Liability, including the
cost of recording or filing any necessary release or termination document;
(2) Any and all real property taxes due and payable,
it being agreed that all real property taxes and personal property taxes shall
be prorated as of the expiration of the day immediately preceding Closing;
(3) Any and all utility charges through the expiration
of the day immediately preceding Closing Date;
(4) The cost of the Survey;
(5) The cost of the title insurance policy for the
Owned Facilities; and
(6) Fees for documentary stamps due upon the
recordation of the deeds from ARC to RIGI and the closing costs associated for
the owned facilities which shall be paid by the RIGI and ARC in accordance with
local custom for commercial real estate transactions.
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10.12 TITLES TO VEHICLES, MACHINERY AND EQUIPMENT. ARC shall deliver
to RIGI duly executed titles to all vehicles, machinery and equipment included
in the ARC Assets (provided such vehicles, machinery and equipment are titled)
free and clear of any Security Interests.
ARTICLE 11
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the parties contained in this Agreement shall
survive the Closing for a period of three years after the Closing Date with the
exception of the representations and warranties contained in Section 4.5, which
shall survive for a period of time which is equal to the statute of limitations
period applicable to the respective Tax liability being asserted.
11.2 INDEMNITY AGREEMENTS OF ARC AND THE STOCKHOLDERS.
(a) ARC and the Stockholders, jointly and severely, shall
indemnify, defend, reimburse and hold harmless RIGI and the Parent from and
against any and all claims, demands, penalties, fines, liabilities, obligations,
losses, settlements, damages, costs and expenses resulting from:
(1) any inaccuracy in, or breach of, any
representation and warranty or nonfulfillment of any covenant on the part of ARC
or the Stockholders contained in this Agreement;
(2) any misrepresentation in or omission from or
nonfulfillment of any covenant on the part of ARC or the Stockholders contained
in any other agreement, certificate or other instrument furnished or to be
furnished to RIGI or the Parent by ARC or the Stockholders pursuant to this
Agreement;
(3) all federal, state, county, local, foreign and
other taxes, including income taxes, excise taxes, sales taxes, use taxes, gross
receipts taxes, franchise taxes, employment and payroll related taxes, property
taxes and import duties, and any penalties or interest, whether or not measured
in whole or in part by net income required to be paid by ARC or the Stockholders
relating to the Business through the Closing: (i) which are not paid by either
ARC or the Stockholders; (ii) which RIGI or the Parent pays; and (iii) for which
the liabilities were asserted during the survival period set forth in Section
11.1, hereof;
(4) any and all negligence claims arising out of
occurrences and events prior to the Closing;
(5) the violation or alleged violation by ARC or the
Stockholders of any Environmental Laws or any orders, requirements or demands of
any governmental
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authorities related thereto, arising out of events or circumstances occurring on
or before the Closing except as otherwise included herein as an Assumed
Liability;
(6) any liability of ARC;
(7) any infringement claim related to any patent,
invention, trade secret, trademark, service mark, trade name or copyright where
the infringement alleged is related to products designed prior to the Closing
unless subsequently modified by RIGI in a manner which renders the product to be
infringing;
(8) any liabilities to employees of the Business
terminated in accordance herewith and any future related actions;
(9) reasonable fees and disbursements of counsel
incident to any of the foregoing;
PROVIDED HOWEVER, (A) that the ARC and the Stockholders shall not be
required to indemnify RIGI and Parent until the aggregate amount of any such
indemnification equals or exceeds $25,000, at which time the ARC and the
Stockholders shall indemnify and reimburse RIGI and the Parent for all such
amounts incurred (including the first $25,000) and (B) that the aggregate amount
of such indemnification by ARC and the Stockholders and the only recourse of
RIGI and Parent on the account of the indemnifications provided in this Section
11.2 shall be limited to the Consideration Stock or the proceeds thereof.
11.3 INDEMNITY AGREEMENT OF RIGI AND THE PARENT. RIGI and the Parent
shall jointly and severally indemnify, defend, reimburse and hold harmless ARC
and the Stockholders from and against:
(a) any and all claims, demands, penalties, fines,
liabilities, obligations, losses, settlements, damages, costs and expenses
pertaining to the Purchased Assets and Business which arise from any event
occurring on or after the Closing resulting from:
(1) any inaccuracy in, or breach of, any
representation and warranty or nonfulfillment of any covenant on the part of
RIGI or the Parent contained in this Agreement;
(2) any misrepresentation in or omission from or
nonfulfillment of any covenant on the part of RIGI or the Parent contained in
any other agreement, certificate or other instrument furnished or to be
furnished to ARC by RIGI or the Parent pursuant to this Agreement;
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(3) any liability of ARC arising out of the Assumed
Contracts, unless such liability is due to the actions of ARC, or other action,
events and occurrences prior to the Closing Date;
(4) the violation of any Environmental Law unless such
violation is the result of events, actions, occurrences or the operation of the
Business by ARC, or other actions, events or occurrences prior to the Closing
Date;
(5) any liability for tort claims which are the result
of actions, events, occurrences or the operation of the business by RIGI on or
after the Closing Date;
(6) any liability or tort claims arising out of RIGI's
use of the name "Addlestone Recycling, Inc." for a period of six months after
Closing; and
(7) reasonable fees and disbursement of counsel
incident to any of the foregoing.
PROVIDED HOWEVER, that RIGI and Parent shall not be required to indemnify
the ARC and the Stockholders until the aggregate amount of any such
indemnification equals or exceeds $25,000, at which time the RIGI and Parent
shall indemnify and reimburse the ARC and the Stockholders for all such amounts
incurred (including the first $25,000) and that, except for (i) any breach of
the representations contained in Section 5.5 with respect to the Consideration
Stock, (ii) the breach of any provision set forth in the Designation of
Preferences, Limitations and Relative Rights of the Series D Convertible
Preferred Stock of Recycling Industries, Inc. (copy of which is attached hereto
as Exhibit A), or (iii) the breach of any of the provisions of the Subscription
Agreement (copy of which is attached as Exhibit B), the aggregate amount of the
indemnification obligation of RIGI and Parent shall not exceed $500,000.
11.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS.
(a) The party seeking indemnification under this Article 11
shall give the party from whom indemnification is sought prompt written notice
of the assertion of any third party claim of which said party has knowledge
which is covered by the indemnity agreements set forth in Section 11.2 or
Section 11.3, and the party obligated to indemnify will undertake the defense
thereof by representatives chosen by the party seeking indemnification but
acceptable to the party obligated to indemnify.
(b) If the party obligated to indemnify, within a reasonable
period of time after notice of any such claim fails to defend, the party seeking
indemnification will have the right to undertake the defense, compromise or
settlement of such claim on behalf of and for the account and risk of the party
obligated to indemnify, subject to the right of the party seeking
indemnification to assume the defense of such claim at any time prior to
settlement, compromise or final determination thereof.
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(c) PAYMENT OF SUMS DUE. After any final judgment or award
shall have been rendered by a court, arbitration board or administrative agency
of competent jurisdiction, or a settlement shall have been completed, or the
parties shall have arrived at a mutually binding agreement, with respect to each
separate third party claim indemnified by the party obligated to indemnify, the
party seeking indemnification shall forward to the party obligated to indemnify
notice of any sums due and owing (and the times when due) by the party seeking
indemnification with respect to such claim and the party obligated to indemnify
shall pay such sums to the party seeking indemnification in cash, within 30 days
after the date of such notice or, if any such sums are due more than 90 days
after the date of such notice, ten days prior to the date each such sums are
due.
11.5 GOOD FAITH EFFORTS TO SETTLE DISPUTES. Each of the parties
agrees that, prior to commencing any litigation against the other concerning any
matter with respect to which such party intends to claim a right of
indemnification in such proceeding, such parties shall meet in a timely manner
and attempt in good faith to negotiate a settlement of such dispute during which
time such parties shall disclose to the others all relevant information relating
to such dispute.
11.6 FEES AND EXPENSES. Notwithstanding any other provision in this
Article 11, in the event of any dispute or controversy between any of the
parties to this Agreement, the prevailing party in such dispute shall, in
addition to any other remedies the prevailing party may obtain in such dispute,
be entitled to recover from the other party all of its reasonable legal fees and
out-of-pocket costs incurred by such party in enforcing or defending its rights
hereunder, excluding any costs incurred under Section 11.5.
11.7 NOTICE OF CLAIMS. No claim by any Party for indemnification
under this Article 11 shall be valid unless the Party seeking indemnification
provides written notice of such claim to the other Party on or before the
expiration of the applicable survival period stated in Section 11.1. The
liability of any Party for indemnification with respect to any claim for
indemnification for which the indemnified Party has timely given notice pursuant
to Section 11.4(a) shall continue until such liability for indemnification shall
have been finally determined pursuant to this Article 11.
11.8 LITIGATION SUPPORT. If, and for so long as, any party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (1) any
transaction contemplated hereunder, or (2) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date involving
the Business, the other party will cooperate with the contesting or defending
party and its counsel in the contest or defense, make available its personnel
and provide such testimony and access to its books and records as shall be
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending party, unless the contesting or defending
party is entitled to indemnification therefor under this Article 11.
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ARTICLE 12
TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated prior to or on the
Closing Date as follows:
(a) At the election of RIGI or the Parent at any time prior
to Closing if:
(1) if any one or more of the material conditions
precedent to the obligation of RIGI and the Parent to close has not
been fulfilled as of the Closing Date, or if ARC or the Stockholders
has breached any material representation, warranty, covenant or
agreement contained in this Agreement PROVIDED, HOWEVER, ARC and the
Stockholders shall have, at the election of ARC and the Stockholders,
at least fifteen days' notice to cure any such breach and the Closing
Date shall be extended by each day of such cure period;
(2) for matters reflected in the Environmental Studies
as provided in Section 7.1(c);
(3) On or before March 15, 1997, RIGI and Parent's
independent certified public accountant's determine that the financial
statements of the Business cannot be audited in accordance with the
requirements of the 1934 Act and the rules and regulations promulgated
thereunder; or
(4) RIGI and Parent are unable to satisfy themselves
that any Adverse Item will not have a material adverse effect on the
operations of the Business; or
(5) RIGI and the Parent are unable to complete due
diligence in a manner satisfactory to a company obligated to file
reports under the 1934 Act or if they discover discrepancies in the
books and records of ARC or any other matters unacceptable to them, in
their sole discretion, during the Review Period.
(b) At the election of ARC or the Stockholders at any time prior
to Closing if:
(1) any one or more of the material conditions
precedent to the obligation of ARC and the Stockholders to close has
not been fulfilled as of the Closing Date;
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(2) RIGI or the Parent has breached any material
representation, warranty, covenant or agreement contained in this
Agreement; provided, however, RIGI and the Parent shall have at least
fifteen days' notice to cure any such breach, except that in no event
shall Closing Date be extended by virtue thereof; or
(c) At the election of any party to this Agreement, if any
legal proceeding is commenced or threatened by any governmental or regulatory
body or other Person directed against the completion of the Transaction and any
of the parties, as the case may be, reasonably and in good faith deem it
impractical or inadvisable to proceed in view of such legal proceeding or threat
thereof.
(d) At any time on or prior to the Closing Date, by mutual
written consent of the parties; or
(e) At any time after April 28, 1997 or as the Closing Date
may be otherwise extended pursuant to Section 3.4 or Section 7.9, at the
election of any Party.
12.2 SURVIVAL. If this Agreement is terminated pursuant to Section
12.1, except as provided in Section 7.8, this Agreement shall become void and of
no further force and effect, and none of the parties hereto shall have any
liability in respect of such termination, except that any party shall be liable
to the extent that failure to satisfy the conditions contained herein results
from the intentional or willful violation of the representations, warranties,
covenants or agreement of such party under this Agreement.
12.3 EFFECT OF FAILURE TO CLOSE. The rights of RIGI and the Parent to
consummate the transaction contemplated by this Agreement shall terminate if
RIGI and the Parent fail to consummate the Agreement on the Closing Date as
herein provided.
ARTICLE 13
CERTAIN ADDITIONAL AGREEMENTS
13.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION. (a) No party
will make any public disclosure (including, without limitation, disclosure to
ARC's employees or customers) of this Agreement or the Acquisition without the
prior consent of the other parties hereto, which consent shall not be
unreasonably withheld, provided that the foregoing shall not preclude any party
from making any disclosure which, in the opinion of its or his counsel, is
required to be made under applicable federal and state securities laws. In no
event shall any disclosure be made without giving the other party an opportunity
to comment on the proposed disclosure. Notwithstanding the foregoing, ARC shall
be entitled to make such limited disclosures as may be required in order to
attempt to satisfy the requirements of this Agreement. Illustrative of the
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foregoing would be providing information to secure title insurance commitment,
survey and any and all consents and approvals required.
(b) Subject to the Parent's obligation as a public company to
issue appropriate public announcements of material events, and subject to this
Section 13.1 hereof, each party will maintain the confidentiality of all
non-public information obtained from any other party.
13.2 EXPENSES. Each party shall pay its own costs and expenses,
including the fees and disbursements of its respective counsel, in connection
with the negotiation, preparation and execution of this Agreement and the
completion of the Transaction whether or not the Transaction is completed.
13.3 WAIVERS AND CONSENTS. All waivers and consents given hereunder
shall be in writing. No waiver by any party hereto of any breach or anticipated
breach of any provision hereof by any other party shall be deemed a waiver of
any other contemporaneous, preceding or succeeding breach or anticipated breach,
whether or not similar, on the part of the same or any other party.
13.4 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given only if and when: (1)
personally delivered; or (2) three business days after mailing, postage prepaid,
by certified mail; or (3) when delivered (and receipted for) by an overnight
delivery service; or (4) when delivered by facsimile transmission for which
prompt confirmation has been received from the receiving party, addressed in
each case as follows:
IF TO RIGI OR THE PARENT:
Thomas J. Wiens, Chairman and CEO
Recycling Industries, Inc.
Recycling Industries of Texas, Inc.
384 Inverness Drive South, Suite 211
Englewood, Colorado 80112
telephone: (303) 790-7372
facsimile: (303) 790-4252
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WITH A COPY TO:
Gerald Raskin, Esq.
John W. Kellogg, Esq.
Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
1400 Glenarm Place, Suite 300
Denver, Colorado 80202
telephone: (303) 571-1400
facsimile: (303) 595-3159
IF TO ARC OR THE STOCKHOLDERS:
Mr. Nathan Addlestone
Addlestone Recycling Corporation
284 Meeting Street
Charleston, South Carolina 29401
telephone: (803) 577-9300
facsimile: (803) 577-9290
WITH A COPY TO:
Lewis Ansbacher, Esq.
Ansbacher & Schneider, P.A.
4215 Southpoint Boulevard, Suite 100
Jacksonville, Florida 32216
telephone: (904) 296-0100
facsimile: (904) 296-2842
A Party may change its address by notice to every other Party.
13.5 FURTHER ASSURANCES. From and after the date of this Agreement,
each of the parties hereto will cooperate with each other and will use its or
his best efforts to obtain all necessary waivers and consents from third
parties. ARC and the Stockholders, at any time and from time to time on and
after the Closing, upon request by RIGI or the Parent and without further
consideration, shall take or cause to be taken such actions and execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such transfers, conveyances and assurances as may be reasonably requested by
RIGI or the Parent for the better conveying, transferring, assigning,
delivering, assuring and confirming the ARC Assets to RIGI.
13.6 RETENTION OF/ACCESS TO BUSINESS RECORDS. For at least five
years following the Closing Date, ARC shall retain all business records related
to the ARC Assets or the Business not delivered to RIGI. During this period,
from time to time on and after the Closing, upon reasonable request by RIGI or
the Parent and without further consideration, ARC shall
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provide RIGI or the Parent access to or copies of said business records.
Likewise, for at least five years following the Closing Date, RIGI shall retain
all business records related to the ARC Assets or the Business and, during this
period, from time to time on and after the Closing, upon reasonable request by
ARC or the Stockholders and without further consideration, RIGI shall provide
ARC or the Stockholders access to or copies of said business records.
13.7 AUDIT BY RIGI AND PARENT. For a period of five years after the
Closing, ARC and the Stockholders shall give Parent and RIGI's independent
certified public accountants full access to the financial books and records and
shall fully cooperate with such accountants in conducting and completing any
audits necessary to enable the Parent to meet the disclosure and financial
reporting requirements of the 1934 Act and the rules and regulations promulgated
thereunder.
13.8 ENTIRE AGREEMENT. This Agreement, including all Schedules and
Exhibits hereto, and the other Closing Documents constitute the entire agreement
of the parties with respect to the subject matter hereof and may not be
modified, amended or terminated except by a written instrument specifically
referring to this Agreement signed by each of the parties hereto or as otherwise
provided in this Agreement.
13.9 CONSTRUCTION. In the event of an ambiguity or a question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" means including without limitation. Where appropriate to avoid
any ambiguity and to encompass the broadest meaning, the word "and" shall mean
"and/or," and the word "or" shall mean "and/or." The parties intend that the
each representation, warranty and covenant contained herein shall have
independent significance. If any party has breached any representation,
warranty or covenant contained herein in any respect, the fact that there exists
another representation, warranty or covenant relating to the same subject
matter, regardless of the relative levels of specificity, which the party has
not breached shall not detract from or mitigate the fact that the party is in
breach of the first representation, warranty or covenant.
13.10 RIGHTS OF THIRD PARTIES. All conditions of the obligations of
the parties hereto, and all undertakings herein, except as otherwise provided by
a written consent, are solely and exclusively for the benefit of the parties
hereto and their successors and assigns, and no other Person or entity shall
have standing to require satisfaction of such conditions or to enforce such
undertakings in accordance with their terms or be entitled to assume that any
party hereto will refuse to complete the Transaction contemplated hereby in the
absence of strict compliance with any or all thereof, and no other Person or
entity shall, under any circumstances, be deemed a beneficiary of such
conditions or undertakings, any or all of which may be freely waived in whole or
in part, by mutual consent of the parties hereto at any time, if in their sole
discretion they deem it desirable to do so.
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13.11 HEADINGS. The Table of Contents and Article and Section headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
13.12 GOVERNING LAW. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the internal
laws of the State of Georgia, without regard to principles of conflicts or
choice of law, except to the extent this Agreement, or any agreement to be
entered into at the Closing, contemplates that the laws of Colorado will govern.
13.13 SUBMISSION TO JURISDICTION; WAIVERS. The parties each hereby
irrevocably and unconditionally: (1) agree that any action or proceeding related
to this Agreement shall be brought in, and hereby submits itself and its
property to the jurisdiction of, the courts of the State of Georgia located in
Candler County, Georgia, the courts of the United States of America for the
Southern District of Georgia, Statesboro Division, and the appellate courts from
any thereof; (2) consent to the venue of any such action or proceeding in any of
said courts and waives any objection that it may have, now or hereafter, that
such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same; and (3) agree that service of process in any such
action or proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage prepaid, to
the party against whom the action or proceeding is brought at its address set
forth in Section 13.4, provided the same is permitted by the appropriate rules
of the governing court.
13.14 PARTIES IN INTEREST. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law, by assignment to the Lender, or with the consent of the other parties.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
13.15 COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be
executed in two or more counterparts, all of which taken together shall
constitute one instrument. Execution and delivery of this Agreement by exchange
of facsimile copies bearing the facsimile signature of a Party shall constitute
a valid and binding execution and delivery of this Agreement by such Party.
Such facsimile copies shall constitute enforceable original documents.
13.16 SEVERABILITY. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
13.17 CORPORATE AUTHORITY. The undersigned have executed this
Agreement with all requisite corporate authority.
13.18 TIME OF ESSENCE. Time shall be of the essence hereof.
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13.19 RIGHT TO STORE. ARC shall have the right to store on the Owned
Facilities any Processed Inventory existing as of the Closing Date without any
charge therefor for a period of six months following Closing. In addition, RIGI
will, at the election of ARC, (i) permit ARC to load such processed scrap with
ARC furnished equipment (but with fuel and operators supplied by RIGI) or (ii)
RIGI will load the same for ARC for $1.00 per gross ton. This provision shall
survive Closing.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused their names to be
hereunto subscribed, all as of the day and year first above written.
"RIGI"
February 26, 1997 RECYCLING INDUSTRIES OF GEORGIA, INC.
By: /s/ THOMAS J. WIENS
-------------------------------
Thomas J. Wiens, Chairman and
CEO
THE "PARENT"
February 26, 1997 RECYCLING INDUSTRIES, INC.
By: /s/ THOMAS J. WIENS
-------------------------------
Thomas J. Wiens, Chairman and
CEO
"ARC"
February 26, 1997 ADDLESTONE RECYCLING CORPORATION
By: /s/ NATHAN ADDLESTONE
---------------------------------
Nathan Addlestone, President
"ADDLESTONE"
February 26, 1997 /s/ NATHAN ADDLESTONE
----------------------------------
Nathan Addlestone
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"ROSEN"
February 26, 1997 /s/ KEITH ROSEN
----------------------------------
Keith Rosen
"BERLIJN"
February 26, 1997 /s/ Susan Berlijn
----------------------------------
Susan Berlijn
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LIST OF EXHIBITS
Exhibit A Certificate of Designations, Rights and Preferences of the Series
D Convertible Preferred Stock of Recycling Industries, Inc.
Exhibit B Form of Subscription Agreement
Exhibit C Non-Competition Agreement
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LIST OF SCHEDULES
Schedule 2.1(a) Owned Facilities - Legal Description
Schedule 2.1(b) Equipment
Schedule 2.1(c) Intellectual Property
Schedule 2.1(e) Computer Software
Schedule 2.1(g) Contracts and Agreements
Schedule 2.1(i) Leases
Schedule 2.2 Excluded Assets
Schedule 2.3 Assumed Contracts
Schedule 3.3 Allocation of Purchase Price
Schedule 4.2 Title to Assets
Schedule 4.5 Tax Liens and Waivers
Schedule 4.6 Legal Compliance
Schedule 4.7 Permits
Schedule 4.8 Litigation
Schedule 4.9 Other Contracts
Schedule 4.10 Tangible Property
Schedule 4.12 Intellectual Property Exceptions
Schedule 4.13 Real Property
Schedule 4.15 Suppliers and Customers
Schedule 4.17 Curtailment of Operations
Schedule 4.18 Employee Relations
Schedule 4.19 Insurance Policies
Schedule 4.20 Certain Relationships
Schedule 4.23 Employee Information
Schedule 4.24 Environmental Matters
Schedule 4.25 OSHA Compliance
Schedule 7.1 Environmental Studies
Schedule 7.2 Title Commitment
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